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Government takes control of bankrupt CF's pension plan

By BRENT HUNSBERGER, Oregonian

June 4, 2003

Oregon - A federal oversight agency announced the takeover of Consolidated Freightways' pension plan Tuesday after the bankrupt trucker failed to make its April contribution, leaving the plan $276 million short of its obligations.

The move affects 8,000 of the Vancouver-based company's workers and retirees, most of whom were salaried managers and administrative staff. It has no impact on thousands of union workers covered under a Teamsters pension plan.

The takeover also adds to the mounting $5.4 billion deficit at the Pension Benefit Guarantee Corp., the federal corporation that insures private pensions.

It is not entirely clear how the takeover will affect payments to retirees, although some recipients already have seen their checks reduced.

"After you put in the majority of your work time for one company, you would expect that you would be compensated a lot better than that," said John Taylor, who was the assistant terminal manager in Portland when the company shut down last year.

Taylor, who worked at the company 29 years, said his benefit check fell from a gross of $1,934 to $1,724 in May. He now manages Eastern Oregon Fast Freight's truck terminal in Portland.

The company cut benefits for 150 retirees in April, said Jeffrey Speicher , a spokesman for the pension guarantee agency. Other ex-CF workers and retirees risk seeing their benefits cut, particularly those who haven't retired yet, Speicher said.

Under federal pension guarantees, CF workers who retire at 65 and meet length-of-service requirements receive pensions of up to $44,000 a year. Those who retire early or work shorter periods of time receive lower pensions.

Mike Brown, a Consolidated Freightways spokesman, said until the recent adjustments to pension checks, some retirees were receiving more than the federal guaranteed minimum payment.

The company warned retirees of the government takeover in January. The plan officially expired March 31. Consolidated Freightways failed to make a $1.8 million payment in April.

"This is not a surprise to the people in the plan," Speicher said.

Consolidated Freightways shut down on Labor Day 2002, laying off 15,500 workers nationwide -- including about 1,000 in Portland -- and sought bankruptcy protection the next day. The company collapsed under the weight of a sluggish economy, operating inefficiencies, seven consecutive quarterly losses and more than $250 million in debt. It is currently auctioning its trucks, terminals and remaining assets.

The government takes over a CF pension plan that had about $228 million in assets to cover $504 million in promised benefits.

The plan ran into trouble about the time the company's fortunes hit the skids. According to the company's last two annual reports, Consolidated Freightways' pension plan fell from $37 million in the black at the end of 1999 to $70.9 million in the red at the end of 2001.

Brown blamed the decline on the slumping stock market and on a change in the way the Pension Benefit Guarantee Corp. calculates the plan's liabilities. Consolidated Freightways's pension is just the latest in a string of failed corporate retirement plans requiring government intervention.

The Pension Benefit Guarantee Corp. took over 157 terminated plans last year. It booked its two largest underfunded pensions in history Bethlehem Steel Corp. and LTV Steel Co. -- recording a net loss of $11.4 billion for the year.

Bethlehem Steel's unfunded liability alone totaled $3.9 billion, Speicher said. But he said the agency has enough assets to meet pension payments for years to come.

"This agency operated for its first 21 years in a deficit," Speicher said. "We don't have an immediate crisis. We do have a long-term financial problem."