Posted on 06/22/2012 11:19:34 AM PDT by jazusamo
Many of the 118,000 salaried retirees are bitterly stating they will never buy another GM vehicle; and anyone who discounts the effects their numbers can have on sales should reconsider.
GM retirees have been loyal GM fans, often purchasing more than one car, not to mention convincing others in their family and friend networks to buy as well. Like the GM reitrement plan, though, those days may be over.
Call it what you will, but in recent emails both the General Motors Retiree Association (GMRA) and the National Retiree Legislative Network (NRLN) consider the ending of the GM retirement fund a definite breach in loyalty. No doubt it is a throwing under the bus; and if GM can do this to its own, then imagine what might happen to customers over time.
For sure, it’s not a great image message for GM. You might even justify the move by General Motors Company (NYSE: GM) as financially prudent. Nonetheless, this financial reengineering has still has soured the attitudes of a majority of GM retirees who have been sending emails to the retiree organizations in a grass roots effort to even protest before the government. Reason is, this kind of financial re-engineering will also create more pension risks to the remaining pension plans by eliminating PBGC protections. It will also significantly reduce PBGC premium contributions from companies.
Fact is, Ford offered lump sum buyouts as well. However, Ford did not take the low road by palming the entire pension plan into an annuity-based entity like Prudential. Even Chrysler has stated that it has no intention of ending its pension plan for salaried retirees.
Of course, Prudential is not complaining, as they are being paid handsomely to take over. Perhaps that is why the monthly benefit is not easily matched by other life insurance companies, including Oxford Life and Security Benefits Corporation which sell indexed annuities with bonus growth and legacy preservation options. Problem is, while you wait a year or two to grow the amount toward an equivalent income, what are retirees supposed to draw from in the meantime? The only choice is savings or IRA; and that's supposed to supplement for the remainder of life.
Be apprised, only a life insurance company can guarantee an income in an annuity form; in this case, Prudential is a group annuity. However, many outside advisors like Mainstay Capital are chomping at the bit to get a hold of all those lump sum dollars to create bond ladders and portfolio mixes in an attempt to preserve legacy funds as well as growth.
According to the NRLN and the GMRA, General Motors is going to give Prudential $3.5 to $4.5 billion to replace its salaried retirees' pension plan with an annuity that will provide steady income, but not provide salaried retirees with the financial protection of ERISA and the PBGC if Prudential went belly up. For the record, on a solvency rating, Oxford Life and Security benefits are higher on the security chain, according to the Standard Analytical Service 2012 report.
Other Backlash
It is the auto sales backlash, though, that GM best be prepared to accept as a result. For the record, it is not only the active retirees that are affected by this move. Future retirees at GM will suffer the same fate of loss of protection. Furthermore, potential customers of GM are watching closely how they treat people.
Sure, one can look at it as an opportunity for retirees. However, the money sent to Prudential could have just as well paid into the pension fund, says the NLRN. Hard to disagree. So, do not think this is a free event even for GM. Earnings will take definite hit for the remainder of the year; and GM still owes the taxpayers which includes the retirees. No wonder the stock can't get kack to its IPO price.
More important, though, every pension that was not at risk is now definitely at risk; and greater risk will have to be taken in the market just to match the Prudential numbers, if the lump sum is taken by those who received a lesser amount.
In my view, it is that kind of corporate character that the public watches. My own book, “Perfecting Corporate Character” authored as far back as 1999, is filled with examples of such plans, manipulations and corporate deck-chair maneuvering by corprate executives.
Bottom line is, GM will lose many future sales from retirees as a result. See, when times got tough, those retirees and employees were always a source of sales which GM, even after killing its bond holders in bankruptcy, could count on. Better believe that will now be curtailed - big time.
My son asked why we were not considering all of the Chevies on the lots and I explained that under no circumstances would any "Government Motors" product be considered.
And we were a Chevy family when I was growing up in the 50s and 60s.
As ye sow, so shall ye reap.........................
First they came for the bondholders, but I wasn’t a bondholder.
Then they came for the taxpayer, but I wasn’t a taxpayer.
Then they came for the young employees, but I wasn’t a young employee.
Then they came for me, and there was nobody around to speak up.
Delicious. About time the pensioners got shafted after shafting everyone else.
Government Motors are definitely NOT on my shopping list forever....................
I all but refuse to buy any UAW-built car, including Ford, but GM, post-bailout? I can’t think of any incentive strong enough to buy from GM unless there were no other option.
As a GM retiree I’m elated that my pension will come from Prudential instead of GM.
Prudential has a MUCH HIGHER credit rating than GM. Plus GM is adding $3.5 billion to the fund as it transitions to Pru.
These retiree associations that bemoan the loss of PBGC coverage apparently have NO IDEA that:
1) the Federal Govt is BROKE
2) the PBGC has a $26 BILLION DEFICIT and getting worse as the Barqaqqi Depressionn grinds on.
That all may be true but that 3.5 to 4.5 billion going to Prudential could be coming from taxpayer dollars that bailed GM out, the government hasn’t recovered all the taxpayer money from GM last I heard for the bailout.
As a retiree what do you say about this backlash thing from retirees about not buying GM products, is it a valid point?
Wasn’t this just for the white collared workers, not the UAW line workers that already got a better deal than contract law dictates in the bailout?
They have offended bondholders, retirees, contractors, conservatives and especially Tea Party members, and the families of each of these groups. I sincerely hope that, as the stench spreads and more decent Americans boycott GM forever, this will be enough to kill that corrupt company completely. GM is dead to me, and I’ll rest easier once their withered hand (supported only by big government meddling) is removed from my wallet.
The ethics of the GM bankruptcy is a whole ‘nother story.
All my comments refer to is the situation facing GM salaried retirees.
I don’t understand why a GM salaried retiree would feel they are disadvantaged by the move to Prudential.
Their entire view is predicated in faith on a govt that is broke and a quasi-govt agency with $26 billion shortfall.
Yes this pension transfer from GM to Prudential is only for salaried workers.
The federal government IS NOT BROKE. We currently have many times over the value of resources and assets to cover the national debt and even the expected payments on social security, federal retirement, and every other bill for generations. Try this: http://blog.heartland.org/2012/06/ferrara-at-tas-green-welfare-green-taxes-green-poverty/
I don’t want you to figure my taxes if you think you can spend more than you take in and the US Government is not broke...
Agreed. I will never buy a GM or any other UAW-made car. I don’t see how any taxpayer with half a brain can throw more money at this terrible organization. There are so many other cars out there now. A lot of imports are made in Tennessee and Mississippi by non-union workers.
As an aside, GM flying a gay rainbow flag above one of their Indiana plants yesterday didn’t sit very well with a lot of people I imagine.
I’m not a GM retiree, just a retiree ... I wouldn’t go NEAR a GM product. Why should I spend any portion of my FIXED INCOME to help pay for Union benefits. Not me. The Honda Pilot is looking good to me.
Time to start converting those communally owned assets to cash ~ pay off the debts, pay the bills, eliminate taxes.
We only buy Hyundai.
I’m a Ford guy. They didn’t take the bailout. I’m still a Ford guy.
I was a lifelong Chrysler guy. They took the bailout. My most recent purchase is a Ford Taurus. I won't go back, ever.
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