It can be argued that union PENSIONS helped spark and spur "The Great
They sure killed GM and Chrysler, didn't they? Drove jobs out-of-
country, didn't they? Until your tax dollars saved 'em -- restored
them -- to regain their blissful seats.
For another go-round.
So now, y'all prepared to bail-out those millions of fat, lazy,
unskilled, semi-literate UAW layabouts?
We hope most of YOU have defined-pension plans, too!
[What's LOL mean again?]
"Pension time bomb: The shadow hanging over GM's turnaround"
The Washington Post
Friday, August 27, 2010; A20
PRESIDENT OBAMA has a riposte for critics of his decision to rescue
General Motors and Chrysler: You can't argue with success. And much
good news has emanated from Detroit of late, especially from GM.
Having wiped out almost all of its debt through an administration-
orchestrated bankruptcy process, slashed excess plants and streamlined
operations, GM is once again turning a profit: $2.2 billion so far in
2010. Sales are up; promising new models are coming to market. GM's
aggressive new management is planning a public stock offering, which
would let the Treasury Department start unloading the 61 percent stake
it bought for nearly $50 billion. U.S. officials speak of escaping
with modest losses -- a small price for averting industrial
All true -- up to a point. But the company's stock prospectus points
to several reasons for caution, including such obvious ones as the
sluggish U.S. economy and overcapacity in global auto manufacturing.
And then there's a threat that the Obama-supervised bankruptcy did not
address: the precarious condition of GM's immense pension plans.
With almost $100 billion in liabilities, GM's defined-benefit plans
for U.S. employees (one covers a half-million United Auto Workers
members, another, 200,000 white-collar personnel) are the largest of
any company in America. Yet they were underfunded by $17.1 billion as
of the end of 2009, and the underfunding had only slightly lessened,
to $16.7 billion, as of June 30. (Chrysler has a similar problem, on a
smaller scale.) Having been filled with borrowed money before
Chrysler's bankruptcy, the funds can limp along for a couple of years.
But, as GM's prospectus acknowledges, federal law will require it to
start pumping in "significant" amounts by 2014 if not sooner. GM does
not say exactly how much, but an April Government Accountability
Office report suggested that a $5.9 billion injection might be
required initially, with larger ones to follow. In other words, any
investor who buys GM stock is buying stock in a firm whose revenue is
already partially committed to retired workers.
When companies go bankrupt, their underfunded pensions often are taken
over by the Pension Benefit Guaranty Corp. (PBGC), a government-run,
industry-funded insurance agency, which then pays retirees a fraction
of what they were owed. But that didn't happen in the GM-Chrysler
bankruptcy. The UAW resisted what would have been a huge reduction in
the generous benefits of its members, especially the many who retire
before age 65. And the Obama administration chose not to push back.
The net effect is that the pension time bomb is still ticking. If GM
earns robust profits, even more robust than it is making now, the bomb
won't detonate. Otherwise -- well, in a worst-case scenario, GM winds
up back in bankruptcy, with PBGC intervention both unavoidable and
more expensive than it would have been last year. And that could
necessitate a bailout from Congress, because of the PBGC's own
We're not offering investment advice -- just a dash of realism about a
still-troubled industry, and a warning that its dependence on
taxpayers may not be ended so easily.