GM pensions major part of collapse

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http://www.bloomberg.com/apps/news?pid=20601039&refer=columnist_lowenstein&sid=aFJd7ViPkXQg
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But among the obligations that caused GM to file for bankruptcy, two are directly related to worker entitlements. In 2003, GM sold $13.5 billion in bonds -- one of the biggest debt offerings ever -- and plowed the money into its pension fund. Then, in 2007, after the UAW went on strike, GM agreed to funnel more than $30 billion into a special trust for retiree health care.
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With each new labor contract, GM management found it easier to grant sweeter future benefits than to raise current wages. Over time, benefits went up much more quickly. That left GM with a daunting unfunded health-care obligation. As retirees lived longer -- one died in 2006 at age 111 -- and the cost of providing health care mushroomed, the expense grew beyond anything imagined in 1949. GM stayed current on pensions, but the money it funneled into retirement plans left less for engineering and restyling. And shareholder dividends? Forget ‘em. Over a 15-year stretch, GM plowed $55 billion into pensions and only $13 billion into dividends. That’s why I said the shareholders had been disenfranchised. Eventually, when the competitive landscape turned, GM fell behind on pensions too. By 2002, GM’s pension fund was $20 billion under-funded. It borrowed to make the pension fund whole, but that merely transferred the problem to the balance sheet.
 
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That's what you get for aging population. They should have done what the other employers did - let their employees fend for themselves. My past employers did offer 401k plans and I contributed the maximum. Now it has lost half of its value. Not very good.
 
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Don't blame the blue collar worker for the downfall of Chrysler or GM. Blame the correct people: MANAGEMENT They decided what products to sell; they decided everything related to suppliers, products, and types of vehicles...And walked away with "BILLIONS" in profit incentives, and MANAGEMENT COULD CARE LESS ABOUT THE COMPANIES..... As usual, the "little guy" gets it in the end, and MANAGEMENT WALKS WITH THEIR MONEY IN THEIR POCKET BACK TO THE BANK.
 
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how come every company offers 401ks and not a pension then? the only ones that I knew that had a pension were any position with the government. the big 3 had a pension but the rest of the automakers do not. The pension obligations do play a part of their downfall.
 
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I vividly remember how expensive Saturns were in the late 90's compared to the early 90's with pretty much the same car. People blamed it on the cost of air bags & such. Health care & pensions were the real costs that were crippling it's ability to compete in the marketplace. But that doesn't matter now that GM is owned by the gov't. The gov't can solve any problem, right? ...Obama should bail out his hometown Cubs. If there was ever an entity that NEEDED a bail out...LOL
 
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I could tell you why companies offer 401(k) plans, however, it would be considered "political", so I won't address the issue related to 401 (a),(k)'s, 203(b), etc. I am an expert related to all types of retirement plans. "Defined Benefit" and "Defined Contribution Plans." But my knowledge is considered "too political" in nature in this forum. The moderators do not understand "political vs economic" views.
 
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401k's were popular since it let the employer off the hook for pensions. It also put everyone's pension money in the market ..to be fleeced. Defined benefit pensions attached themselves to the employer. That $30B should have already been in a trust to find the pensions of the workers that were promised the benefits. Blame the management that didn't put that money aside THEN, while they had it. Does anyone here actually say that management behaved in an HONEST AND ETHICAL MANNER on this issue? I'd say that they drained the company of assets KNOWING FULL WELL that they were never going to be able to keep their promises. Promises that had been in place for a very long time. Now I'd surely LOVE to extract EVERY DIME out of their hides and cast them into the eternal lake of fire for being LIARS AND THIEVES ..but ..they have skated with the $$$ and remain champions of commerce and heroes to some. I'd rather spit on them. They have nothing to be proud of outside of the scam that they managed to pull off while leaving someone else holding the bag. Some achievement to hang on the wall. Bravo!
 
401k plans are popular because they're portable. They go with you when you leave your company. They're cheaper to administer as actuaries and pension departments don't have to get involved in onerous recordkeeping. Of course, you have to get participation from employees other than the highly compensated for the plan to remain in effect. This can be a difficult sell as these plans were called "Salary Reduction Plans" 30 years ago.
 
