UAW, Pensions & Retirement: The Black Swan Trumps the Sacred Cow

I am going cross-eyed in front of my laptop trying to understand this mess! I am a 30 year seniority union employee in Canada paying into a fully funded defined benefit pension plan. The plan is very sound, with very little exposure in the stock market. It is jointly administered by company and union trustees. I plan to retire at 55 after 37 years of service. My employer can go bankrupt any day now, and my accrued pension income, and that of all current retirees is guaranteed - ie fully funded once I reach retirement age. Why then, are the Big 3 paying pension benefits for all of their already retired employees? Should not their pension plans have been funded and protected while they were still employees? Are current employees pensions being funded now, or relying on some miracle in the future? What kind of pension plan is this? The mind boggles...

Everyone Should See This-UAW exposed at Ford/The Bosses at Work Rampant Fraud www.clickondetroit.com/video/15908257/index.html

Living in Detroit 50 something retired UAW employees make more per annum than presently employed engineers at the Big 3. We are so tired of the "entitlement" attitude that, unless the UAW agrees to end the disparity, it will be a cold day (Florida) before we ever buy another Big 3 vehicle. This entire GM Bailout has exposed the ridiculous benefits these UAW people enjoy. A Jobs Bank that pays 85-100% of pay-what makes them think they deserve so much more than the unemployment benefits the rest of American workers qualify for? Further, if the incoming administration merely absorbs the inflated pension costs of the UAW and socializes them onto the back of the American Taxpayer in order to relieve GM Chrysler and Ford of the burden instead of demanding modifications the automakers themselves have been too timid to demand for current and retired UAW members, then I truly believe the American Taxpayer will handle it by refusing to buy the cars. The taxpayers are watching and they aren't happy. Unlike the with the banking fiasco, the consumer gets the last word on the Auto/UAW bailouts via the wallet. Hopefully, the company heads and the UAW leaders realize they must appease not only the Government but also those they expect to continue to purchase their product. Thus far, I haven't seen evidence of that understanding........put more plainly...you are negotiating with the people who you are trying to sell automobiles. Act like it or suffer the consequences.

56 and at 62 more than 1/2 is dropped , and picked up by Social Security ! These men forced to work overtime and 6 & 7 days a week , payed a First Class Tax Base and Full Social Security / and had NO life ! ( Without a First Class Tax Paying Base , we cannot afford a first class infrastructure ) ? You should think on this !

Pretty soon there will be a big public backlash against the UAW and the Detroit auto makers. People are getting tired of hearing their problems while never addressing the real issues..

Brian, If Toyota sales are down 30 plus percent and they are sporting their first loss in 70 years this not bode well for the auto industry in general. In trying to figure the economics of this industry I pose this question. If they sold 1 million cars ( my number for hypothetical purposes ) one year ago and sales this year are down 30 percent and this causes a loss does this mean that they don't make money on the first 700,000 cars they sell? If that in deed is the case, they are the most efficient then what chance do GM, Ford and chrysler have of climbing out of this hole.

Brian got the business equation correct - the Big 3's operating costs, which include funding the current and legacy pensions plans, are killing them. Gary got it right with the PBGC assuming the pensions and what happens to the retirees. However, the real 8 foot gorilla in this living room, is the political clout of these retire UAW workers and their influence on the Democratic party. The current Democratic leadership does not have the backbone to stand up to the political fallout by forcing the correct economic solution for this NATION, they will do only what is right for their PARTY. Structured Chapter 11 remains the most viable solution. Open up all compensation plans (white collar and blue collar); transfer the pension plan to the PBGC; open up all supplier contracts; kill non-profitable car models and/or production facilities; make the company smaller, leaner, and much more competitive. Both Management and the UAW have to receive a brutal wake-up call - to be competitive in the 21st Century world market means your business model must be based on toady's realities, not from the 30's, 40's and 50's. Anyone in management or union that can't accept this message needs to find another career path. Elsewise, millions of people incomes will be destroyed when the Big 3 goes Chapter 7 (total liquidation) in months!!!!

