75% of Americans think the UAW should die

[DinoDoc]

What happens to union contracts when a company enters bankruptcy?

[mrmitchell]

What happens to union contracts when a company enters bankruptcy?

They turn into doves through the power of prayer.

[Zkribbler]

What happens to union contracts when a company enters bankruptcy?

Something very similar as to what would happen to bondholders and shareholders. Do Americans hate these people too? Seems like an awful lot of hatred bubbling here.

[DinoDoc]

Something very similar as to what would happen to bondholders and shareholders. Do Americans hate these people too?

I'm sure they hate both the union and the management who ran the company into the ground.

[DanS]

I, for one, hate them for squandering hundreds of billions of dollars of our resources on the way down the tubes. They deserve maximum scorn.

[chequita guevara]

I'm sure they hate both the union and the management who ran the company into the ground.

The death of Detroit lies entirely at the hands of management.

[Imran Siddiqui]

The death of Detroit lies entirely at the hands of management.

Oh, tell another joke!

[Q Classic]

Oh, tell another joke!

Actually, he's quite right. Detroit's management could have hired Robocop, but they didn't, and now look at what kind of hellhole it is.

FACT.

[Imran Siddiqui]

I forgot about that

[Zkribbler]

Robocop couldn't have made us buy their gas-guzzling SUVs.

[Japher]

They spent all their money on chasing Robocop

[Seeker]

Why did they think that 'gas-guzzling SUVs' were the way to go?

Because they could no longer compete on price/quality in the sedan/small truck market against the imports. Why?

Yes there were some bad management decisions. But their healthcare costs are a big unspoken reason behind many of these seemingly boneheaded decisions.

[Dinner]

I dare say they're not the only ones choking on health care costs. Most of the large manufacturers are. Which is all the more reason to put in place universal health care (which Obama won't do because he's so scared of being called a socialist )

[Kidlicious]

I, for one, hate them for squandering hundreds of billions of dollars of our resources on the way down the tubes. They deserve maximum scorn.

What about their pension funds that we insure?

http://www.nytimes.com/2008/11/25/business/25auto.html

G.M.’s Pension Fund Stays Afloat, Against the Odds

Published: November 24, 2008
When General Motors left Washington empty-handed last week, among the lingering questions was whether its huge pension fund could topple and crush the government’s pension insurance program.

When any pension fund fails, usually as part of a bankruptcy, the government takes over its assets as well as its payments to retirees. In G.M.’s case, its plan would dwarf the nation’s pension insurance fund.

Still, G.M. appears to have enough money in the pension fund to pay its more than 400,000 retirees their benefits for many years — even with the markets swooning around it. That is largely because of the conservative way G.M. has managed the fund recently, and it explains why G.M. has not joined the long list of companies pressing Congress for pension relief.

But this glimmer of hope in a bleak auto landscape could change drastically, particularly if G.M. struggles along for a few more years, only to go bankrupt. The company’s blue-collar work force is still building up new benefits with every additional hour worked, and the pension fund will have to grow smartly to keep up with those costs.

If G.M. continues paying people to retire early, the costs will grow even more, because the plan will have to pay retirees for more years than it budgeted. And G.M. is not contributing additional money to the plan right now.

Already, G.M. says it will be paying retirees about $7 billion a year for the next 10 years. The fund’s assets were worth $104 billion at the end of 2007, more than enough to cover its obligations of $85 billion. Since then, the assets have declined and the obligations have grown, each by undisclosed amounts. The company says it does not plan to add any money to the fund for the next three or four years.

Even if G.M. were forced into bankruptcy, the government might insist that it keep the fund, and cover any shortfalls with its own money.

“We would maintain that it can afford to keep its plan intact,” said Charles E. F. Millard, director of the Pension Benefit Guaranty Corporation, the federal agency that takes over failed plans. “Based on past history, we think that argument has a reasonable chance of success.”

Whatever its ultimate fate, the G.M. fund may illustrate, against the odds, that it is still possible to offer traditional, defined-benefit pensions even in a historic bear market.

The other American automakers, Chrysler and the Ford Motor Company, also operate pension funds. Ford said that its fund, which is about half the size of G.M.’s, had a small surplus at the end of 2007. Since then, however, it is thought to have suffered a bigger percentage of losses than G.M.’s fund, because it uses a different investment strategy.

Little is known about the Chrysler pension fund today because the company stopped making mandatory pension disclosures when it was taken private in August 2007.

Along with pensions, G.M. has promised to provide health care to retirees, but those medical benefits are not guaranteed by the federal government. The total cost of these benefits in today’s dollars was estimated at $60 billion at the end of 2007, and G.M. had set aside only about $16 billion to cover the cost.

That year, G.M. and the United Automobile Workers agreed to let G.M. cap its health obligations to retirees by creating a separate entity to manage the retiree health plan, and making a big payment. The automaker has said it will make the payment in January 2010, and its retiree health obligations will end then. In the meantime, G.M. has issued securities to cover part of the cost and is holding them in a subsidiary created for that purpose.

The G.M. pension is viable today because of the company’s response to the firestorm at the beginning of this decade, said Nancy C. Everett, chief executive of G.M. Asset Management. The unit manages the company’s domestic and foreign pension funds, as well as other big pools of company money.

In the two years after the tech crash of 2000, most American pension funds suffered their worst squeeze ever. Although the stock market swings are even more severe now, pension funds have been buffered somewhat by relief provisions written into the pension law signed in 2006.

At the time of the tech crash, most pension funds had invested heavily in stocks, and stocks lost billions of dollars in value. At the same time, interest rates fell to unusually low levels, causing a painful mismatch, because low rates make retirees’ benefits more expensive for pension funds to pay. G.M.’s pension fund finished 2002 with a shortfall of almost $20 billion, by far the biggest of any American company.

... continued at site