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The reality is over the years, GM, Chrysler and Ford offered these pensions because if they didnt they would have had a lot of work stopages from strikes. The strikes would have killed them. The elite media drive by idiots forget that part of the equation. THe UAW leadership failed the workers by not being honest with them. The let the companies play the game that as long as they held market share, they could fund these botique retirement pensions, health care for retirees etc The reality was they never set aside the money as they lost marker share. The UAW and management are both to blame since neither faced reality and negotiated to a middle ground where retirees would get a normal pension and some health care benefit that GM could afford. You cant have 5 retirees for 1 current worker. I really feel sorry for the Salary retirees because they are the ones with no voice and are probably screwed the most.
 
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 Originally Posted By: Bamaro
The pensions and health care costs are the root cause of all of Detroit's problems.
That's true. Another good reason for national health care. You'll never be able to save enough $$$ to retire on a 401K. Pension is a lot better for the worker. Thank God there is still social security because that's what most retirees are going to be living on anyway.
 

PT1

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The guys in Management & the Union who struck all of those fairytale dream benefits are to blame. Today.GM is gone. Replaced by Government Motors...which will fail miserably since they have a 31 year old Yale lawyer running the whole thing. Since he has never worked or stepped in an auto plant...they are doomed. If you buy a GM vehicle today...you are nuts unless it's 50% off sticker. The US taxpayers are already tired of pumping cash into this dead horse and will soon over turn the politicos who did this mess. You can't legislate consumer perception. Right now Ford and Toyota are offering so many better choices as well. Soon you will see the "New GM " hype ads on TV...but who will invest in the company after they just screwed the bond & stockholders?
 

PT1

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 Originally Posted By: cousincletus
 Originally Posted By: Bamaro
The pensions and health care costs are the root cause of all of Detroit's problems.
That's true. Another good reason for national health care. You'll never be able to save enough $$$ to retire on a 401K. Pension is a lot better for the worker. Thank God there is still social security because that's what most retirees are going to be living on anyway.
There is no good reason for national healthcare...ask anyone in Canada or the UK. They all advise against it. National healthcare will chase another 20% of the manufacturing base out of the US. Then cap & trade will get another 30%. People should pay their own healthcare. I have been paying mine for 30 years and it is top notch. The governments theft of SS dollars will only continue with healthcare.
 

Tempest

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 Originally Posted By: cousincletus
 Originally Posted By: Bamaro
The pensions and health care costs are the root cause of all of Detroit's problems.
That's true. Another good reason for national health care. You'll never be able to save enough $$$ to retire on a 401K. Pension is a lot better for the worker. Thank God there is still social security because that's what most retirees are going to be living on anyway.
I really hope that this is a tongue in cheek post...
 

PT1

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 Originally Posted By: Tempest
 Originally Posted By: cousincletus
 Originally Posted By: Bamaro
The pensions and health care costs are the root cause of all of Detroit's problems.
That's true. Another good reason for national health care. You'll never be able to save enough $$$ to retire on a 401K. Pension is a lot better for the worker. Thank God there is still social security because that's what most retirees are going to be living on anyway.
I really hope that this is a tongue in cheek post...
I don't think so as many people are uninformed and don't realize that SS has been robbed by politicians for decades. LBJ paid for the Vietnam War with the SS dollars. SS will run out of cash when I turn 65. With the current deficits the US taxppayer will have to pay a 67% tax to pay for the existing debt....won't happen.
 
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 Originally Posted By: PT1
There is no good reason for national healthcare...ask anyone in Canada or the UK. They all advise against it. National healthcare will chase another 20% of the manufacturing base out of the US. Then cap & trade will get another 30%. People should pay their own healthcare. I have been paying mine for 30 years and it is top notch. The governments theft of SS dollars will only continue with healthcare.
I like my national healthcare. It doesn't change too much if I'm laid off or not. Everything I've read says that per capita, the Canadian system is cheaper than the US even though the US system doesn't cover everyone... Many upper income people in Canada aren't thrilled that their care is comparable to the walmart greeter next to them but that doesn't bother me at all.
 
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 Originally Posted By: PT1
There is no good reason for national healthcare...ask anyone in Canada or the UK. They all advise against it.
Huh? It's not a perfect system but I generally support it. My dad is retired and had to go for heart surgery several years ago. I can only imagine what the bill would've been in the US. No, it's not really "free"... but socialism isn't so bad. Join us, comrade!
 

Tempest

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 Quote:
Many upper income people in Canada aren't thrilled that their care is comparable to the walmart greeter next to them but that doesn't bother me at all.
Should their house, car, cloths... be forced to be the same as the greeter's as well?
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Join us, comrade!
We are getting there...
 
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