If the pension fund is overfunded, where's the "hidden" obligation? The pension fund has more money then the PBGC, which means the gov't. wouldnot have to pick it up.

Boycott GM and Chrysler products until they die. It will send a message to Congress the American public is fed up. We just can't afford to pay everyone that the Dems owe. The UAW is the cause of this mess. For the Last 6 years they have had a good economy and GM and Chrysler should have tucked a few dollars away for a rainy day. I guess they didn't make any money they just gave it to the UAW. BOYCOTT, BOYCOTT

The government is in debt,lets cut all the government pensions.The military is in debt,lets cut all military pensons.Get real!Accountability is out the window in America and big business is running with it.Without the unions the middle class would be history.

Best article on this topic so far. I am a salaried worker at Delphi. In the last 3 years, I lost part of my pension, retirement health care, and the 30 and out retirement option. Hourly still has 30 and out retirement, and almost free retiree health care. Don't bash the current hourly workers. 80% of them have been with GM/Delphi less than 3 years. This new class is hard working and thrilled to be working harder and getting more money than a Wal-mart greeter. None are HS dropouts, and most have some college/tech training. The retirement legacy has to be STOPPED, now. It would not be right to "revoke" retirement of a 62 year old who has been retired for 10 years, and make them come work for another 3-8 years. We don't have a job for them, and don't want them. But we need to take action now for the people with 20-25 years so that they won't be added to the problem in 5-10 years. Oscar

Robert was correct in saying the pensions were over funded. At least as of 12/31/2007 according to the GM 10-K. In addition, very little of the assets covering those obligations were invested in equities. This is also in the 10-K. However, we do not know how funded the pension plans are today on a PBGC basis. It is not clear. The PBGC may need to fork over nothing if the plans are well-funded, even in the event of bankruptcy. This is different from the airlines because these plans may in fact be better funded. At the end of 2007, it appeared that way. So, to make these broad conclusions about these pensions is irresponsible. This is probably why the VEBA is being addressed and not pensions. Is the surplus protected in some way? Are the assets immunized against the obligations? Are they protected against volatility? Is total compensation (including retirement benefits) comparable to the foreign competition? These are the questions that you should be asking.

Obama promised to "spread the wealth". Cool. Obama and his democratic majority in the house and senate should have no trouble passing a bill that would give every working person the same health and retirement benefits that the government and union employees get. If the retired lose the union benefits, they would still get medicare and social security the same as the rest of the workers who do not have the benefit of health coverage and pension for life.

I am absolutely disgusted with the UAW. In 2007 I purchased a new domestic vehicle and had I known then what I know now about the UAW, out of principle I would have opted for a foreign vehicle. Allow me to expand............. My disgust is deeply-rooted, as I lost my job this past October due to market conditions. As such, I took my lumps as anyone working within a capitalistic society should. I filed for unemployment insurance, made alternate arrangements for medical insurance, and threw myself into the job market. Why UAW workers should be entitled to anything more than myself during hard times is beyond me. Furthermore, I am a college grad with several years of professional business experience, and during my top earning year I earned less than what the mean (and uneducated) laborer employed by one of the Big 3 makes. Two months into unemploment and without a single viable lead, I would be happy to accept a job at the starting hourly rate as currently prescribed by the UAW. If I recall, last week I heard a UAW member pouting on television about having to contribute a portion of his wages for the purpose of benefits. I just wanted to tell that guy "welcome to the real world". Ignorance is obviuosly blissful. At this point, UAW members should be thankful that they even have jobs! Oh yeah.....on top of what I've already stated, as a taxpayer I have to contribute a portion of my unemployment insurance to support this idiocy. I'm done with it!

