You'd think we were back in second grade, what with all this "not" stuff. New York Times Op Editorialist Roger Lowenstein joins celebrity stock picker (and former GM booster) Jim Cramer and Merrill Lynch analyst John Murphy in accepting GM's not impossible nightmare. In his attempt to discover "WHO shot GM?" Lowenstein passes rising gas prices, a lack of hyrbids and bad design and goes straight to… the United Auto Workers' (UAW) legacy costs. "None of G.M.’s management miscues was so damaging to its long-term fate as the rich pensions and health care that robbed General Motors of its financial flexibility and, ultimately, of its cash." Huh? Apparently, without paying all that money to the UAW GM could have "designed new cars or researched alternative fuels. Or it could have acquired half of Toyota." Or bought Saab! Or HUMMER! Or started Saturn! Oh wait… sorry. It's all about universal health care and highly relevant shit like that. "The sorry decline of General Motors has proved Reuther right: the government is the better provider of social insurance. Let industry worry about selling products." Sure. That's the right approach. NOT!
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But, the UAW pensions funds, that wasn’t GM:s money in the first place? As I understand it, it is pensions, belonging to retired UAW-workers. So, GM has only been a custodian of sorts? I mean, it is not that they can count the money as it’s own? Any which way you see it, looting pension funds does have to mean grabbing money that is not yours to begin with. So how can that be seen as an asset? And an asset that they wrongfully believes would have saved GM:s ass? I mean, what is this? 1984? Alice through the looking glass?
Hmmn, and how is Mr Lowenstein funding his golden yrs? Doesnt every American deserve a retirement plan? Every blue collar worker’s dream is to retire from the body breaking, mind numbing job he has endured to capture a small piece of the American Dream.
Please dont put me in the spot of defending the modern UAW. It has become as fat and overblown as the SUVs the bosses tell them to make. But why does the line worker always gotta get the heat? He is just trying to get by , same as everybody else.
Every single American owes a debt to the Organized Labor Movement. Admit it or not. Read the history books before flaming me with your neo-con bullshit.
30 and out has been a real damaging blow to long term survival. Start at 18 work till 48 and retire with full benefits and nice pension. Collect them benefits and pension for another 30 to 40 years. Just unsustainable over the long run. What a mess it will be if the companies start declaring bankruptcy and shed their pension liabilities. If you are paying a million retirees say 50 grand a year it does get rather expensive if you do the math. Like 50 billion a year. And to top it off you need to also pay the laid off employees full pay and benefits. Definately to many people riding in the cart and not many pulling the cart.
Unbeleivable, blaming the victim. Uness I am mistaken, the rank and file didn’t design the cars that no one wanted, didnt invest heavily in fuel wasting velicles, while ignoring the samll vehicles that are now eating its lunch. Ignoring them for like 30 years!
Unless I am mistaken, if GM bites the big one, the workers, past and present will loose everything too.
Robert –
The brief article in the Times clearly pins the blame of GM’s woes on the ineptitude of management over the years and rightly points out that the most costly blunder has been consistently failing to deal with the cost structure of the pay and benefit agreements struck with the UAW. He doesn’t seem to say anything truly contradictory to arguments you have been making in the DW series for years. So my question is why all the attitude towards Lowentstein?
Incidentally “When Genius Failed” is a great book that chronicles and interesting trigger point of 1998’s market turmoil …. I am ordering “While America Aged” Amazon next..
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The line workers’ pensions and benefits are too rich relative to what benchmark, Red Ink Rick’s guaranteed pension and benefit package?
The Detroit-3 treated their employee welfare obligations like a gigantic Ponzi scheme. Instead of investing sufficient funds to cover future payouts they deferred them and paid rich bonuses to executives and healthy dividends to shareholders. A glance at most products dribbling off the assembly lines confirms the R&D budget also took a hit. It was self-serving shortsightedness on a massive scale.
Yesterday TTAC reported GM wants to “borrow” its VEBA obligations. If the UAW is foolish enough to let it happen, and there are no statutory safeguards, you can bet your ass Rick will be first at the trough. The workers should bend over a grease up!
http://tinyurl.com/fyez3
30 and out is/was a fairly standard policy in blue collar, military, and civil service jobs. It was a lure to put up with a body breaking , mind numbing job. Without it the positions wouldnt have been filled.
People would have gone on to be newspaper hacks, politicians, lawyers, accountants
financial analysts and managers. That is a stretch, because there would have been nobody actually producing anything and there would be no need for all those white collar parasites (jobs)
rprellwitz
He doesn’t seem to say anything truly contradictory to arguments you have been making in the DW series for years. So my question is why all the attitude towards Lowentstein?
Lowenstein is using GM’s decline as an excuse to lobby for nationalized (or at least government owned and operated) health care and pensions. I don’t think it’s a particularly good example for his argument.
Yes, GM’s cost structure was/is bloated by management’s capitulation to UAW demands. Since the beginning of the Death Watch series, we’ve been pointing-out that GM is a high-cost automaker competing against low-cost transplants on price. Not a recipe for success.
But to suggest that GM would be kicking-ass if not for its [freely negotiated] obligations to its workers is lunacy.
I don’t think Lowenstein is laying the blame at the worker’s feet. I’ve read his book “While America Aged” and he is pretty clear that while workers negotiated and won pension rights that ultimately became unsustainable, the fault for the situation should be placed on industry. Industry should have pushed nationalized pensions and health care. If they had, they would have costs similar to other auto-building nations.
It’s going to be interesting watching this headline evelve…
“Bankruptcy is not unthinkable for Detroit’s former king”
“GM bankruptcy possible…”
“General Motors probably to bankrupt…”
“General Motors bankruptcy likely, says…”
“GM bankruptcy announcement imminent”
“Text of GM bankruptcy announcement”
“Michigan communities ponder life in post-GM world”
Robert –
The sorry decline of General Motors has proved Reuther right: the government is the better provider of social insurance. Let industry worry about selling products.
Your right this is a very weakly supported conclusion.
What else might G.M. have accomplished with that money? It could have designed new cars or researched alternative fuels. Or it could have acquired half of Toyota — a company that the stock market now values at close to $150 billion.
This however is merely a shotgun approach to speculating on the possible outcomes were the cash not being diverted to the UAW, hardly a bold statement about ass-kicking.
I am curious to see what the book actually says. Is that the source of the ass-kicking reference?
jerseydevil: Unbeleivable, blaming the victim. Uness I am mistaken, the rank and file didn’t design the cars that no one wanted, didnt invest heavily in fuel wasting velicles, while ignoring the samll vehicles that are now eating its lunch. Ignoring them for like 30 years!
Calling the UAW a victim is a bit much. The union was every bit as happy to ride the SUV (and before, that, the big car) gravy train as management was.
jerseydevil: Unless I am mistaken, if GM bites the big one, the workers, past and present will loose everything too.
Pension benefits would be covered by the federal Pension Benefit Guaranty Corporation (PBGC), up to a certain amount ($51,750 a year for those who retire at age 65).
The concern is the loss of health care benefits. PBGC doesn’t cover those, so unless the retiree is eligible for Medicare, he or she must purchase private insurance, which is typically expensive in that age bracket.
Our neighbor was retired from Bethlehem Steel. When that company went bankrupt, he lost his health benefits, but retained his pension, thanks to PBGC. He still had to go back to work to pay for his prescription drugs.
Bluecon, it is not the pension and it is not the 30 and out that has become backbreaking for Detroit. It is the retiree healthcare costs. If money is deducted and invested there is more than enough for a comfortable retirement at any age with 30 years of investing, provide of course that the money is actually invested. I work in a union job where we have 1 401K and a matching company contribution. However, Medicare will be my healthcare when I am age eligible. The retirees of Detroit don’t want Medicare but rather their own excellent private health plans which of course they want their employers to pay for. That is what is killing Detroit in costs. So why the hostility to 30 years and out? The hostility should be towards those expecting private healthcare coverage for free. If they pay for it they get it and if not then they should accept Medicare.
Are pension and wage costs solely responsible for Detroit’s decline? No. Remember that back in 1971, when Detroit in general, and GM in particular, had a much better reputation, and the cost differential wasn’t as great, GM gave us…the Vega.
Have these costs given management less room to maneuver today? Yes. They were negotiated in a different era, when Detroit essentially set the cost of a new car. Any increased costs were simply passed on to consumers in the cost of the car. It was a different world for both management and the UAW.
Given the outcome of the last contract negotiation, it appears that both sides have faced reality, but it may be too late.
Sherman Lin
I am not hostile to 30 and out.
I just realize that it is an unworkable concept as instituted by the Big 2.8 and the Unions. The high number of retirees is largely a result of 30 and out. Without the thirty and out and all the buyouts there would be a hugely smaller number of retirees. The system to pay the retirees is largely a Ponzi scheme. The employees would have been much better off putting money in their own 401k type plan. I sure wouldn’t want to be counting on a pension like this to remain solvent.
Even the 29 billion GM is to hand over to the union for Veba is a tiny amount of the liability and several times what GM is worth.
With the demographics and the huge bilge of baby boomers coming up on retirement this will get much worse. How is the government going to pay for the Social Security ponzi scheme?
As a native of Bethlehem, PA (though thankfully not a resident) I think the story is not quite so simple.
Analysts now agree that the seeds of Bethlehem’s demise were sown due to labor agreements in the 1950s. Labor insisted on trying to kill the goose that laid the golden egg. Management would do just about anything to appease labor and avoid losing production. Thereafter, a fatal combination of greed and stupidity on the part of both management and labor ensured they would never again be competitive. Before they woke up to reality it was too late.
Thus today, rather than a worthwhile contributor to the nation, Bethlehem’s legacy is reduced to that of PBGC payments to the retirees (which the rest of us msut pay for) and an unsightly blight on the environment.
I see too many parallels with the auto industry to believe the outcome will be significantly different.
Rick Wagoner in a speech in Dallas today has stated that gm has “no thought whatsoever of bankruptcy” …. “cash position will remain robust throughout the year”….”has a lot of money for a company its size” (market cap is $5.565 Billion as i type) rumors “don’t help anything”
I don’t know what the speech was for.
The health care system in Japan isn’t the same as the system in Canada or Norway or Italy. Each system should be thought of as an experiment and each experiment has some features that work well and some that need refinement.
Health care in the U.S. is a disaster. 25 to 40% (depending on who you read) are not covered with any type of insurance, doctors are quitting because they are tired of fighting with insurance companies, we have the most expensive “system”, and our insurance companies take 1/3 of all money spent on health care for their administration expenses.
We should be looking for ways to get out from under our present insurance companies, ways to simplify paper work for hospitals and doctors, and ways to simplify the lives of our businesses.
Today some American businesses are working to help us. Walmart, Google, and Microsoft are finding ways to simplify medical record keeping and lower costs.
Unfortunately our government is frozen in inaction because of people who are afraid of the word “socialism” and lobbiest for the insurance companies.
Along with a lot of other poor planning GM didn’t think ahead on medical costs. American industry had the opportunity to push for government sponsered health care back in the 1950’s when other industrial nations started their experiments but we were afraid of that terrible word – socialism.
Before you get excited, scared, or angry because you saw that terrifying word please stop and think. Should we turn our police forces, national security, streets & roads, water supply, food inspections over to private industry? How do we protect ourselves from insurance companies siphoning off 1/3 of our health care money?
While we wait for answers the U.S. falls behind in life expectancy and our businesses suffer.
Well I think there’s pretty clearly sufficient blame to go around among execs AND labor. One thing’s for sure: if Lowenstein writes a book about GM’s collapse, his title this time sure as hell WON’T feature the word Genius.
The NYT should indeed be worrying about bankruptcy. Its own. Should we take anything they say seriously??
Folkdancer
You think if GM can’t afford gold plated health care the government can? Canadas health care system is very good as long as you don’t get sick or need to use it. Far lower standards than the USA.
The demographics say disaster coming for health care. How you going to take care of all those fat, out of shape, aging boomers?
If this was Japan, Rick Wagoner would have jumped out the window years ago.
In Dallas Rick Wagoner emphatically stated that “Bankruptcy is not an option. Speculation and comments about bankruptcy in the past week are “not at all constructive or accurate,” Rick Wagoner said Thursday. We have 24B in cash and $7B in credit available.”
“Under any scenario we can imagine … our cash position will remain robust through this year” and the company has options for raising cash beyond that, Wagoner said at a lunch meeting of Dallas business leaders.”
What now?