GM Pension Vow Seen as `Garbage' as Bankruptcy Might Wipe Out $16 Billion

[Purveyor]

Source: Bloomberg

By Holly Rosenkrantz

April 8 (Bloomberg) -- Den Black, a retired General Motors Corp. engineering executive, says he’s worried and angry. The government-supported automaker is going bankrupt, he says, and he’s sure some of his retirement pay will go down with it.

“This is going to wreck us,” said Black, 62, speaking of GM retirees. “These pledges from our companies are now garbage.”

As the biggest U.S. automaker teeters near bankruptcy, workers and retirees like Black are bracing for what may be $16 billion in pension losses if the Pension Benefit Guaranty Corp. has to take over the plans, according to the agency. As many as half of GM’s 670,000 pension-plan participants might see their benefits trimmed if that happened, an actuary familiar with the company’s retirement programs estimates.

The possibility that GM might dump its pension obligations is likely to intensify debate over the treatment of executives of companies that receive U.S. aid. GM Chief Executive Officer Rick Wagoner, ousted by the Obama administration last month, may receive $20.2 million in pensions, according to a regulatory filing.

“The core issue is fairness,” said Harley Shaiken, a labor professor at the University of California at Berkeley. “To have workers lose a significant amount of their pension after giving a lifetime to building a company is devastating under any circumstance. It’s made all the more worse by the symbolism of a $20 million payoff at the top.”

Read more: http://www.bloomberg.com/apps/news?pid=20601109&sid=aUiWeapb4KWo&refer=home

[bluestateguy]

1. I have an idea

Maybe it's a bad idea, but at this point all the options are bad, so please be nice:

If GM goes into bankruptcy and dumps its pensions and health care, why not just use TARP money to cover those pensions and health care for the retirees? I know there is ERISA, but that's only a drop in the bucket.

[AZ Criminal JD]

3. As you say nothing but bad options but it is a bad idea

ERISA only covers part of the pension and nothing concerning health care. If TARP was used then every pension and company health care plan would have to be covered. You can't just cover the benefits of one company and get away with it.

[w4rma]

13. Fine with me. The TARP money is better used in this way than the way it's currently being used. (nt)

[pattmarty]

4. How the fuck we shoot Wagoner and take his 20 mil and give............

..........it to the retirees?????

[bluestateguy]

7. going to need a lot more than 20 million.

Were talking billions here, not millions.

[pattmarty]

12. I realize that, but it was just my satirical response.

[Igel]

35. On the same terms?

That wouldn't be very nice.

It's a loan, after all. Even under bankruptcy, I suspect the loan would have to be repaid. The government tends to be first in line among creditors--it wrote the rules, after all.

[madmom]

2. Question for any body who might know, there are a lot of retirees who took

buy-outs,they retired early so the work force could be cut.Part of the buy-out "deal" was they would be paid their retirement.So now since this "deal" is being reneged on, can these workers sue, or go back to work?

[AZ Criminal JD]

5. No, they can't sue or go back to work.

If this is handled in bankruptcy court then the judge would have the power to end those agreements.

[groundloop]

6. I know several GM retirees

One of them is the most right wing, Limbaugh loving, Obama hating, obnoxious person that I've ever met. I hate to see anyone get screwed like this, but....

[raccoon]

9. I have a relative who's a GM retiree. He's also right wing, Obama hating. nt

[TNOE]

18. My Dad is a GM Retiree

and he and my mother both voted for and love Obama - and they are praying he somehow manages to save the company and their pension.

[amandabeech]

25. My uncle is a UAW GM retiree. He's an independent who voted for Obama .

n/t

[county worker]

8. How are people supposed to take care of themselves in their old age?

We are living longer, we are getting paid less, jobs are going overseas, the cost of living and health care is going up, the market is no guarantee of investment growth, what are people supposed to do? Where is the money coming from to live on?

Maybe we need a soylent green program or something.

[Deja Q]

10. Real reforms.

:shrug:

[Delphinus]

17. I imagine the retirement age

is going to rise substantially, for one. When Social Security was first enacted, people were only living for a year or two afterward. Now days ... aren't we heading into the age of centenarians?

As far as the health care costs rising, they're not just rising, they're shooting through the roof! Single payer NOW.

[AngryAmish]

23. The unfortunate answer is people have to work longer

We can't afford to pay for retirement of twenty years for everyone. The demographics do not work.

[amandabeech]

26. Unfortunately, physical occupations take a lot out of people, even today.

Some people just can't keep going in those occupations that long.

Some can do sit-down work, but a lot of them will be completely miserable sitting at a desk all day. Most won't be able to make much money at it.

[nichomachus]

28. Exactly

I know a lot of older people who are doing very well -- but they're not doing assembly line work, or working in a foundry, or on construction.

