Looming GM Bankruptcy May Threaten Worker Comp. For Its Md. Employees - Southern Maryland Headline News

Looming GM Bankruptcy May Threaten Worker Comp. For Its Md. Employees


By ELI SEGALL

ANNAPOLIS (Nov. 16, 2008)—With General Motors Corp. near bankruptcy, Maryland officials are preparing for a possible fallout: If GM collapses, it may not have the cash to fund its workers' compensation plan in Maryland.

The automaker has more than 200 employees statewide, most of whom work at a transmission plant in White Marsh. Slammed by plunging car sales and the global credit squeeze, GM has been burning through cash in recent months.

Analysts have said GM may be forced into bankruptcy protection next year. The firm is now lobbying Congress for an emergency bailout loan to keep it afloat.

In Maryland, GM has a "self-insurance" workers' compensation plan, meaning it can bankroll insurance and benefits itself, instead of buying a plan through a private vendor. According to state officials, if GM collapses, the firm may not have the money to pay for the program, among other possible outcomes.

Workers' compensation plans fund the benefits for employees who are injured at work.

R. Karl Aumann, chairman of the state's Workers' Compensation Commission, said at a hearing Wednesday that state officials are closely monitoring GM and other distressed, self-insured firms with operations in Maryland.

"When the economy is in a bad state, it's our responsibility to make sure the self-insured program remains viable, and that those employees covered in the program aren't left in the lurch," Aumann said, in a phone interview.

Nevertheless, a bankruptcy filing may not automatically wipe out GM's funding, he said. A Chapter 11 filing, for instance, lets a company stay in business and reorganize, while shielding its assets from creditors.

In addition, if the funding did vanish, the Worker's Compensation
Commission, which regulates the health of all self-insured firms in Maryland, can use GM's security deposit to pay for the program. Aumann could not immediately confirm the amount of GM's deposit.

Tom Wilkinson, a GM spokesman, said Friday that the firm is not considering a bankruptcy filing, as this would scare off consumers and further dry up liquidity. He declined to comment on GM's future ability to pay for the self-insurance plan.

Aumann said it's rare for a company to default on its workers' compensation program. The last time this happened, he said, was with Bethlehem Steel Corp., which declared bankruptcy in October 2001.

The Pennsylvania steel company had roughly 4,000 workers in Maryland at the time of its collapse. Within a few years, the number of claims and benefits that had to be paid outstripped available funds, and the state assumed responsibility for the payments.

Dennis Carroll, general counsel for the Injured Workers' Insurance Fund, a quasi-state agency, said most of Bethlehem's claims have since been paid off.

GM, based in Detroit, is not the only company in Maryland with self-insurance.

According to the Workers' Compensation Commission, more than 430,000 employees are covered by this kind of plan. Their combined payroll makes up roughly 15 percent of salaries statewide.

One such company is Safeway Inc., which operates dozens of stores across the state.

The state received more than 24,000 workers' compensation claims last fiscal year, a 3.5 percent drop from the previous year. In the commission's most recent annual report, manufacturing, auto or otherwise, was not in the top five of claims filed.

At the top of the list was "policemen-security", who filed more than 2,000 claims last fiscal year. Other industries in the top five included trucking, construction and hospitals.

Capital News Service contributed to this report.

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