Wednesday, April 29, 2009

Is the new autoworker accord creating a death spiral for all Pension Plans?

Laurel Magri: lying, deceptive, manipulative whore.

As the GM/Chrysler saga plays out, is the death knell sounding for pension plans?

When bankruptcy for Chrysler was first being discussed, GM brought the issue of pension to the forefront through a restructuring plan they submitted to the Canadian Federal and Ontario provincial governments. GM said that it was being crippled by pension payments and it was crucial they be relieved on those responsibilities.

Suddenly the subject of pensions for members of the Canadian Auto Workers - and who pays for them - became a hot-button topic and a toxic issue for politicians.

Angry constituents complained bitterly that they did not want to see taxpayers' money used to absorb the autoworker's pensions should the companies collapse.

As part of the recent autoworker negotiations, Canadian auto workers made a historic concession to pay into their own pensions. Newly hired Canadian autoworkers will now contribute $1 for every hour worked or about $1,700 a year.

CAW president Ken Lewenza rationalized the move in an interview saying that newly hired members of the United Auto Workers in Detroit will have no pensions. The CAW needed to act to maintain Canada's competitive position.

Meanwhile the New York Times reports that the plight of carmakers could upset all pensions.

Stating that the US goverment is considering taking over the pension plans of General Motors and Chrysler, the Times noted that for hundreds of thousands of retired auto workers a federal pension takeover would mean sharply reduced benefits.

Pension experts predict that a US government takeover of those giant pension plans could accelerate the decline of other traditional pension plans as the move will spur other auto companies and all types of manufacturers to abandon such benefits for competitive reasons.

“If one of these companies solves its pension problem by shunting it off to the federal government, then for competitive reasons the others have to do the same thing,” said Zvi Bodie, a professor of finance at the Boston University School of Management and longtime observer of the government’s pension insurance system.

“That is the death spiral,” said Bodie.

"Not only would Ford have reason to opt out of the expense of maintaining a pension plan, but so would Toyota and Honda, which also have pension plans at their American plants", said Teresa Ghilarducci, a professor of economics at the New School for Social Research.

In Canada, the wolves are already gathering at the pension door. Ontario Premier Dalton McGuinty says Ontario doesn't have the resources to put more money into its pension safety net (which is the government vehicle that bails out private pension plans that fail).

Yet, Ontariio has all the resources necessary for to protect and support public service (and MPP) pension plans.

Those public service plans, like GM and Chrysler's private sector plans, are also under stress from shortfalls. But they are 100% funded from tax revenue. It seems a double standard that public sector pensions are 100% per cent protected against shortfalls, while private-sector pensioners can be thrown to the wolves.

How long before the private sector pension death spiral brings down the public plans too?

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Email: village_whisperer@live.ca

1 comment:

  1. Old Russian saying...You can tell same lie 1000 times but not change truth!

    Difference between USSR Communist media and USA "mainstream media"

    In Russia government make media say what they want - even if lie.
    In USA "mainstream media" try make government what they want - even if lie..
    .....eventually they become same thing?!

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    ReplyDelete