Yes, people are living longer, but that doesn't equate to an ability to do hard physical labor. People didn't used to live long after retirement age, but that was in the days before antibiotics and aggressive medicine. Nowadays, people live longer, but while mortality has been pushed out, morbidity has been extended also.

It's logically false to claim that because people live longer that they are capable of working as they did in their 40s and 50s.

[Babel_17]

32. Thanks for pointing that out

I do road construction (mostly asphalt paving) and the life expectancy for that kind of work is turning out to be shockingly low.

I only have a few years till I can get out so I'm probably going to stick with it. So many guys I worked with have died of (lymphatic) cancer.

We had an OSHA class and our union rep asked those who worked with asphalt to raise their hands. He pointed at us and said "you're dead".

He then said, "Sorry, I'm not trying to be a wise guy". I told him I knew what he meant. He's warning the younger people.

Needless to say, construction work wears you out in other ways too. Even a republican like Bob Dole understood that there's a limit to raising the SS retirement age.

[NJCher]

48. get out now!

It's not worth it. Thanks for posting this--I did not know this about people who work with asphalt. It is shocking that nothing has been done about this. Certainly, if the issue were studied, one would think protections could be developed for people who do this type of work.

I heard a trucker say that a significant number of them develop cancers of the urinary tract. It had something to do with where they sit in the cab.


Cher

[LiberalFighter]

37. I've been going thru obituaries and death records of members in our region.

Yes, there are many that have 10 or more years of retirement before they die. But there are still many that die shortly after they retire. Or those that do manage to live those 10 years or more past retirement do so with work related body ailments. Some are lucky enough to do so in good health.

You are right to bring up the fact that certain types of occupations don't cause as many problems on a person's body as other occupations. Another factor that is common in the fields you indicated is that those workers are generally working constantly until they get their assigned break. Assembly line workers for instance have to keep pace with the line speed. It doesn't take much for them to fall behind if something goes wrong.

[llmart]

40. Work longer????

Many of us here in the Detroit area would love to be able to "work longer" but here's a news flash for you. THERE ARE NO JOBS.

[natrat]

39. who cares it's the bankers,oligarchs and politicians we care about, this is america

[leftyladyfrommo]

11. Not much different from me - I lost most of my 401k in the

market meltdown. I'm just kind of trying to put some stuff together to make enough to get by. Most of us have lost our retirement. Why should they be any different?

[Name removed]

19. Deleted message

Message removed by moderator. Click here to review the message board rules.

[Nihil]

36. Maybe your "special case" blinkers are as bad as other people's?

You are suggesting that it was that poster's fault that her pension
went AWOL whilst claiming that it was everyone else's fault that
the GM ones might do the same.

To quote a nearby poster "How horribly stupid and evil".

MAYBE there should be NO "special cases" - not bankers, not traders,
not politicians, not car workers, NONE. How's that sit with your
little selfish worldview? Hmmm.

> I bet you didn't break your ass on an assembly line for 30 or 40 years.
> MAYBE you should have done a better job of MANAGING YOUR 401K.

Hey, I can play your game! Look ...

"MAYBE you should have done a better job of MANAGING YOUR LIFE."

or

"MAYBE you shouldn't be so bitter at having wasted your life naively
trusting the bullshit out of your manager's mouth for four decades."

or

"MAYBE you should cut other people the same break that you keep screaming
for people to grant you?"
:shrug:

[Hannah Bell]

30. You think because you lost your 401K, everyone else should lose too?

Except the bosses, of course.

No wonder the working class is losing, with that kind of mentality.

[high density]

41. This is a serious lesson in the "don't put all your eggs in one basket" rule

It seems clear no matter what promises were made, workers can't expect to rely exclusively on a pension or 401ks invested in the stock market for retirement income.

[Hannah Bell]

42. right, cringe & accept it, peons.

[kiranon]

14. Need universal health care. Companies cannot pay for current and past

health care needs. Also, many people do not have retirement benefits because their jobs did not come with any. Somewhere along the line, government pension plans and company pension plans will need to be addressed. Is it right that those without pension plans pay for those with pension plans when everyone worked all their lives? The City of Vallejo in California could not pay for its very generous pension plans for its city employees and went bankrupt. Is it fair? Not to those who believed they had those benefits coming, not for the City that could not make good on promises maybe it should never have made and not for taxpayers who do not have the money to pay for it. The entire pension plan/social security system needs to be revisited and fixed in a way that works for all. Those who had 401k plans and invested it in the market lost a great deal. Many homeowners are underwater on their mortgages. Most everyone, not just the auto workers, have lost or may lose their retirement funds. I don't know how to solve this mess. But, maybe conditions are right for the problem to be addressed and an attempt made to fix it.

