Automaker Pensions Underfunded by $17 Billion

[Psephos]

Source: NY Times

DETROIT — The pension plans at General Motors and Chrysler are underfunded by a total of $17 billion and could fail if the automakers do not return to profitability, according to a government report released Tuesday.

Both companies need to make large payments into the plans within the next five years — $12.3 billion by G.M. and $2.6 billion by Chrysler — to reach minimum funding levels, according to the report, prepared by the Government Accountability Office. Whether the companies will be able to make the payments is uncertain, the report concluded, though Treasury officials expect the automakers will become profitable enough to do so.

If either company’s plan must be terminated, the government would become liable for paying benefits to hundreds of thousands of retirees. The effect on the government’s pension insurer, the Pension Benefit Guaranty Corporation, would be “unprecedented,” the report said. The agency manages plans with assets totaling $68.7 billion, less than the $84.5 billion in G.M.’s plan alone.

The carmakers’ pension plans were jolted by the downturn, increased liabilities and other factors. G.M.’s plan was overfunded by $18.8 billion in 2008, and was then underfunded by $13.6 billion last year, the report said. Chrysler’s plan was overfunded by $2.9 billion in 2008 but underfunded by $3.4 billion last year. The plans cover about 650,000 people at G.M. and 250,000 at Chrysler.

Read more: http://www.nytimes.com/2010/04/07/business/07cars.html

[jody]

1. Not to worry taxpayers who have no retirement or health benefits will bail them out including Toyota

that just closed their plant in Fremont California.

[whats_a_zip]

35. I think Obama can fix this.

It make take the VAT tax, and some higher rates on the rich, but he'll get it done.

[we can do it]

37. Who Picked Your Job For You? You Did. You Could Have Chosen w/Pension

so stop complaining about people who have a pension as part of their compensation.

[raccoon]

39. Oh, like people can get any job they want. All they have to do is apply. nt

[we can do it]

40. My Problem Is People Who Complain About What Others Have Worked Hard For

[Brickbat]

2. Of course, the PBGC is so corrupted, the term "pension insurer" would make me laugh if it wasn't so

fucking infuriating.

[jody]

4. Agree 100%. I wonder how many DUers understand the facts behind your post? n/t

[doc03]

7. PBGC corrupted, how so? n/t

[Brickbat]

11. Back in the 90s, it was bullied into not releasing its annual list of the 50 (I think) most under-

funded pensions. Lobbyists for those companies came crying to Congress about how appearing on that list would scare employees and make them look for work elsewhere, when magical bullshit accounting would show that those pensions actually WERE funded just fine. So the PBGC stopped publishing the list. Or just kept it internal, or something.

Under the Bush administration, the PBGC hiked premiums that companies paid to the PBGC to insure the pensions, thus encouraging companies that WERE funding their pensions just fine to buy out their pension plans and convert them to 401(k)s. This left struggling companies behind to fund PBGC, which doesn't help anybody. The PBGC itself also switched to investing more in stocks, with the expected results.

There were other changes made in, I think, 2006, under the "Pensions Protection Plan" or something named equally soothing.

[cap]

3. how the heck did we get here?

for decades, these pension funds worked correctly and supported thousands of workers. We had the babyboomers moving through so there should have been plenty of money in the pot.

[jody]

5. Because negotiators for unions and corporations assumed an ever increasing demand for products at

increased prices.

Any intelligent analyst of such things always considers at least the "Best Case" and "Worst Case" scenarios and decision makers plan a retreat if the "Worst Case" occurs.

[doc03]

8. Sounds like you are anti Union to me. The reason these pension

plans are going under is the race to the bottom this country has been in for the last 40 years. First manufacturing moved south for anti-union scab labor then when they got too expensive they started moving to other countries.

[jody]

10. No, I'm pro-union however I will not ignore the complicity of unions who negotiated with companies

that jointly created the current mess.

As I've pointed out elsewhere, the current problem is significantly affected by decision makers from bot unions and corporations who read only the "Best Case" scenario and completely ignored the "Worst Case" scenario.

Apparently both sides agreed that taxpayers would bail out retirement programs if the "Worst Case" scenario occurred as has occurred.

[doc03]

6. Simple plant closings and job eliminations

The companies offered buy-outs to all their employees and cut their workforce in the USA or sent the jobs to other countries. The remaining employees couldn't support the pensioners. The same thing that is happening to SS. Tom Brokaw's greatest generation demanded more and more benefits without paying for them so now us baby boomers are left with a bankrupt system.

[jody]

9. The most accurate synopsis of the problem I've read on DU. Wish all DUers understood. n/t

[doc03]

12. I worked 40 years in the steel industry and

for the first 17 years service I get a small pension $200 from the PBGC. I have another pension that covers the last 23 years that is insured by the PBGC. It sounds like you think if the PBGC goes under we should just pull ourselves up by the bootstraps and get a get a job at Walmart.

[jody]

15. No. My point is PBGC was never adequately funded so workers are in the same position as anyone who

has an insurance policy and the insurance company is unable to meet its obligations.

I have several very close friends in the same position as you and I in no way hold them or you responsible.

Nonetheless, the problem of an insurance company being unable to meet obligations does exist and at least we can hope to prevent other occurrences.

