Bennie yourself out of business then blame somebody else. It's not like they make superior products.
Take away the Vette, Mustang, 300C/Charger, and a couple of Caddies, and the Big Three's got nothing.
Posted on 10/23/2005 4:27:25 PM PDT by rdmartinjd
Delphi's bankruptcy filing -- a result of mounting, unsustainable pension costs incurred decades ago -- was grim news for its creditors, its stockholders, and its tens of thousands of workers. But it was also a warning of things to come: for the entire American auto industry, and for Social Security as well.
Delphi was a GM division until its spinoff in 1999. As part of that deal, America's largest auto maker granted over 4,000 Delphi employees the right to return to GM.
Now, those workers are taking General Motors up on its generous promise. GM will take responsibility for their wages and benefits, to the tune of up to $11 billion in increased company costs, all without adding a penny of revenue.
This is a staggering blow for GM, which, like Ford, is already struggling to stay afloat -- despite an increasingly excellent and popular product line -- under the weight of its defined benefit pension plan. And those chickens are already roosting, beginning with the company's astonishing new deal with the UAW to cut retirees' health benefits by a whopping $15 billion.
That the UAW even considered such a plan tells the tale. For more than half a century, the union has demanded ever-escalating contracts, receiving at Delphi not only $60 per hour wages on average, but a vast, defined-benefit pension system too, designed like Social Security, but with far fatter checks. The idea is good, but the structure is nightmarish; and this long, incremental process has put America's car makers in the unsustainable role of supporting two entire, separate workforces, one of which -- being retired -- is permanently idle.
The gut reaction of many is to blame foreign competition for Detroit's problems: skilled Asians taking far less pay.
But this is precisely wrong.
For all the talk about “outsourcing”, far more jobs are flowing into America than the other way around: three times as many according to management über-guru Peter Drucker. And nowhere is this massive “insourcing” more apparent than in the auto industry: foreign car plants dot the South, paying top wages to the world's best workforce, but avoiding Detroit's union trap.
While the Big Three desperately seek to escape their union straitjacket by building plants abroad, every other carmaker on Earth is taking advantage of the most productive workforce in the world.
It's too late for outsourcing to help Delphi anyway. To save its pension system, Delphi's unions will have to swallow a mind-boggling 66% pay cut. And it only gets worse, for Detroit and for America.
Starting next year, the first wave of America's 78 million baby boomers will reach retirement age. Barring serious reform, an every smaller workforce will have to accept ever smaller wages to support idle, dependent parents who once demanded a bad retirement deal, and who won't even get all of what they bargained for.
Delphi and GM (and Ford and Chrysler) are America's canary in the coal mine. From Delphi to CalPERS to Social Security, America's defined benefits system is heading for trouble.
None of this was inevitable. And much of it still isn't. A top-down, centrally planned, one-size-fits-all system -- which every leftist labor boss and politician promised would bring Nirvana -- was always bad economics. And there was always a better way.
If you own a 401(k) or an IRA, you're a part of it already.
Personal accounts completely change the equation: no ongoing payments to two separate workforces, and no worries about current profitability, because retirees have received their company contribution long before. No need for current workers to take pay cuts to support their elders either: instead, an ever-improving work product can compete head-on against the Japanese (or whomever), and rising profits can fund current workers' retirements.
Perhaps above all else, personal accounts end all possibility or -- or need for -- benefit cuts to seniors: what's in a private account is yours. No one can ever take it away: not for a pay cut, not for a bankruptcy. And not for some cockamamie new government spending program either.
However badly it may have been sold, this is what the President's Social Security plan was trying to achieve for all of us earlier this year. Defined-benefit pensions are promises which cannot be kept, because companies -- and governments -- are not gods who can tell the future. And the Delphi debacle makes clear: whatever snags the Bush plan faced, America must reach past them and enact real Social Security reform, fast.
The Oracle of Delphi has spoken. Let's pay heed, and nip America's pension disaster in the bud.
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-- Rod D. Martin is Founder and Chairman of Vanguard PAC (http://www.theVanguard.org). A former policy director to Arkansas Gov. Mike Huckabee and Special Counsel to PayPal.com Founder Peter Thiel, he is a member of the Board of Governors of the Council for National Policy, Executive Vice President of the National Federation of Republican Assemblies (NFRA), and editor and co-author of Thank You President Bush, the definitive handbook to the second term.
