Thanks Joe, for the clarification. I forgot to mention Iacco's stock options. Yes, He had a great incentive to do his job well.....and I think the roll model would work well in this case also.
I have been digging and digging, because this whole "we are going broke" thing is not just sitting just right with me. I smelled a rat....or a stinking fish, and I am slowly putting all the pieces of the puzzle together.
IT'S ALL ABOUT THE HEALTH CARE COSTS -- PLAIN AND SIMPLE!!
PENSIONS The auto industry has basically single employer (each company has one, and you belong to one at a time) type of plan for retirement benefits. Salaried and hourly each have their own plans.
Based upon the 5500 forms that have to be filed with the government, both GM and Ford's pension and retirement plans at least thru 2006 were fully funded plans. (I checked on each one -- there is raw government required data on each and every plan, that has to be filed each year.) The latest information filed and available is for 12-31-2006. (reports for 12-31-2007 are due 210 days after the close of the plan year -- are not yet available).
Pensions in the auto industry are known as a Defined benefit plan. There is a formula in each plan that states that you get so many $$ for each year of credited service per month. Salaried plans function similarly, but usually take into account an average of the last 5 or 10 years of earnings.
The pensions, by all filed government accounts, are not the problem.
So, there is no unfunded liability that the Pension Guarantee Corporation would have to take over. So what retirees or employees have been promised, they would get. Again, any special supplements agreed to by management (to get people to retire, for instance) are considered unfunded because they are paid from present earnings, and usually not set up in a trust fund type of plan.
The problem lies in that GM (especially) would like to get all their employees OFF the defined benefit type of plan, and onto a 401K type (like an IRA) type of plan because of a law that was passed in 2007 called the Pension Reform Act of 2007. This reform act significantly tightened the rules for Defined Benefit pension plans, and only gave companies with underfunded pension plans 7 years (until 2014) to fully fund the plans....or face severe consequences.
My guess is that with the volatility of the stock market lately, the overfunded pension plans have taken a hit....and GM especially sees a monster of possible unfunded liabilities looming large ahead.
GM also has the most employees, and thus the most potential retirees in the system. Some of the plans actually have more people retired than working today.
GM also was forced by the US Bankruptcy court to cover the benefits of the Delphi corp -- their main parts suppply arm -- which was spun off and then taken into bankruptcy. In order to emerge from bankruptcy, the Judge voided all labor contracts, significantly reduced wages and benefits -- but put GM on the hook forpension and other benefit costs thru 2011.
Also, as part of the UAW 2007 labor agreement, GM CAN halt production at a plant -- however the plants cannot be permanently closed. Some level of wages and benfits continue to be paid even while production is halted!!
Health Care was even more fun and interesting to read about.
For over 10 years, the auto industry has been quietly been lobbying for some type of "catastrophic coverage" for its employees while publicly touting their "best in the world" coverage to everyone. They basically want an HMO or Medicare type of plan covering all their workers and retirees.
IMHO, you cannot have it both ways.....
Either you support a national health care movement, get the union to buy in, and support it, or you pay the piper.
Today, health care for active employees and retirees costs the auto industry 12 billion $$ each year!! (amazing, isn't it).
The Voluntary Employee Benefit Agreement was signed by all 3 auto companies in 2007. The estimated costs was 66 Billion $$ present day cash to fund the trust, and get it running. Annual contributions would be made by each company. GM's share of the the initial kick in is to be 51 Billion $$, due 1-1-2010.
This really is the "legacy costs" that everyone keeps harping on. Health care $$ come directly out of profits of the business -- it is an expense item. While companies accrue so much per month per employee, there really is not "pot of gold" to draw from except profits.
Ford and Chyrsler have smaller #s to kick in toe the VEBA trust. Ford, at least, has been apparently making plans to make its contributions.
Chyrsler is anyone's guess, because of who owns them now, and what has happened to the financial markets recently.
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It appears that Ford, from all that I have read, has been taking steps over the past several years to get its house in order. It is not there yet, but it is on a clear path.
(i don't buy Fords....so don't think that I'm trying to get you to buy a Ford.) They are also taking steps to redesign, re-engineer and revamp plants. They appear to be in etter shape financially.
GM, on the other hand, seems to be run by total blockheads!!
Why would you agree to a production halting scheme if you cannot actually close the plant, and it really does not save you wages & benefits???
Why, or why, would you agree to pony up 51 Billion $$ for a health care plan -- due in 30 months -- and then fiddle away the time to take care of your obligation??? (Did you think that if you closed your eyes, and wiggled your nose, it would all go away??)
The UAW and well as all the other types of union members who work at GM have to be totally laughing their asses off at GM's management stupidity!!
I cannot imagine being in the room when these negotiations were taking place, and keeping a straight face, let alone my cool.
So, it's about the Health Care Costs.........Its about plants that they really want to close, but by union contract they can't really.
It's about a company being so HUGE and so VERY STUPID that God himself couldn't help them.
I have little sympathy for this kind of gross, bumbling stupidity. They do not need a bail-out or a loan. They need shot, carved up like a turkey, and trimmed to a reasonable operating efficiency. Work rules need to change.........The world is not standing still waiting for GM to sneeze any more.
Sorry to be so long & rambly, Just some more of my two cents....
I cannot wait to see the plan that they deliver to Nancy Pelosi on Dec 2.
Buy your popcorn...this is getting better than the Saturday night movie....."Horror on Main Street, Part 2".
Cheryl
