The Big 3 - facts and issues

[NOBama]

Does that mean if a company goes under then there is no superannuation for its employees?

Again, I'm on shakey ground here but, that next to the last paragraph in the link Bob gave us indicates that the PBGC would be involved.

Pension Benefit Guaranty Corporation

If a defined benefit pension plan (traditional company retirement) is terminated because the employer has financial problems and cannot fund the plan, then the Pension Benefit Guaranty Corporation (PBGC), a government corporation formed under ERISA, will assume responsibility for the plan. The PBGC pays benefits after termination up to a certain maximum amount. Defined contribution plans (such as 401(k) plans) are not insured by PBGC.

Maybe somebody with more corporate bankruptcy knowledge will come along and shed more light on the particulars.

 

[editec]

I've just spend about an hour trying to get a handle on the UAW pension fund, it's obligations, and so forth without much luck.


Looks to me like the decline number of UAW workers coupled with the huge number of retirees and their families, coupled with the fact that the stock market crashed (thus effecting the pension fund's valuation) puts the pension fund and the Health care pension fund into big trouble.

As to the government bailing those out if they go belly up?

I doubt the organization designed to deal with pensions that go OOB is up to the task.

 

[SwingVoter]

As to the government bailing those out if they go belly up?

The PBGC is financed by premiums paid per covered beneficiary, not income taxes. Also, gov't wisely increased the premium calculation in 2006, and it's now indexed for inflation, and will rise to $34 per plan participant in 2009.

PBGC Premiums Rise With Enactment of Budget Reconciliation Bill

 

[tigerbob]

.....puts the pension fund and the Health care pension fund into big trouble.

Health Care issue should be less of a problem in future. Problem is, the deal agreed with the UAW doesn't come into force until 2010 - much too late at the current cash burn / reserves rate:


Last year, GM brokered a historic deal with the United Auto Workers allowing it to eventually shed health-care obligations and potentially cut labor costs, such as wages and benefits. On the capacity side, Clarke said GM has worked extensively in the past three years to shave its manufacturing footprint in the U.S. to an appropriate size.

Of course, GM has to wait until 2010 and pay out $7 billion to take advantage of that UAW deal. And, with U.S. automobile demand collapsing further each month, GM’s capacity issues look to be far from solved.

Deal Journal - WSJ.com : Why GM Says Bankruptcy Is an Impossibility

 

[Annie]

Health Care issue should be less of a problem in future. Problem is, the deal agreed with the UAW doesn't come into force until 2010 - much too late at the current cash burn / reserves rate:

Because of Obama and national health care? What do you mean?

Last year, GM brokered a historic deal with the United Auto Workers allowing it to eventually shed health-care obligations and potentially cut labor costs, such as wages and benefits. On the capacity side, Clarke said GM has worked extensively in the past three years to shave its manufacturing footprint in the U.S. to an appropriate size.

Of course, GM has to wait until 2010 and pay out $7 billion to take advantage of that UAW deal. And, with U.S. automobile demand collapsing further each month, GM’s capacity issues look to be far from solved.

Deal Journal - WSJ.com : Why GM Says Bankruptcy Is an Impossibility

So you are saying the US taxpayer should bail them out until 2010, because they have intentions?

 

[Turboswede]

2. If the Big 3 are not bailed out, is Chapter 11 an option?

Chapter 11 seems like the best option. Gets the makers out of their ridiculous UAW contracts, allows them to focus on the business of retooling and making a better car / truck. But is Chapter 11 an option? From the reports I’ve read, you have to have a viable business model with Chapter 11 - if your business is not a ‘going concern’, that’s chapter 7 (liquidation), not chapter 11.

Tigerbob, it looks like we have been locked into the bailout mode which I expected but hoped against. While I can’t talk about GM or Chrysler, a Chapter 11 would have been the best solution to the problem with the Federal Government Backing Up Warranty and support concerns which may affect the going concern value.

