By Deepa Seetharaman
NEW YORK (Reuters) - The United Auto Workers should consider allowing General Motors Co to shift management of blue-collar pensions to a third party because such a deal would make the No. 1 U.S. automaker stronger and ultimately benefit the union, the former head of the U.S. autos task force said on Wednesday.
"The UAW should take a serious look at this," former car czar Steve Rattner said in an interview in New York. "It's in their interest for GM's stock to go up; it's in their interest for GM to be profitable."
Earlier this month, GM said it would overhaul its white-collar pension plan as part of its plan to temper the risks posed by its pension liability. GM will offer some lump-sum buyouts and transfer responsibility for the plans of 118,000 retirees to a unit of Prudential Inc.
Many analysts described the deal as expensive, but necessary to shore up GM's balance sheet in the long run. They also viewed it as a possible harbinger of things to come for blue-collar retirees. Pension obligations to those retirees account for more than half of GM's $134 billion global pension liability.
"Which one went bankrupt more recently, Prudential or GM?" Rattner said. "I think the UAW should at least have an open mind about it."
Rattner led the Obama administration's effort to restructure the U.S. auto industry during the depths of the downturn in 2009. GM's pension risk was discussed during those discussions, but the issue was tabled to grapple with more pressing matters.
A growing concern for decades as U.S. automakers lost market share to foreign-based automakers in their home country, pension costs became an albatross for the U.S. industry with the sector's downturn five years ago.
Over a 15-year stretch that ended in 2006, GM put $55 billion into its workers' pension plans, compared with $13 billion it paid out in dividends, according to the 2008 book, 'While America Aged" by Roger Lowenstein.
In 2009, GM and its smaller rival Chrysler Group LLC filed for bankruptcy. Both automakers have rebounded strongly since then, but their pension liabilities remain a concern.
Last year, the UAW agreed to discuss with GM ways to reduce its pension risk. Analysts have speculated that the union may prefer transferring, or annuitizing, the pension obligation to a third party to lump-sum buyouts.
Still, the changes to GM's salaried pension plan prompted Jim Shepherd, the head of GM's retiree group, to pen a letter to GM Chief Executive Dan Akerson, expressing "consternation and disgust" at the deal.
"Once again, salaried retirees, those of us not protected by a labor agreement, are being singled out for disparate treatment," Shepherd, president of the General Motors Retirees Association, said in a letter posted on the group's website.
But Rattner and analysts say GM must find ways to reduce its pension obligation, which has swelled to nearly four times its market value and made investors nervous.
By contrast, only 90 companies in the S&P 500 have a pension obligation that account for more than 25 percent of its market value, Morgan Stanley analysts said. One-third of companies in the index have no defined benefit plans at all.
"It's a problem of global competition," said Rattner, who is now chairman of Willett Advisors LLC, the investment arm for New York City Mayor Michael Bloomberg's personal and philanthropic assets. "I'd like our workers to have pensions as much as anybody. It's got to be done in a way that's cost effective where our companies can compete."
(Reporting By Deepa Seetharaman; editing by M.D. Golan)