GM Bankruptcy Threatens Pensioners

sharon sanders · Nov 16, 2008

"...Beyond suppliers, a collapse at GM also carries a risk to thousands of auto dealerships and to the government's pension-benefit insurance arm.

On average, auto dealerships employ 7.3% of a typical state's payroll, and 740,000 dealership jobs nationwide come from the Big Three makers. GM's 6,000-plus dealers employ about 325,000 of those people, according to estimates from the National Automotive Dealer Association.

One of the biggest fears in Washington is how a bankruptcy filing by one or all of the auto makers would affect the federal agency that insures the retirement savings of almost 44 million Americans. The Pension Benefit Guaranty Corp. ended 2007 with a $14 billion deficit, though that shortfall was expected to shrink to about $11 billion. Were GM to place its pension burden on PBGC, it would more than double the agency's current shortfall..."

http://online.wsj.com/article/SB122670818143330019.html?mod=article-outset-box

sharon sanders · Nov 23, 2008

Re: GM Bankruptcy Threatens Pensioners

SATURDAY, NOVEMBER 22, 2008

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By ALAN ABELSON<dateandtimestampwithbr></dateandtimestampwithbr> | MORE ARTICLES BY AUTHOR

If the Big Three go under, the consequences won't be a walk in the park. The next show is dropping.

ASKING THE BIG THREE AUTO MAKERS HOW THEY feel about bankruptcy is like asking prisoners on death row how they feel about capital punishment. And the CEOs of the companies were right on script last week: To a man they solemnly agreed, in a slight variation of Engine Charlie Wilson's famous aphorism, that what was bad for General Motors was bad for Ford and Chrysler, too.

Dressed in their Sunday best, they had come to Washington to humbly beseech the administration and Congress to fork over $25 billion or so in loose change to see them through a rough patch. What they left with was their ears still ringing from two days of angry lame-duck quacking and the vague hope of something more tangible next month or next year, if they last that long.

For some inexplicable reason, Nancy Pelosi and her gang insisted that they wouldn't cough up so much as a red cent unless the car guys showed them a plan describing in not too many words (reading makes our lawmakers' lips grow tired) how the lucre would be spent to revive the supplicants' ailing businesses. You would think that even the notoriously dim congressfolk would have learned from their experience with Mr. Paulson the futility of putting a dollop of faith in a plan. Even the best-laid plan, like the most stringent funding, is eminently fungible.

For their part, in pleading their case, the execs conjured up hellish visions such as losing their corporate jets if they failed to get the necessary scratch. In the end, we have a hunch, the companies will wind up with their $25 billon, whether in dribs and drabs or one fat bundle, while the lawmakers will all feel a whole lot better for having preened, scolded and pontificated before the unblinking eye of television cameras, demonstrating how zealous they are in guarding the public purse.

The hyperbole was bad enough; but the hypocrisy was worse. As a piece in The Wall Street Journal observed, not a few of the senators and congressmen who raged in righteous indignation at the very notion of using taxpayer money to keep the listing auto companies afloat just happened to be from states that are host to foreign car producers, which, just coincidentally, of course, stand to benefit handsomely were the Big Three to go under.

Even the prospect of a bailout for Detroit gave a sizable herd of economists conniptions, clear evidence that the idea can't be all bad. In particular, these often errant sages were quick to pooh-pooh the notion that bankruptcy would be a disaster. We had the strange feeling that we'd heard that tune before. Then it came to us: It was eerily reminiscent of the confident assurances as the subprime mortgage market veered toward collapse that it was no big deal because it was certain to be "contained."
This not-to-worry contingent argued with some passion that warnings of 200,000 potential job losses were a gross exaggeration, although they were conspicuously shy on persuasive detail of what the possible figure might be. Only 150,000?

Some pointed to the airline industry as proof there's life after bankruptcy. But as Pan Am and TWA and any number of smaller carriers suggest, it ain't necessarily so. And, except that they both offer transport, the differences between airlines and autos are manifestly much greater than their similarities.

Few travelers care or, more important, have much choice when their airline lands in bankruptcy. By contrast, a car buyer might understandably be reluctant to buy a Chevy, let's say, with GM in bankruptcy, if only because he couldn't help wondering about the durability of that 100,000-mile, five-year warranty -- or how easy it'll be to get parts or sell the car.

As auto makers, no matter what flag they fly, have long known and crafted their sales pitches accordingly, psychology and emotion are key elements in what makes a consumer cotton to this or that jalopy. On that basis alone, you don't have to be a Sigmund Freud to conclude that bankruptcy would act as an another formidable roadblock to Detroit's recovery.

Moreover, the shock waves are apt to radiate far and wide. With unemployment rife and resolutely heading ultimately for 10%, with the nation sliding into the most devastating recession since that biggie back in the '30s, with the global economy under stress and markets of every stripe in wild retreat, this would seem, to put it mildly, not the most auspicious time for the Big Three to go over the edge.

Much as we share a philosophic distaste for bailouts, we're also of a mind that it's obligatory to take a deep breath and face up to the possible ugly consequences of Detroit going bankrupt. To just blithely assume it'll be a walk in the park is downright fatuous.

http://online.barrons.com/article/S...?mod=b_hpp_9_0002_b_online_exclusives_weekend

GM Bankruptcy Threatens Pensioners

sharon sanders

Editor-in-Chief & President

sharon sanders

Editor-in-Chief & President