The Next GM Pension Plan

March 30, 2009


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.


Business 101

November 20, 2008


If you’re going to borrow money for your company, the first thing any lender (outside of mom and dad) will ask for is a business plan.  You must have a plan that demonstrates how the borrowed money will successfully lead to business profits and eventual repayment.  This is as fundamental as it gets.

That the CEOs from GM, Ford and Chrysler did not so much as have a business plan to present to Congress says a great deal about their arrogance.  Or their incompetence.  Or both.

The act that the Big Three is trying to perpetrate on Congress goes way beyond contemptible.  It’s a shame that so many auto workers will pay so dearly for such inept management.

Just Say No!

November 18, 2008


With regard to saving the auto industry, there are at least two broad possibilities that have not been broached much by the media:

  • Merger with and/or buyout by a foreign auto manufacturer, say, Toyota or Honda.
  • Government aid not related to manufacturing operations but to the retirees that in large part are sucking the automaker dry.

I was not in favor of a financial bailout and I am not in favor of a direct auto bailout, either.  Management and the unions have only themselves and each other to blame for their predicament.  Americans voted with their pocketbooks years ago; it’s not like anyone other than GM management didn’t see this coming.

So instead of a bailout, consider those options above.

A buyout by a strong foreign manufacturer, however unlikely, is something that would change domestic management culture overnight.  A buyout (as opposed to a bankruptcy) would help to salvage the hundreds of parts suppliers on whom the foreign automakers rely just as heavily as the domestic auto companies.  The show-stoppers are health care, retirement obligations and the unions.  Especially the unions, who have far less leverage today than during strong economic periods; so if Toyota was to make a move, now would be a good time to buy into the domestic industry on the cheap.

The second idea is to improve competitive costs against foreign manufacturers by relieving the auto industry of a $1,500 per vehicle levy – retiree benefits – by taking them off the automakers’ hands, in return for ownership in the company.  Socialized health care and pensions for retirees.  Let’s call that, hmmm, Medicare and Social Security, respectively.

GM management will fight tooth and nail against the former, and the unions the latter.  So instead, Congress will be hard pressed not to take the easy way out and simply give the automakers a blank check with few strings attached.  It is the worst possible option, and the one they are likely to take.