Posted on 10/10/2005 7:25:09 AM PDT by devane617
CNBC stated that Bank of America swithed their position on GM to "SELL". It is being mentioned that GM will follow Delphi into Chapter 11. Although GM has 38 Billion in cash and assets, it may not be enough to cover what is certain to be a huge drop in sales during the next few months. If GM files, that will be extremly bad for our economy.
GM will shed it's pension and retiree health care obligations by filing bancruptcy. Then us tax payers get to foot the bill. GM gets to keep running with fewer expenses. The unions did the same thing to the major airlines that declared bankruptcy. Now their pensions and benefits are slashed because of these bankruptcies. Unions are one of several things preventing companies from making changes needed to stay competitive. Then they get worse changes when their employer declares 'game over' and files Chapter 11. I bet it will happen before Oct. 17 when the new laws kick in.
There is NO easy answer. Everyone will have to understand that US products, even those made by labors making minimum wage, will be more expensive that products made in china. I don't see that happening.
I imaginge the bulk of their pension plan is invested in their own stock. If the stock value plummets, then the ability to meet pension obligations evaporates, and then the Federal Pension insurance will have to kick in (i.e. me and you and our kids will pay through the nose in the form of taxes).
A second observation is that in the mid 90's, the Clinton Admin (abetted by the Republican controlled congress) dropped the level by which a company's pension was considered to be 'overfunded'. I don't remember the exact number but it used to be that you needed around %150 percent of your obligations in your pension fund and they dropped that to around %120 percent. During the high-flying 90's, that allowed some large companies to declare as earnings what should have been pension contributions.
Just something to watch out for if self-insured giants, such as GM, become insolvent.
After corporate bankruptcy, if you retired before 65, your pension is reduce significantly due to the rules of the government administereed system for such situations. It could possibly even be eliminated. That happened to the retired air line pilots who have mandatory retirement at age 60. The guys that took early retirement are going to get screwed big time. With the new bankruptcy laws, there won't be any way out when their pensions get cut by law. Since GM is such a huge company, this will have resonating effects on the economy. Fortunately, GM doesn't dominate the economy like it once did.
"The unions have used their political muscle in Michigan to make it a closed shop state, which makes employers leave. Those that stay cannot be competitive in the long run.
Combine that with long term pensions and you've got yourself a disaster"
And GM opened a plant in Tennesee, (Saturn). If those guys at the top were doing anything other than figuring out how much they can get from the company, and planning bankruptcy, they could have worked a solution.
Unions are weakened, and although they tend to be stupid, they are human. Is it possible if management made it crystal clear that Saturn was the first of many, they'd strengthen their barganing position? GM management has the ear of politicians. They could lobby for fundamental changes, and if not given concessions, move to an American state that's more business friendly. Clearly there must be an advantage to manufacturing in the US or the Germans and Japanese wouldn't even try.
Of course, those are the things that a real management would do. I would say GM doesn't have a real management.
That was in addition to health benefits you’d kill for. That was also when they were extorting things like 25-and-out at ANY age, so you could easily have a 45 or 46 year old “retiree” drawing it – for literally 35+ years.
Hey, I'm sure the ones working now will "sacrifice" for their union brothers....who have "gone fishin" for these last many years...
"There is NO easy answer. Everyone will have to understand that US products, even those made by labors making minimum wage, will be more expensive that products made in china. I don't see that happening."
Most of the posts I read here would tell you the WalMart effect is a good thing. The mere invocation of the name WalMart will generate posts.
I would agree, there are no easy, and few good answers. The cost of energy could be a blessing in disguise. The cost of those widgets goes up when it costs twice as much to ship them from China to here.
Unfortunately, we have too many liberals here who haven't lost their jobs yet. Until they do, they won't tolerate relaxing some of the stupid regulations of the workplace and over the top EPA stuff.
I guess we're going to have to take the pain, and see if we have the guts to grow. Otherwise, look at England, that will be our future.
I have a few questions.
Why on this board, when something like this comes up, the focus of the attacks is on the union? (And by proxy the rank and file worker).