Not to worry, GM's pension is covered by the PBGC (i.e., the taxpayers) if GM is unable to pay.
Bush really did not do a good job of selling his reform plan, and least in part because he didn't really claim to have one. He spent a lot of time saying he was open to suggestions. That's not how it works, and that's not how he works when he wants things to go the way he wants.
Now we have Madame Meirs and her unfortunate advancement threatening to derail the whole second term.
I really am depressed. But it's not just because of Bush and co., but they are not helping!
When GM made it's deal with the Union, the retirees didn't have a say. They never got to vote on it according to an article I read. Yet, they are the ones who are supposed to cut back so they can save the company. My husband worked 27 yrs before becoming disabled and now he collects his pension that he worked for. Unlike other Delphi employees that can work, he can't. Where does that leave us? In the toilet.
The problem was, these companies simply didn't set enough money aside at the time to pay for these workers' retirements. It's a difficult thing to plan for. Take a 35 year old worker: you know he'll work 30 years, and on average, you'll have to support him for an additional 10 years or whatever. So you put the money away each year, let it grow, and then you should in theory have enough.
Problem is, that even small variations can have a big impact. Think you'll earn 8% a year on the money you set aside, and you only earn 6% or 7%? Disaster. Think the average worker will live 9 years and due to increased health care and prescriptions, he lives 11? Nice for the retiree, of course, but not good for the company. And of course, health care costs are the biggest variable of all: who knows what it'll cost to take care of the average retiree in 30 years?
In essence, the corporate planners got something wrong: they underestimated the life spans or health care costs, or overestimated the returns or they just didn't put enough money aside.
Of course, the unions bargained hard: maybe they pushed too hard. Management didn't push back, though, because these were all theoretical costs 30 years hence, and probably weren't worth fighting for. Well, that 30 years in the future is now here and we've got a problem. Oh, and if you think it's bad in the corporate world, trying looking at municipalities. It's frightening there.
So the only real solution is to do IRA and 401K plans. This way, all the workers set their own money aside. They choose how risky they want to be, they choose how much to take out and when. "With great power comes great responsibility".
BFL (bookmarking for later)
Defined pension plans can be absolutely crippling for a company. It is all coming home to roost for companies who have allowed themselves to be held hostage by socialist labor unions.
That's a real understatement. I worked for a company that offered generous pension and health plans for retirees. In the 80's, statistics showed that the average retiree lived 18 months after retirement.
I don't know what the average is now, but I sure do know plenty who are well over their 15th year of retirement.
IRA's, 401(k)', MSA's etc. and individual control over the money would be a far superior system.
And far safer than just hoping the company you left 20 years ago is still solvent enough to pay your pension.
I aint yer pal, and your cars are crap.
It should be obvious by now, that there is no such thing as a defined benefit system. There is no free lunch. That is you get benefits equal to what you put in. If you get more benefits than you put in, bankruptcy is sure to follow.
The one exception is social security where there was a single one time free lunch for the first recipients or generation. This free lunch comes at the expense of the last recipients but if there is a last group of recipients, it is the end of the world and social security is the last thing they are worrying about.
PBGC only covers pensions up to 28k per year, far less than the current GM pensions.
Both my parents are GM employees who are counting down the days until the pension kicks in. They never had to save a dime for retirement and even make fun of me because I work for a small company have to save my 10% from every check.
Thing is that what goes around comes around. With these defined bebefit plans if you die its not your money to give to your survivors. With your own saved pension plan the money is yours to keep.
You get no sympathy from me. You will still get a reduced pension from the govt./taxpayers like me. You will still get social security from taxpayers like me. And why did you not save and invest a little while your husband made good money making crappy cars ?
Two things come to mind. Management made money, pensions are not a worry. Shareholders made money. Workers are all to blame because they wanted a part of the pie.
I think the average man dies at 79 and women 84.
You were very rude to the lady. Sometimes it is better to say nothing.
The chevy aveo is made by daewoo and not as good as the hyundais. The cobalt is over priced, underpowered and gets surprisingly bad gas mileage for a little car. The trailblazer has bad build quality and poor driver visibility. The equinox is a pretty good suv at a good price point. Don't know much about the Impala, but the accords and camrys have 20 years of stellar reputation to fall back on while the Impala has none. The impala had better be 10-20% better to get people to switch.
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