Don’t buy the line of BS FoMoCo’s officers and directors are selling, they want a bailout to save their Executive Pensions and equity holdings, not to avoid layoffs. Layoffs are inevitable at this point and that sucks, but what would suck more is using tax dollars to fund the executive pension and stock purchase plans.

Obviously they will not tell the American public that the reason for the bailout is to save the top .1% of FoMoCo’s employees & contractors from loosing hundreds of millions of dollars, but that’s what they are in fact pitching for.

A Chapter 11 is exactly what the corporate officers and directors won’t want and it will not surprise me if they do anything in their (considerable) power to avoid it. The majority of Officer & Director compensation is paid in the form of Equity which becomes worthless in reorganization. Under a Cpt 11 William Clay Ford will personally lose about $20M, while Mulally $28M. In addition, the Ford Supplemental Executive Retirement Plans are funded through what are called “Rabbi Trusts” which are considered assets subject to creditor claims in a Chapter 11.

Unlike the Officers, the pensions of the workers are guaranteed by the Pension Benefit Guarantee Corporation and any renegotiation would leave current plan assets intact. What they would do is probably adjust the actuarial assumptions in the plan for calculating the benefit so that the annual funding requirements would be easier to meet.

What a Chapter 11 would look like at Ford would be something like this:

The Bankruptcy judge would allocate a $0 value to all ford Common stock and probably preferred shares as well in exchange for some new form of debt instrument.

Ford and the bankruptcy judge would “cram down” some debt, for example, the bankruptcy court could order that a debt owed to a material supplier would be reduced to the level representing the original costs incurred by the supplier to provide the original materials to FoMoCo.

FoMoCo and the UAW would be allowed to renegotiate the collective bargaining agreements for a change in the actuarial assumptions. FoMoCo and the UAW have been trying to do this for years but the NLRB will not let them (check out some of FoMoCo’s 8-K’s). The UAW is trying to work with ford to reduce these costs and save Jobs, but the NLRB won’t let them because, absent a bankruptcy, the UAW can’t go back on agreements it already entered into on behalf of its members.

After a significant portion of debt were eliminated, FoMoCo would be able to unload the Premier Auto Group and Ford Motor Credit. On the balance sheet that would have them with about $160B in assets and $118B in debt.

Ford would reissue new shares for debt issued at the beginning of the Cpt 11 and FoMoCo new stock would be about $21/share ($42B assets / 2B shares outstanding).

Who would be out of work? Defiantly the Officers, their job is to protect the investor’s equity and they have managed to destroy it. Employees of the PAG at the management level, Jaguar will not stop making cars but a lot of the Ford managers at Jaguar will become redundant. FMC, Ford Motor Credit will probably need to be liquidated and as those jobs are not protected by the Union, they would be the first to go.

It would probably take about a year, FoMoCo would NOT go out of business as the core manufacturing could be restructured to generate about between $4.1 (liberal estimate) and $1.8B per year and the company hold about $42B in net assets.

What a bailout will do is protect the Ford shareholders, directors and officers until the next boom cycle begins and we can go through this whole drill again in 2032 or so.

 

[Annie]

Tigerbob, it looks like we have been locked into the bailout mode which I expected but hoped against. While I can’t talk about GM or Chrysler, a Chapter 11 would have been the best solution to the problem with the Federal Government Backing Up Warranty and support concerns which may affect the going concern value.

Don’t buy the line of BS FoMoCo’s officers and directors are selling, they want a bailout to save their Executive Pensions and equity holdings, not to avoid layoffs. Layoffs are inevitable at this point and that sucks, but what would suck more is using tax dollars to fund the executive pension and stock purchase plans.

Obviously they will not tell the American public that the reason for the bailout is to save the top .1% of FoMoCo’s employees & contractors from loosing hundreds of millions of dollars, but that’s what they are in fact pitching for.