[aquart]

15. I don't understand how anything is allowed to touch a pension fund.

That money is supposed to BE THERE. Not airy fairy maybe there but THERE. Because this is the future of hardworking honest people who did everything right, everything their employer and country asked of them. Not bankruptcy not ANYTHING should be allowed to touch a pension fund.

[Blue_Tires]

22. +1

[Kensan]

33. Pension Contributions. . .

We all like to think that pensions are fully funded, but the truth is that actuarial assumptions have been gamed for decades to allow large corporations to skim from their retirement obligations. That is why 401(k) plans have replaced company pensions. You personally fund your own 401(k) plan (with a little matching from your employer generally), which is why it is called a "Defined Contribution" plan. The old style plans were "Defined Benefit" plans where your employer promised you a retirement benefit of a certain amount based on employer contributions and tax deferred earnings.

The game was that you could take a 5-year rolling average investment return when you calculated the future benefit. So if I assume that my $100,000 in the plan today will earn 8% per year, then I will have $$$ available upon retirement. When the stock market was rocketing upwards, investment returns were double digits for the rolling average period. This meant that the employer had a minimal contribution into the plan because the investment earnings were projected to cover the expected benefit. So even with the market on the way down, you would still have some years with good returns to average into your 5-year rolling average. So employers didn't have to kick in money during the good times, and now the plans aren't funded to meet projected benefits down the road. With these huge companies teetering on the edge of bankruptcy, the benefit plan contribution money isn't there at all.

The fascinating thing is that the executive plans generally did get funded. I assume that the actuarial assumptions used for the executive plan were more conservative (ie, the investment return was at the low end of the range) vs. the employee plan that assumed the stock market was headed for 20k.

Just ask a United Airlines retiree how he/she feels about the Pension Guarantee Trust taking over their plan. Last I heard it was a 60% hit, and that was back in early 2007 when the stock market hadn't crashed yet.

[LiberalFighter]

38. Most companies do not match 401k unless it is for management.

[Babel_17]

34. Didn't congress

allow GM to be able not to fund the pension and just owe the payments to retirees?

Either way, the big question in my mind is if the retirees will organize around a strategy if GM gets a bankruptcy reorganization.

Employee wages get first claim, I think, but what's the law for retirement debt?

If they're asked to settle and don't want to can they demand that GM be scrapped for cash so that they can get paid?

[Joe Bacon]

47. Tell that to a bunch of ex-steelworkers!

I'm from Western Pennsylvania and I remember how men who put up to 40 years of their lives in the mills got screwed when the steel industry died in the early 80s. A whole bunch of other folks fell short a couple years of their pensions and they got NOTHING. Even those who did have pensions saw them whittled down to pennies on the dollars they were promised. To add another insult, ERISA wiped out their medical benefits a couple years ago. They wound up raped. And what did the Pundit Class in DC and New York say? THe Friedmans and Broders told them to suck up and take it like a man.

Now the Auto Workers are going to get screwed the same way.

[Romulox]

16. Remember when the excuse to pay off AIG bonuses was "the Sanctity of Contract"?

Yeah, well that doesn't apply here (for some reason.) :shrug:

[tritsofme]

20. You can bet a bankruptcy judge wouldn't have allowed the bonuses to be paid.

But because AIG gets to live as a zombie instead of failing is what made that mess so complicated.

[Romulox]

21. Right. And that's why the Obama admin wouldn't allow bankruptcy in THAT case.

[yowzayowzayowza]

24. ...Er at the very least...

said bankruptcy reorganization should convert these pensions into shares in the reformed company, so retirees could at least benefit from the company they helped build.

[amandabeech]

27. I doubt that those GM shares are going to be worth anything close to what those pensions would be

worth.

The retirees are going to take a huge hit, and many of them are simply too old or beat up to be able to take even an easy part-time job.

[yowzayowzayowza]

29. Still, twould be better than nothing. n/t

[amandabeech]

31. Not by much.

I've pretty much given up on Chrysler, and I think that GM would have a very hard time getting back on its feet after bankruptcy.

[sendero]

43. Welcome to corporate America...

... surely you are aware that this is exactly what happened to the steel workers in the rust belt back in the 80s?

How outraged were you then? How outraged was anybody?

Here's how it works - your continuing benefits are there as long as the company you worked for is making money. GM is not, what do you think should happen?

[Romulox]

44. What do you think President Obama means when de demands concessions from "everyone involved".

Our government is doing this, just as much as corporate America.

[sendero]

45. My post was probably not clear..

... it is these very endless benefits that were a major factor in bringing down GM. It is inevitable that they would be cut.

[Romulox]

46. Just as it was "inevitable" that AIG's counterparties would be paid at 100%

in other words, not inevitable in the least. These are policy choices made by our politicians, not the forces of nature at work here. :hi: