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The process has accelerated dramatically this year. Two major U.S. airlines--Delta and Northwest--turned to bankruptcy court to cut costs and delay pension-fund contributions. This followed earlier bankruptcy filings by United Airlines and USAirways, both of which jettisoned their guaranteed pension plans. Then on Oct. 8, the largest U.S. auto-parts maker, Delphi Corp., filed for bankruptcy protection, seeking to cut off medical and life-insurance benefits for its retirees. Delphi's pension funds are short $11 billion. To Elizabeth Warren, a Harvard law professor who specializes in bankruptcy, this is just going to get worse, as ever more companies see the value to their bottom line of "scraping off" employee obligations. "There's no business in America that isn't going to figure out a way to get rid of [these benefit promises]."
That may include the world's largest automaker--General Motors. Although GM chairman Rick Wagoner has insisted that "we don't consider bankruptcy to be a viable business strategy," some on Wall Street are skeptical, given the company's array of problems. Their view was reinforced when GM, the company that dominated the American economy through the 20th century, announced on Oct. 17 that it had reached a precedent-setting agreement with the United Auto Workers leadership to rescind $1 billion worth of health-care benefits for its retirees. If ratified by the union membership, the retrenchment will hasten the end to company-subsidized health care for all retirees. From 1988 to 2004, the share of employers with 200 or more workers offering retiree health insurance plunged, from 66% to 36%. The end result: a fresh and additional burden on retirees. Concluded a report by the Kaiser Family Foundation and Hewitt Associates: "For the majority of workers who retire before they turn age 65 and are eligible for Medicare, the coverage provided under employer plans is often difficult, if not impossible to find anywhere else." For retirees over 65, "employer plans remain the primary source of prescription drug coverage for seniors on Medicare ... This coverage is more generous than the standard prescription drug benefit that will be offered by Medicare plans beginning in 2006."