A Chapter 11 is exactly what the corporate officers and directors won’t want and it will not surprise me if they do anything in their (considerable) power to avoid it. The majority of Officer & Director compensation is paid in the form of Equity which becomes worthless in reorganization. Under a Cpt 11 William Clay Ford will personally lose about $20M, while Mulally $28M. In addition, the Ford Supplemental Executive Retirement Plans are funded through what are called “Rabbi Trusts” which are considered assets subject to creditor claims in a Chapter 11.

Unlike the Officers, the pensions of the workers are guaranteed by the Pension Benefit Guarantee Corporation and any renegotiation would leave current plan assets intact. What they would do is probably adjust the actuarial assumptions in the plan for calculating the benefit so that the annual funding requirements would be easier to meet.

What a Chapter 11 would look like at Ford would be something like this:

The Bankruptcy judge would allocate a $0 value to all ford Common stock and probably preferred shares as well in exchange for some new form of debt instrument.

Ford and the bankruptcy judge would “cram down” some debt, for example, the bankruptcy court could order that a debt owed to a material supplier would be reduced to the level representing the original costs incurred by the supplier to provide the original materials to FoMoCo.

FoMoCo and the UAW would be allowed to renegotiate the collective bargaining agreements for a change in the actuarial assumptions. FoMoCo and the UAW have been trying to do this for years but the NLRB will not let them (check out some of FoMoCo’s 8-K’s). The UAW is trying to work with ford to reduce these costs and save Jobs, but the NLRB won’t let them because, absent a bankruptcy, the UAW can’t go back on agreements it already entered into on behalf of its members.

After a significant portion of debt were eliminated, FoMoCo would be able to unload the Premier Auto Group and Ford Motor Credit. On the balance sheet that would have them with about $160B in assets and $118B in debt.

Ford would reissue new shares for debt issued at the beginning of the Cpt 11 and FoMoCo new stock would be about $21/share ($42B assets / 2B shares outstanding).

Who would be out of work? Defiantly the Officers, their job is to protect the investor’s equity and they have managed to destroy it. Employees of the PAG at the management level, Jaguar will not stop making cars but a lot of the Ford managers at Jaguar will become redundant. FMC, Ford Motor Credit will probably need to be liquidated and as those jobs are not protected by the Union, they would be the first to go.

It would probably take about a year, FoMoCo would NOT go out of business as the core manufacturing could be restructured to generate about between $4.1 (liberal estimate) and $1.8B per year and the company hold about $42B in net assets.

What a bailout will do is protect the Ford shareholders, directors and officers until the next boom cycle begins and we can go through this whole drill again in 2032 or so.

I agree in principle, whole heartedly. It will cost 10's of thousands of jobs and be very hard to swallow, but better now then when it looks like we are peeking out an abyss. We are in the abyss now, bring it on and get it over with.

If my dad or grand dad was a UAW retiree, we'd help them out. So will there kids and grandkids.

Perhaps one or more of them will survive Chap. 11 to become a version of it's best self?

 

[Paulie]

I agree in principle, whole heartedly. It will cost 10's of thousands of jobs and be very hard to swallow, but better now then when it looks like we are peeking out an abyss. We are in the abyss now, bring it on and get it over with.

If my dad or grand dad was a UAW retiree, we'd help them out. So will there kids and grandkids.

Perhaps one or more of them will survive Chap. 11 to become a version of it's best self?

There have been prominent businesses who have successfully come out of Ch. 11's and subsequently flourished again.

K-Mart is a good example.

The only thing stopping the auto makers is greed, plain and simple.

 

[Annie]

There have been prominent businesses who have successfully come out of Ch. 11's and subsequently flourished again.

K-Mart is a good example.

The only thing stopping the auto makers is greed, plain and simple.

Around here K-Mart isn't doing so well, though better than my quoted grammar mistakes above.

I agree about pure and simple greed.

 

[tigerbob]

Because of Obama and national health care? What do you mean?

No, because "GM brokered a historic deal with the United Auto Workers allowing it to eventually shed health-care obligations", as indicated in the article (????).

So you are saying the US taxpayer should bail them out until 2010, because they have intentions?

No, again, I wasn't saying anything. I was just posting a link to the article I had alluded to earlier, paraphrasing the content, and saying that GM will be bankrupt in a month, so what is planned in a year is too little too late. Basically I was amplifying my thoughts from the first para of post 12.

Am I missing something here?

 

[Paulie]

Around here K-Mart isn't doing so well, though better than my quoted grammar mistakes above.

I agree about pure and simple greed.

Well I'm sure there are markets where Kmart has a tough time competing, that is to be expected, given their competition.

The thing about the automakers, is that Americans ultimately WANT to buy American vehicles. It's in our nature. The problem is, they aren't offering us something good enough to keep our business. And when economic times get tough, we will buy what we can best afford. And right now, US vehicles aren't cutting it.

The demand could easily be there for the taking, if they got their act together.

I think US automakers could benefit from a bankruptcy in the long run, and could ultimately prosper once again. It's all up to them.

 

[Annie]

Well I'm sure there are markets where Kmart has a tough time competing, that is to be expected, given their competition.

The thing about the automakers, is that Americans ultimately WANT to buy American vehicles. It's in our nature. The problem is, they aren't offering us something good enough to keep our business. And when economic times get tough, we will buy what we can best afford. And right now, US vehicles aren't cutting it.

The demand could easily be there for the taking, if they got their act together.

I think US automakers could benefit from a bankruptcy in the long run, and could ultimately prosper once again. It's all up to them.

I was a holdout, buying "American" when everyone was going the 'good route' of Japanese. I owned a 1981 Ford Escort it died, literally the day it was paid for, 2 years. Then I bought a 1983 Chrysler Caravan, lasted beyond my divorce, though I traded it in for a 1995 Chrysler LeBaron convertible. Now, that was a wickedly good car, sorry I tossed it because of gas prices in 2002 for Toyota, (my first foreign car), Corolla. Was looking for low maintenance and good mileage. In 2005 went with Mazda, as I wanted a 6 cylinder, the 4 was underperforming.

I'm looking again, but unlikely will 'buy American.' Not that I don't want to, can't afford to. That is the problem.

 

[tigerbob]

Tigerbob, it looks like we have been locked into the bailout mode which I expected but hoped against. While I can’t talk about GM or Chrysler, a Chapter 11 would have been the best solution to the problem with the Federal Government Backing Up Warranty and support concerns which may affect the going concern value.

Don’t buy the line of BS FoMoCo’s officers and directors are selling, they want a bailout to save their Executive Pensions and equity holdings, not to avoid layoffs. Layoffs are inevitable at this point and that sucks, but what would suck more is using tax dollars to fund the executive pension and stock purchase plans.

Obviously they will not tell the American public that the reason for the bailout is to save the top .1% of FoMoCo’s employees & contractors from loosing hundreds of millions of dollars, but that’s what they are in fact pitching for.

A Chapter 11 is exactly what the corporate officers and directors won’t want and it will not surprise me if they do anything in their (considerable) power to avoid it. The majority of Officer & Director compensation is paid in the form of Equity which becomes worthless in reorganization. Under a Cpt 11 William Clay Ford will personally lose about $20M, while Mulally $28M. In addition, the Ford Supplemental Executive Retirement Plans are funded through what are called “Rabbi Trusts” which are considered assets subject to creditor claims in a Chapter 11.

Unlike the Officers, the pensions of the workers are guaranteed by the Pension Benefit Guarantee Corporation and any renegotiation would leave current plan assets intact. What they would do is probably adjust the actuarial assumptions in the plan for calculating the benefit so that the annual funding requirements would be easier to meet.

What a Chapter 11 would look like at Ford would be something like this:

The Bankruptcy judge would allocate a $0 value to all ford Common stock and probably preferred shares as well in exchange for some new form of debt instrument.

Ford and the bankruptcy judge would “cram down” some debt, for example, the bankruptcy court could order that a debt owed to a material supplier would be reduced to the level representing the original costs incurred by the supplier to provide the original materials to FoMoCo.

