Contracts, Markets, and Laws in the US and Japan
Edited by Zenichi Shishido
Chapter 8: Reduction of retirees’ benefits upon the reorganization of a company
In the wake of the global financial crisis of 2008, both the United States and Japan have experienced the collapse and subsequent reorganization of some of their largest companies, including General Motors (GM) in the United States and Japan Airlines (JAL) in Japan. In the reorganization processes of both GM and JAL, one of the key issues to be resolved was the reduction of retiree benefit payment obligations of the companies (the “legacy cost”). The legacy cost took the form of healthcare and life insurance benefits in the case of GM and a defined-benefit pension plan in the case of JAL. The negotiation for the reduction of these payment obligations took place under the shadow of laws regarding the priority of claims of retirees in a bankruptcy scenario and the modification of such claims.
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