Would GM risk gutting retiree health benefits? (it could happen)

[Bozita]

front page, below the fold

http://www.freep.com/money/autonews/gmbenefits27e_20050527.htm

Would GM risk gutting retiree health benefits? Wall Street analyst says it could happen

BY JEFFREY McCRACKEN
FREE PRESS BUSINESS WRITER

May 27, 2005


If runaway medical bills are truly threatening the survival of General Motors Corp., as the automakers' executives have said, could GM simply eliminate UAW retiree health benefits?


It's a viable option, according to one of the most provocative reports to come out of Wall Street in some time.


The report, by Brian Johnson, who studies the auto industry for investors at the New York research firm Sanford Bernstein, provides a window into some of the current thinking of multibillion-dollar investors as they study the struggles at GM -- and wonder how to profit from them.


To be clear, there is absolutely no indication that GM's management is considering such a radical move. Neither GM nor the UAW would comment for this report. However, Johnson and various law-review pieces argue that employers like GM (or any automaker, for that matter) could immediately eliminate UAW retiree health benefits without fear of a legal strike and eventually win a protracted court battle.

more...

[Benhurst]

1. Would Pope Benedict XVI allow child molester priests to stay

in the Catholic Church?

GM's management will do anything it can get away with.

[Al-CIAda]

2. Sadly, this needs to happen -then Xerox, and a spat of others.

Then MAYBE the American IDIOTS will awaken from their stupor.

[TNOE]

3. Sadly is right

especially when it hits home, my dad is a GM retiree and beleive me - he and my Mom are really really concerned - about benefits and pension. That freaking job nearly killed my dad - and this is the thanks he gets. Seriously, what are all these people going to do?

[phantom power]

4. Spend their old age in poverty, is what.

That's the special evil of yanking the rug out from somebody who's at or near retirement. At that age, what can you do? If you're lucky enough to be healthy, I guess you could go back to work, assuming anybody would hire you.

You sure don't have time to start over, and re-save another nest egg.

[central scrutinizer]

15. not to worry - the workers have Social Security as a safety net

sarcasm/off

[Warpy]

5. Getting out from under pension "debt" is a priority

Never mind that those pensions were funded by employee contribuitions. The company has had use of that money until the employees retired, and now consider it their property, not that of the contributors.

The next priority will be to get rid of health insurance for current employees.

[Zacpres]

16. Dont think thats right.

Defined benefit pension plans are funded by the employer not the employee.

[gratuitous]

6. What would GM be "risking"? Bigger bonuses for their CEOs?

As we see from the United Airlines default on its pension obligations, the bankruptcy court gave its imprimatur to a unilateral breach of contract, and now it has the color of law. If GM decides to default on its obligations to its pensioners, what will it be "risking"? They can take that money and lavish it on their executives and laugh their overrich butts off at the poor unfortunates who won't have any retirement income. And some court somewhere can surely be prevailed upon to grant legal status to this theft.

I don't see a downside for GM in defaulting on its pension obligations.

[TahitiNut]

8. GM and other such companies employ generations of workers.

Far, far more than United Airlines, they're a "company town" employer, with the children and grandchildren of retirees working, even in non-union positions. If they were to broadly abrogate retiree pension benefits, they'd not only face strikes, they'd face extensive unionization of white-collar jobs and 'blue flu' work stoppages. They'd totally lose the internal myth of "caring" for workers in their "GM Family."

I hope they try it.

[gratuitous]

9. Well, United has always tried to portray itself that way too

But when push came to shove, they first prevailed on the lower echelon workers (although I would caution against letting an airplane mechanic overhear anyone call them "lower echelon") to take a wage freeze and benefit reductions in order to tide United over during a rough patch. A few years later, United hit another rough patch and came back to the mechanics and other "menials," who told management they'd already given, why don't you try the pilots? The pilots pretty much paralyzed the airline, and United's management figured out how to make do with last year's yacht at the marina.

But if GM goes to the bankruptcy court for protection from its creditors, I see them trying the "us too" approach: After all, since United cut itself a sweet deal in defaulting on pensions, why shouldn't GM get a taste, too? Those $1,000 an hour corporate attorneys don't work pro bono, you know. GM's union and nonunion workers could cry and moan, but when there's a limited amount of money to be plucked from the festering corporate corpse, I don't see management giving up its place as first in line.

I'd like to think GM isn't like United, but with the example of United to work from, why wouldn't they give it a try?

[Iowa]

10. I'd add one more item to your list...

If they tried to pull this there are a ton of people who would never buy GM again. Furthermore, I'd make it a point to park my empty shopping cart next to any shiny new GM product I encounter in any parking lot. And I'm a guy who doesn't even know anyone who works for GM - or who as ever worked for GM.

[Vitruvius]

13. Damned right. If GM reneges on pensions, I'll NEVER buy GM again either.

Never.

[sarcasmo]

30. If United gets to dump their Pensions GM will too.

[havocmom]

7. Worked for United

They will all be doing it. All those promises to workers... rewards for loyality, hard work, dedication, yada yada... Bullshit! CEOs do not care for anything but their own hides.

[bleedingheart]

11. This is where Pricilla Owens will pay up for her appointment...

[annabanana]

18. ding! . . . . . .n/t

[natrat]

12. would george bush allow a prostitute to pose as reporter in the WH

[Zacpres]

14. Out of curiosity?

If GM is broke and remains in bad financial shape what is the alternative?