FoMoCo and the UAW would be allowed to renegotiate the collective bargaining agreements for a change in the actuarial assumptions. FoMoCo and the UAW have been trying to do this for years but the NLRB will not let them (check out some of FoMoCo’s 8-K’s). The UAW is trying to work with ford to reduce these costs and save Jobs, but the NLRB won’t let them because, absent a bankruptcy, the UAW can’t go back on agreements it already entered into on behalf of its members.

After a significant portion of debt were eliminated, FoMoCo would be able to unload the Premier Auto Group and Ford Motor Credit. On the balance sheet that would have them with about $160B in assets and $118B in debt.

Ford would reissue new shares for debt issued at the beginning of the Cpt 11 and FoMoCo new stock would be about $21/share ($42B assets / 2B shares outstanding).

Who would be out of work? Defiantly the Officers, their job is to protect the investor’s equity and they have managed to destroy it. Employees of the PAG at the management level, Jaguar will not stop making cars but a lot of the Ford managers at Jaguar will become redundant. FMC, Ford Motor Credit will probably need to be liquidated and as those jobs are not protected by the Union, they would be the first to go.

It would probably take about a year, FoMoCo would NOT go out of business as the core manufacturing could be restructured to generate about between $4.1 (liberal estimate) and $1.8B per year and the company hold about $42B in net assets.

What a bailout will do is protect the Ford shareholders, directors and officers until the next boom cycle begins and we can go through this whole drill again in 2032 or so.

That is a completely fascinating and very clear explanation of a complicated subject. Kudos to you. I'll have to read it a few more times to get my head round all of it, but it does potentially answer a lot of the questions in my OP.

That said, I've been doing other stuff for the last hour or so and haven't seen any news yet today. I was rather hoping that Ch. 11 would be one possible option, but from what you said in your intro it appears that it might be academic.

 

[Paulie]

I was a holdout, buying "American" when everyone was going the 'good route' of Japanese. I owned a 1981 Ford Escort it died, literally the day it was paid for, 2 years. Then I bought a 1983 Chrysler Caravan, lasted beyond my divorce, though I traded it in for a 1995 Chrysler LeBaron convertible. Now, that was a wickedly good car, sorry I tossed it because of gas prices in 2002 for Toyota, (my first foreign car), Corolla. Was looking for low maintenance and good mileage. In 2005 went with Mazda, as I wanted a 6 cylinder, the 4 was underperforming.

I'm looking again, but unlikely will 'buy American.' Not that I don't want to, can't afford to. That is the problem.

It IS the problem, you're right. The ones that you CAN afford, are junk.

I just bought a 99 Taurus that has so many little annoying problems. Nothing really major yet, but from what I've gathered they are common problems with that car. I only paid $1,000 for it though, and its got 60k on it and in great condition otherwise. My mother owns a Ford Focus, and she's had nothing BUT problems with it for years. My girlfriend recently had an '01 Ford Explorer, and it had engine problems that were really tough to diagnose, and under 100k miles. She's got a Nissan Altima now, and it runs like a champ. Go figure.

 

[Turboswede]

It IS the problem, you're right. The ones that you CAN afford, are junk.

I just bought a 99 Taurus that has so many little annoying problems. Nothing really major yet, but from what I've gathered they are common problems with that car. I only paid $1,000 for it though, and its got 60k on it and in great condition otherwise. My mother owns a Ford Focus, and she's had nothing BUT problems with it for years. My girlfriend recently had an '01 Ford Explorer, and it had engine problems that were really tough to diagnose, and under 100k miles. She's got a Nissan Altima now, and it runs like a champ. Go figure.

Ok, here is my history with Ford. I don’t think it matters one way or another when it comes to the bailout, but I love talking about Cars.

1991 Ford Taurus SHO (while under warranty)

• Heater core packed in, dealer fixed and reinstalled dash without hooking up lights
• Dash removed, lights work but now none of the gauges do
• Rear brake calipers seized, repaired but continued to leak
• ECU system on fritz, replaced by ford
• Clutch packed in, replaced clutch and did not hook up 2 spark plugs and reverse linkage not hocked up
• 2nd heater core packed in.