In a similar way, several states among which California with its 37+ million people faces a major problem because public employees have retirement demands that the state cannot meet.

[doc03]

17. I think most states and cities are in deep trouble with their

pensions, they made promises to their employees and then can't pass tax levies to pay for them. Sometime in the future all this pension debt is going to hit the fan, SS, corporate and public plans will all be unsustainable. I agree with the tea party people to some extent, they do have a point.

[jody]

19. With our common experience we recognize unfunded retirement programs are ignored by politicians. n/t

[doc03]

22. Another common thing corporations do is buy another

company out to raid their overfunded pensions. Say company A has an overfunded pension they can't touch it themselves but many times Company B will take over that company and they can raid the excess funds. We had that happen at my company back in the 90's. We went on strike for 10 1/2 months to get a defined benefit pension plan. After the strike was settled our employer instead of funding a pension plan took over another company that had a overfunded plan and added us to their plan. So they screwed those workers out of their excess pension funds and added us to their plan and now we are all screwed with a underfunded plan.

[jody]

25. Agree again, that's why I wrote a LTTE a decade ago about corporate control. See below.

You might like to read another LTTE I wrote at http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=367x19609

[cbdo2007]

36. not to mention the decrease in quality and innovation over the past 15 years

I know this is a touchy subject here with American auto fans always worshipping their American cars and foreign car fans worshipping their imports...but it's a reality that foreign automakers had the insight to start making cars that last longer and get better gas mileage than American autos about 20 years ago. Unfortunately this major loss of revenue has helped to get us where we are now and hopefully it's not too late for the American auto makers to now catch up now that they're going to start dominating again for another decade +

[naaman fletcher]

13. What about Ford? nt

[doc03]

14. I don't know about their pensions but Ford

has a huge debt. I just read about it yesterday I think it was $35 billion. If Ford's new products don't sell or the economy goes into a double dip Ford will be in deep deep trouble too.

[jody]

16. And if Ford goes bankrupt PBGC will bail them out meaning taxpayers. n/t

[doc03]

18. So I will be 62 tomorrow and I guess I better tell them to cancel

my retirement so I can and work until I die. I don't want to be a burden on you taxpayers.

[jody]

21. I'm 12 years older and believe me I worry about my children, grandchildren, & great grandchildren.

IMO there are only two choices or combinations -- "Increase taxes and/or reduce benefits".

[doc03]

23. Politically it is suicide to do either. The Republicans would love

to cut benefits and the Democrats won't agree to that. Then if anyone even thinks about raising taxes the Republicans raise hell. Look at the HCR bill the Republicans claim Democrats are going to cut Medicare and at the same time claim they will raise taxes. I have come to the conclusion this country is just ungovernable today.

[jody]

24. Agree ungovernable and a pox on politicians. n/t

[doc03]

28. Take the state of Ohio, we elect a Republican Government

they cut taxes and after a few years the state is nearly in bankruptcy. Then we get a Democratic Government they are forced to raise taxes and get the finances in order and sure enough next election the Republicans are back in. This has been going on as long as I remember. We have a Democrat Governor (Strickland) today, the last Republican Governor (Taft) left office in disgrace a convicted criminal and the state was in a total mess. Governor Strickland comes in and had to cut services and raise some taxes and now we a Republican John Kasich ahead in the polls.

[jody]

29. I remember a little about Ohio, I spent 4 years there in the Dayton area at WPAFB. n/t

[dencol]

34. Ungovernable is right...

Maybe Dems will lose big this year and the fall of our country can be accelerated. With weak opposition, it draws out the transition toward totalitarian capitalism and a large lower class in hopeless poverty. We're like a frog in a pot of water right now - nobody is in the streets because it is happening so slowly. If the bottom falls out, there will be change at long last! The people will force it.

[Psephos]

26. There is a third choice.

Grow the economy. Reliable 3-4% growth per year would fix most of these problems, absent any additional growth in spending.

[jody]

27. OK but if you know how to grow the economy at 3-4%, voters from all parties will elect you president

and I'll be first in line to donate all I have for your campaign.

[Psephos]

30. That would take someone a lot smarter than me. :)

However, there seem to be a number of countries in Asia that have it figured out these days.

The US had it figured out in the past, as well.

http://seekingalpha.com/article/62350-historical-gdp-numbers-1947-present

[jody]

32. I really doubt that anyone in the world KNOWS how to grow our economy at 3-4%. n/t

[aquart]

20. Touch a pension fund, get your greedy hands lopped off.

In a just society.

[quakerboy]

31. I thought that was handled in the whole restructuring bailout deal?

I thought that was part of the big financial crisis the auto companies had, and that the unions had made a deal where they essentially ended up owning large chunks of the companies in place of that underfunding.

Apparently I was wrong? Or is this something totally different?

[earcandle]

33. I think the banking industry has to re-fund these pensions before they can pay high salaries to any

one. 

[defendandprotect]

38. All of the pensions are underfunded in a cozy deal with those who were

assigned the job of monitoring --

They let them "estimate" higher earnings for the pensions -- and thereby

underfund them. At least, that was one way they did it.

Taxpayers will have to make up this capitalistic theft as well --