The Next GM Pension Plan

March 30, 2009

gm-car

Because of its long term pension liabilities, GM is worth more dead than alive.  I doubt any automaker or wealthy investor (other than the U.S. Government) will touch it prior to its evenutal bankruptcy.

The company’s crazy pension commitments are just crazy.   As of last year they were costing the company $1,300 per car.  With GM sales down something ridiculous – over 50% in February from the year prior – pension costs this year will cost over $2,000 per vehicle.

What’s a GM pensioner to do?  Well, nothing, really.  The pensioner can sit on his or her ass all he or she wants and will still collect until the company is sucked dry.  After that, who knows?  For some reason I think I’ll be helping to pick up the tab.

Here’s my suggestion after the bankruptcy:  Offer up a pension amount fixed at some amount per car.  Let’s say the company agrees to put $1,000 per car into the pension account.  Take the total car sales for the year, multiply by $1,000 and divide by the number of pensioners; that’s the amount each pensioner will get the following year.

This has some real advantages over the current scheme, mainly that pensioners could make out really well in good years, and they have an incentive to help GM make sure it has good years.  And I won’t have to subsidize them through some government support package.

Just a thought.

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Strange Dreams

March 19, 2009

Why is this?

Sure didn’t seem like a dream while I was dreaming it.

And I dream this, regularly.


$300B Treasury Bond Purchase

March 18, 2009

When the Fed buys Treasury bonds with money it doesn’t have, isn’t that the same as taking out a loan on a loan?

Wall Street is cheering right now.  Maybe they understand in some perverted way.  I don’t.


E = MC²

March 18, 2009

mr-fusionMy undergraduate degree was in Bio-medical Engineering.  As part of the curriculum I had to do a “senior project” which many of my peers regarded with disdain and did whatever they could to get the lamest assignment and do the least amount of work.

My advisor – who thought nothing of pulling a bottle of Jack Daniels out of his desk and sharing it with people he liked, had aspirations for me.

“Plasma physics,” he said.

Now, I did okay in physics.  I loved learning about things like torque and the coriolis effect and relativity.  But I had expected my focus to be in something bio-medical.

“Nonsense,” my advisor said.  “You need to expand your horizons.”

So I spent the better part of my senior year in the plasma physics lab, learning about deriving energy from seawater using the same process the sun uses:  Nuclear fusion.

That was long ago.  Energy from controlled fusion was just around the corner, maybe 20 years off.  Last summer the news was that it was still 20 years off.  Fusion is a lot harder to control than everyone thought.  Uncontrolled fusion – Hydrogen bombs – have been around since the Cold War.  Controlled fusion, that’s another story.  Most of the world has given up believing that it could be REAL SOON NOW.

This past month the National Ignition Facility announced that it had reached a milestone in the simultaneous firing of 192 laser beams focused on an inert target, signaling the end of the facility’s massive construction phase.  The facility is huge:  A 10-story building that takes up about 3 football fields, designed to implode a tiny tiny pellet of deuterium with such force that virtually its entire mass is converted to energy, releasing many times more energy than it took to implode it.

With the completion of the facility and one in France using a technique identical to what I studied, commercial production of energy from fusion is just around the corner, if just around the corner means sometime around 2050.

That’s like 40 years from now, and not a moment too soon.  The world’s supply of easily-extracted fossil fuel is estimated to run out in about 75 years.

Like the pyramids, controlled fusion will take many lifetimes of careers to build.  I am more optimistic that it will happen within mine.


Wal-Mart and the Internet Cheapen Everything

March 15, 2009

bitterness-poor-quality

The fill valve on my toilet broke for the third time in two years.  I blame the Internet.  And Wal-Mart.

Our refrigerators used to last 12 or 15 years; today they last 7 before the compressor burns out.  We shrug as if this is how it has always been.  It has not.  Our collective desire for cheap is an enabler that allows Wal-Mart and others to trade off quality for price and in the process lower our standards of acceptance.  Likewise, thirty years ago our highly competitive newspapers were thick with articles and quality writing because, well, because they were competing on a level playing field with other newspapers.  Today they are vacuous and on the verge of extinction, unable to beat free no matter how much they cut their overhead.  A major paper is shutting down nearly every week.

The creep toward cheap was relatively slow and insidious.  So was the decline in the resulting product quality.  It is our acceptance of this decline that chews at me.

Wal-Mart and the Internet have led this race to the bottom.  It’s a disease.  The first symptom was the societal shift toward diminished quality because it made products more economical.  Cheaper plastics.  Thinner metal.  Smaller sizes.  Fewer parts.  The Internet forced the print media to compromise as well.  Less research.  More opinion.  Fewer sources.  Poorer writing.  We sat back as the competitors to these low-cost suppliers lowered their costs – and reduced product quality – in a futile effort to remain competitive.

In the end, the only fill valve that I can get for my toilet is from the same manufacturer that made the last two.  I don’t expect the next replacement to last any longer than the others.

There will always be a few boutique stores and BMW-like merchandisers that put quality first; some of us will be willing to pay for that quality.  But for Everyman, Wal-Mart and the Internet will reign, churning out product that would have been unacceptable a generation ago.


Born-Again Savers

March 14, 2009

Wednesday night’s Daily Show blast of Jim Cramer and CNBC exposed how so many of us were duped by frenetic Wall Streeters who parlayed our money into something worth half of what it was a year ago.

We listened to people no smarter than we who were tantalized with 30 percent returns and conveniently forgot to mention that there is a difference between Savings, and Investments.

Now that financial advisors have found Jesus, they’ve once again started preaching about that difference; but only because they’re jobless if they can’t obtain more of our money.  They need us to be reformed investors, and born-again savers.

american-savings-2

We have been repentant – kind of – and are saving again.  America’s savings rate grows with every recession, then plummets when the economy improves.   It has risen dramatically (see the little blip at the far right of the graph) after falling essentially to zero since 2005.  To ZERO.

Even in this worst of times we are not close to putting away enough of our income to avoid a cat food-based retirement.  The erosion of the Social Security net might persuade us to save more, you would think, but hi-def TVs and Starbucks are just too tempting.  We suck at saving but we’re great at believing our government will bail us out when the sky falls in 2020.

I still have many years before reaching retirement age and have a pretty good chance of getting there with enough savings to be comfortable.  I’m not so sure about my 64-year-old friend, who can no longer retire at the end of the year.


Back to the Future with High-Speed Rail

March 11, 2009

high-speed-rail

If I hear one more article about the promise of high-speed rail in New York I think I’m going to gag.

Does anyone remember the promise of the Buffalo subway system?  That service to nowhere cost the government somewhere around $500M back in the early ’80s.  Ridership never came close to justifying the cost.  You think high-speed rail across the upstate region is going to suddenly make Buffalo, Rochester, Syracuse, Utica and Albany chic destination spots? Amtrak with all its millions in government help couldn’t do it, not while it shares the same rails with slow-moving freight trains and dilapidated stations.

And until you solve the problem of obtaining easy last-mile travel once you step off the train, city-to-city high-speed rail will remain unattractive.   So far, that last-mile discussion hasn’t even begun.

While construction of a rail line may have some short-term (very short-term) benefits to a few laborers scattered across upstate New York, rail’s life cycle costs are enormous.  We have spent the past 30 years proving that such rail service can’t exist without subsidies; why would we want to subject ourselves and our children to that kind of future penalty?

Let’s get real.