SOLD Taurus (50% depreciation in 4 years)

1995 Escort LX (Made in Mexico)

• Door weather stripping incorrectly installed pool in passenger foot well.
• Pool in trunk, seam sealer not correctly applied
• Front rotors warped, needed to go back 3 times to have rotors replaced
• New pool in trunk because of incorrect spot welds
• Passenger’s Rain channel comes lose on freeway

SOLD Escort (50% depreciation in 2 years)

1997 Mustang GT

• 2 and 3rd gear syncros defective after 2,000 miles, dealer says I have been doing too many “burn outs”. After 2 weeks they approve transmission replacement. Takes 2 weeks.
• Right wheel bearing packs in, replace.
• Head Gasket blows on freeway, towed to dealer, 2 weeks to fix
• On drive home 2nd gasket blows, gasket installed upside down. Engine overheats in process; heads now require replacement, in shop 3 weeks.

SOLD mustang with 15,000 miles (50% depreciation in 3 years)

2004 BMW 325i

• New Wiper Blades (free)
• 15% depreciation in 3 years

2007 Honda Accord
Nothing so Far

1995 Mustang GT,
Fun Car as long as you replace everything but the 302 with aftermarket parts. Don’t mind working on a car for fun, but I will NEVER buy a new Ford again.

 

[Paulie]

Wow. The 91 Taurus has heater core problems, and mine is a 99 and it also has a common heater core problem. I looeked it up before online to find the fix, and there's zillions of other people all complaining about the same thing.

So in at least 8 years that we know of, they still never fixed the problem of a clogging heater core. That's absurd. It's things like that which make me think Ford DESERVES to fail.

 

[tigerbob]

Wow. The 91 Taurus has heater core problems, and mine is a 99 and it also has a common heater core problem. I looeked it up before online to find the fix, and there's zillions of other people all complaining about the same thing.

So in at least 8 years that we know of, they still never fixed the problem of a clogging heater core. That's absurd. It's things like that which make me think Ford DESERVES to fail.

Taurus is the same as the Sable, right? My wife used to drive an 89 Sable. Guess what? Heater core problems.

 

[Paulie]

Taurus is the same as the Sable, right? My wife used to drive an 89 Sable. Guess what? Heater core problems.

Yeah that was Mercury's Taurus counterpart.

Wow, that's sad.

It's like they don't even care.

 

[Zoomie1980]

I’ve seen a load of threads / posts on this subject, but a lot of them seem to be making assumptions about several things or ignoring (willfully or not) key information. So I’ve tried to source several key pieces of info to try and get the numerous sides of the discussion into the open. I don’t pretend this is an exhaustive list - merely an attempt to provide some degree of balance.

1. How many people does the auto industry ‘employ’ / or how many total jobs does the industry support?

Estimates seem to vary between 2 and 3 million, including those who are indirectly employed. I’ve also seen it stated as about 10% of the US workforce. Here are a few links that support these figures. So, if the big three go to the wall, we are talking about potentially up to 3 million people unemployed.

Automotive industry - Wikipedia, the free encyclopedia

Economic contributions of the automobile industry to the U.S. economy. | North America > United States from AllBusiness.com

http://www.ita.doc.gov/static/auto_reports_jobloss.pdf

2. If the Big 3 are not bailed out, is Chapter 11 an option?

Chapter 11 seems like the best option. Gets the makers out of their ridiculous UAW contracts, allows them to focus on the business of retooling and making a better car / truck. But is Chapter 11 an option? From the reports I’ve read, you have to have a viable business model with Chapter 11 - if your business is not a ‘going concern’, that’s chapter 7 (liquidation), not chapter 11.

Chapter 11, Title 11, United States Code - Wikipedia, the free encyclopedia

Going concern - Wikipedia, the free encyclopedia

3. Could an automaker who has filed for Chapter 11 be deemed a going concern? One of the key criteria appears to be that the automakers revenue streams need to be tenable.