American CEO's make salaries out of line with the rest of the world. (2 to 3 times more than Japanese or German, forget Chinese). Why is it, that is rarely mentioned? However, the comparision of Chinese to American workers is seen as a good thing.
There is much gnashing of teeth over lazy workers making too much for doing too little. Why is it no one complains that the GM CEO got a 25% bonus last year when stock prices fell? And that's not an uncommon practice, rewarding incompent executives. Carly Fiorina, (HP), got a $22 million buyout after presiding over a 50% drop in HP's value.
I know unions are problematic, but what of the other problems? They don't count?
Many rail here about how the left is anti-American. Trying to export the job of an American who works 40 hours and comes home, goes to church, raises kids, coaches sports, pays taxes... that's as un-American as you can get.
If GM declares, so will Ford. Illinois, Wisconsin, and especially Michigan will take tax hits you won't believe.
Chinese-badged cars should be at the Chicago 2006 Auto Show. This could be interesting.
That said, I just sold a Sable with 200k on it, I just loved it. I replaced it with a used Century with 45K of about 5 grand. It's a nice car, like it a lot better than any Toyota. If the Chevys had the same soundproofing, ride control, and goodies as the Century, GM wouldn't have these problems.
Surely you jest! My husband is a Delphi/GM retiree and he sure doesn't get $40K/yr pension. Try more like $12oo per mo.Health care is NOT totally free either. We pay 50% or our medical thank you...And I've never been sent to Disney World for free...Did you just leave the sarcasm button off?
I agree with your assessment but we should go further with what is under our control.
We need to rigourously inspect all cargo coming into the country, for security purposes. This would not only provide better port security ... it would increase lead times and, thus, cost, for anything manufactured overseas. And the cost of the additional inspectors should be borne by the exporter/importer and NOT paid for by you and me.
This wouldn't be overtly protectionist but it would have a similar effect and maybe, just maybe, we'd make a few more things here.
Actually it did. A lot of heavily unionised, unprofitable industries were destroyed under Margaret Thatcher. Did us the world of good :0)
"upper management is raiding the dying companies' coffers."
Is that so? How do you know that?
Look for a European consortium(subsidized by the gov.)to buy GM then a merger with German owned Diamler Chrysler with the new conglomerate to be named "Globalist Motors"
"GM has failed to design efficient cars in favor of gas guzzler SUV( this time it is not a slam against SUV drivers"
Well now how do you suppose that could happen? How could GM sell SUVs without any buyers? That's like sayting you support the troops but not the war.
"GM has failed to design efficient cars in favor of gas guzzler SUV( this time it is not a slam against SUV drivers"
Well now how do you suppose that could happen? How could GM sell SUVs without any buyers? That's like sayting you support the troops but not the war.
"Is that so? How do you know that?"
25% bonus for poor performance. Large and rising salaries for a company contemplating bankruptcy. What would you call that?
" I've owned GM products for many years, just purchased a new Yucon XL (by fourth) and it's an excellent vehicle for my purposes. "
That's the irony; GM has gotten their quality way up there, too late. The competition is fierce, even without China's input. GM's weakness is design, which Bob Lutz is slowly fixing. And union, medical and retiree liabilities.
I'm a non-union retiree. :-)
That won't happen. More likely will be more interaction with foreign partners. There is still a lot of room for consolidation in the automobile business. Two Japanese Majors, two German majors, two American majors, and two French majors equals about 4 or 5 too many players on the field.
The "jobs bank" is a major stickler with Delphi. They say they are paying 4000 employees not to work (never a good idea) and this cost them 400 million a year. The word is that after acouple of months the court will order the reduction of wages and elimination of the jobs bank, which effectively voids the union contract.
The main stickler is the pension, which is why they are trying to get GM back in the picture. A report I read is that Delphi has 30,000 U.S. hourly employees and 12,000 hourly retiriees. That 12,000 has to represent the number of retiriees since the spin off, because that number seems low for a company thats been in business since 1906.
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