It is so interesting to me that so many people are willing to just trash the nation's retirees. I bet you can't wait until you retire so we can just take that away when the nation's finances go into the shitter. So much for working your entire life for retirement security to have it minimized to a "legacy" cost that is expendable on a dime. The UAW and unions like it are responsible for creating a middle class and now because corporate greed has reduced worker's benefits and pay to the lowest priority in almost all companies, we want everyone to get paid less to do more. This auto deal has essentially made Japanese car companies our standard of living. That's nuts for a country that claims to be so all about AMericans. You should really take some time to learn more about the important role unions have played in this country.

Why don't the autoworkers have 401K plans like the rest of us?

HANG ON GANG; JUST WAIT UNTIL THE U.A.W. COMES KNOCKING ON MR. OBAMA'S DOOR...PAY BACK IS EXPECTED AND IT WILL BE GRANTED....AT OUR EXPENSE. MERRY CHRISTMAS!

Chapter 11 baby!

With the unemployment rate creeping up how long would it take to fill all the union jobs with pay of 15-20.00 per hour? Management should go as well...this is not an either or but both need serious changes.

This is only the tip of the iceberg folks. What about the local, state and fed retirements and pensions that are coming up. My wife works for the federal and will be able to retire at 54 with full benefits. What BS. I own my own business and only wish I could give my employees the same perks as she gets. I have employees that take home more pay than I do and still dont come close to what she gets. She works hard and earns her money and god knows I shouldnt complain about her wages but in the round about way we are paying for that high salary through taxes. The one thing Ive learned about being successful in a small business is work hard, do quality work, stay competitive, and most important have a spouse with a better job than you have.

In a way this reminds me of social security...every one understands the problem but no one will attempt to fix it. In the place of a well thought out solution it seems most prefer to destroy the entity and then figure out who to blame and how to spin.

The reason GM's pension plan has not been discussed is because it was over funded.Also if GM were to go bankrupt the government would be obligated to pay a big portion of the GM retirees pension.

Simple answere are just that: simple. Do Honda and Toyota make superior products? I'd say that's pretty subjective. Did GM and Ford make too many SUVs and pickups because they were stupid? If they did, it was only in answer to "stupid" consumers. They built what people would buy. Look at what the small, fuel-efficient cars have done in the market place for the Big Three. Not much. If GM and Ford were so stupid in building SUVs and pickups, why did Toyota, Nissan and Honda jump in the last few years with their own versions? A Chevy Silverado gets better mpg than a Tundra or a Titan, and in my opinion is a superior product.

Couple of points: (1) I have an American car and have bought American for over 10 years. They are every bit as good as anything produced by the foreign competitors. The service has been excellent. One problem in ten years was paid for by the American company with only one letter to corp headquarters with my situation. It is a false perception by most Americans there is a quality difference. I am one very satisfied customer. (2) Lets clear up a very important point about the legecy costs of pensions and health care. Not if, but when the American auto makers go bankrupt and default on their obligations to retirees this will happen. Health benefits will go away, BUT their pensions will be picked up by the PBGC and paid in full up to $2700 per month. I know as a displaced airline employee. The retirees who received less than the $2700/month received their current benefit with no adjustment for inflation. Those with higher benefits (pilots) were cut to the $2700/mo. So please, stop telling me about the poor retiree who only gets $400/mo and what will happen to them. They will still get their check. All this bailout money is going to do is fund the VEBA. It would be cheaper to just use the government money to fully fund the retiree with a one time shot (political reality, the Dems owe the unions and will pay them off with bailout money and card check), cut the health benefit cord now, convert the retirement plan to a 401K, fix the workrules, kill the job bank.

Don't cut worker pay,workers are not rich their making just enough money to pay everyday bills. The Japanese Auto manufacture limites their CEO'S to 1 million dollars a year at their U.S. auto plants. Look at the savings that the fortune 500 companies would have if the limit on CEO's pay was 1 million dollars a year. Cut all white collars workers pay and Ceo's pay equally bonuses included. Have a nice day.