[Al-CIAda]

17. How about cutting into management perks and benefits?

[TNOE]

19. Yes that for one -

but the problem was and stil is the management of GM - why should older workers be made to pay for the assine mistakes of management - like gee, building only SUV's and other gas guzzlers KNOWING a potential oil crisis would be looming, as in the 70's, not being forward thinking enough. They can totally screw up a company, get their golden parachute worth millions and just say "oops, sorry, screw you" ala ENRON.

When the market was booming they were all dipping their hands into the pension fund and sharing the wealth - and now that the market has tumbled (which also should have been expected to happen under Bush, always does under a Republican) - now they are looking for someone else to pay for their mistake. As usual.

[Abathar]

23. They built what people bought

and what vehicles have the highest profit margin? SUV's and pickup trucks are at the top of the list, and they couldn't make them fast enough. Just a few years ago they were making billions of profits off of those because people wanted them, if they didn't make what people wanted then they went to Ford or Chrysler who would make them. As a toolmaker I build tooling for the automakers, the more they change the models the busier I get, things have REALLY picked up for us lately. I work on a lot of air induction systems and they keep getting smaller and smaller dia's, meaning leaner and leaner engines.

[TNOE]

25. Yes, but certainly

any management who is smart enough to garner millions in salary and benefits should be smart enough to not only invest in gas guzzlers that the stupid people want until gas goes up sky high, and then meanwhile take some of those profits and start building your hybrid product, etc. Its called FOREWORWARD THINKING - and if your going to ask for the big bucks, then you had better damned well deliver. This is nothing but mismanagement - and they want to blame it on the unions and healthcare.

[Zacpres]

21. Management perks and benefits?

Your talking about billions of dollars for the pension and health care benefits for retirees. You can pay every manager $0 and wouldn't even come close to taking care of the problem.

The pension plan debacle will go on for years as more and more companies will eliminate these programs. If the only alternatative is for the company to go out of business then what are they to do?

Yes its a terrible thing thats happening but I have not heard a well reasoned solution to the problem.

[Bridget Burke]

22. If GM goes out of business....

Don't you think management has Golden Parachutes ready?

The poor suckers who didn't make the idiotic decisions will suffer.

[TNOE]

24. Its a contract - Its a commitment

its called doing the right thing by your workers - you promised them a pension - now pay up. I would love to see an audit done as to how many accounts or how much money GM possibly has stashed in oversea's bank accounts, Swiss, Caymen Islands, etc. (ala Halliburton, while their screwing their workers out of medical benefits). Have auditors look into everything that can be cut, downsize, etc.

Basically, this is not the workers fault, it is GM management's fault for running what should be a very profitable enterprise straight into the ground.

[Zacpres]

26. I'll not disagree

with the fact that poor management is a problem. But I'm not sure you realize the scope of the problem. We are talking about tens of billions of dollars here. There is no way GM is hiding billions of dollars in some secret offshore account.
GM share price is down the tubes, their bonds have been downgraded to junk status and they are eating thru cash reserves.

All rhetoric aside - what is the solution to the problem?

[TNOE]

27. I do realize the scope of the problem

I've been reading all that has been coming out about GM - and I don't know what the solution is now that frankly management has screwed everything up so bad - BUT what I do know is that the older workers should not be required to sacrifice what they worked for. I think alot of the mismanagement was done on purpose, to break the unions and to break the company so that they could get out of paying healthcare and benfits for retirees. I think what they have done is no less criminal than what ENRON did. Gouge the consumer and then blow the $$$ on themselves and perks. Crimes should be a whole lot stiffer for these executives - it should mean prison for them to mismanage, and I don't mean the whitecollar prisons, I mean hardcore prisons. Then perhaps you wouldn't see alot of what is happening ever happen again. Anyone and I do mean most anyone in a position to run and manage a company knows that in good times - you have to be prepared for the bad times. I think there has been more criminal misbehavior here than just bad luck or a down market. I think this is what they've been wanting - for years.

If the airlines all do it, GM does it, then Ford does it, the Chrysler does it, and on down the line to much smaller companies - can you even begin to imaigine the drain on the economy and the state that this country will be in. And all the while now, Bush is trying robbing our Treasury the same way these robber barrons robbed their companies and then he can't wait to get his hands on our social security money to do the same.

One suggestion would be - this war has cost $300 Billion - $300 billion would probably pay every single pension that they are hoping to renige on. Call off the war - slim down the military budget to less than 1/2 (which we would still have the largest) - and start working with other countries - use intelligence and diplomacy rather than war - war has always been and always was a way for the extreme rich to get more filthy rich from the blood of America's young. War is organized robbery - 1st stop there.

[Strawman]

28. Universal Health Insurance

Either through Single Payer or the recent Feingold proposal that mandates states get to universal health coverage.

That's the solution.

[Abathar]

20. Logically you are right on -

All the upper management's payroll combined is NOTHING compared to the rise in health care costs for the retirees. My Grandfathers - both of mine and my wifes father, worked for GM and 2 are still alive collecting. It's the catch-22, lose it to keep the company solvent or lose it when they declare bankruptcy, either way they lost.

[Bridget Burke]

29. Either way, management wins.

They have their own money & their own benefits--separate from those of the workers.

If the company goes bankrupt, management will use their Golden Parachutes.

If retirees or ex-employees have their savings devastated by medical expenses, they will find it harder to declare bankruptcy.

Obviously, the country's health care system needs a drastic change.

[Bozita]

31. kicking to match up with a new GM story in LBN