Deal Journal - WSJ.com : Why GM Says Bankruptcy Is an Impossibility

Why The Automakers Deserve To Be Rescued, New Republic: The Cost Of Letting Them Fail Could Be Greater Than The Cost Of Saving Them - CBS News

Auto bankruptcy would drive away buyers: survey | U.S. | Reuters

4. If Chapter 11 is not an option, what’s left.....

Seems clear to me - bailout or liquidation.

Liquidation under Chapter 7 - this is where the UAW (surprise) says no bailout will lead to - means several hundred thousand jobs disappear immediately, with several million more possibly following. Federal, state and local government would lose $156bn in tax and spending on welfare programs over 3 years (if you believe the numbers - see earlier Wiki link). Shares become worthless - which is less of a worry as I see it as far as individual investors are concerned (shares can go up and down and they took the risk) and more of a worry for pension funds that are heavily invested - rightly or wrongly - in auto stock. Plus of course the vast number of auto retirees lose their pensions (this could happen under Chapter 11 as well). The stocks of other industries (particularly certain commodities) will be impacted as well.

On the other hand, bailing them out means inflated UAW contracts may remain in place, incompetent or at best short-sighted management may remain in place, it will still take years to turn the ship around (we all know what happens to ships that take a long time to turn), and there is a likelihood (some would say certainty, with some justification) that more handouts will be needed by the autos. Plus of course, an alarming precedent is being set. Where does it all stop?

One thing is certain - whatever happens it will be a mess and the pros and cons of each potential direction will be so convoluted as to allow plenty of room for dems and reps to blame each other for years to come.

I honestly think this is being viewed by not just Republicans, but a number of fiscally conservative "Blue dog" Democrats to deal a fatal blow to UAW and perhaps totally anihalate it. While Honda, Toyota and BMW are hurting, too, they are still making it due to non-unionized labor in the union-hostile South.

Like it not, like Unions or not, the day has come that Amercian business simply can no longer afford classic unionized labor contracts with Pensions. Very, VERY FEW American workers have pensions as almost all are stuck with 401k's and everyone pays hefty out of pocket medical expenses and almost all Americans are left to fend for themselves in old age for anything beyond what Medicare provides. Time for the Big Three laborers to join the rest of us.

Even if we have a bailout, I'm almost certain it is going to require the essential gutting of the UAW contracts. It has to, because they simply can no longer compete with labor costs a full 50% HIGHER than their competitors. Simply cannot be sustained in a modern global economy.

 

[Zoomie1980]

Health Care issue should be less of a problem in future. Problem is, the deal agreed with the UAW doesn't come into force until 2010 - much too late at the current cash burn / reserves rate:


Last year, GM brokered a historic deal with the United Auto Workers allowing it to eventually shed health-care obligations and potentially cut labor costs, such as wages and benefits. On the capacity side, Clarke said GM has worked extensively in the past three years to shave its manufacturing footprint in the U.S. to an appropriate size.

Of course, GM has to wait until 2010 and pay out $7 billion to take advantage of that UAW deal. And, with U.S. automobile demand collapsing further each month, GM’s capacity issues look to be far from solved.

Deal Journal - WSJ.com : Why GM Says Bankruptcy Is an Impossibility

Well, this is the rub. They have somewhat strong-armed the UAW to historic concessions, which, BTW, still are not enough to make then globally competitive, but they have to survive to 2010 to even get there! That isn't going to happen nor be allowed to happen. I fully predict any bailout will insist that the 2010 contract become effective IMMEDIATELY and will probably be cut even more, essentially a UAW worker today will be MUCH CLOSER in compensation to his non-union counterpart working in Toyota plants in Tennessee.

And they should be pretty much held to retool for virtually 100% alternative energy sources for passenger vehicles and light trucks inside of 7 years as well as retooling for Natural Gas powered heavy trucks.... The military arm of the Big Three, may very well be ...ugh... Nationalized....