What do you guys think?
I dunno.. Won't Toyota, after a while, have the same problems too? And why don't they have any now? Are they really that young?

from The Car Connection

 

Well, it certainly wouldn't bother me, since I likely would never buy an imported vehicle...

Like cigarettes, I have no problem with the government taxing the hell out of products I don't buy...

 

Not Toyota's fault that GM et al got themselves into this situation, though...

 

Toyota's, Nissans, and Hondas sold in the American market today are built in America, by Americans, and have a fairly large domestic content. They really aren't imported anymore (a few exceptions). So what do we make of that? The GTO on the other hand is an Imported.

I think size has everything to do with it. GM is huge and they have a lot of workers near retirement age (baby boom generation). I'm not really familiar with the situation but they (big 3) must have made mistakes somewhere down the line or else their pension plans wouldn't have been under-funded.

 

I'm pretty sure most Japanese auto-makers don't give their employees significant retirement benefits.

It's our fault. We have open trade and borders in only one direction. While we barely tax or tariff anything from Japan, how much do the Japanese add to an American car? At least 10K to the price. How can two countries compete fairly when one market is closed or protected (and hence protects that countries auto industry and profits) while the other is open. There's a reason that newer technologies and industries like microprocessors and semiconductors et al. have recovered and in fact have taken back every bit of share lost during the '80s. They aren't taxed and tariffed by their competition.

This is a problem for most developed countries. The number of kids per couple is declining, leaving a huge disparity in 10-20 years between the number of people working vs. retired. The Big3 are experiencing what Social Security and Medicare will. No one has the guts to tackle this issue head on before it becomes a crisis.

 

Another thing that got the big 3 in trouble is the recent poor market performance.. They were betting that their investments they made would pay off the pension plan.. but since hte market has been doing so poor, they aren't getting any money back on the interest.. I think thats why there was a big push to raise those billions? of dollars for the pension plan, to keep it afloat..

I've also read GM is expecting by 2012, a big chunk of the people on the pension plan will literally die of old age.. So if all goes well, they just have to buy some more time..

 

Here is a copy of the Jerry Flint article (from forbes.com)

Column: Solve the Pension Mess
Forbes 09/19/03
author: Jerry Flint

A crisis looms over the domestic automobile industry: too little money has been set aside to pay pensions and retiree health benefits. At the end of last year General Motors' pension fund was $19 billion short of what it should have. Its health care liability is underfunded by $51 billion. Ford and Chrysler aren't as bad off now, but their turn in the box will come. All three are competing with foreign outfits that have either younger workers or less expansive promises to cover the doctor and drug bills of retirees.


These figures may prove in the end to be too high or too low. Let the Dow Jones average fall to 7000 next year, and the problem gets a lot worse. Let Medicare cover prescription drugs, and the shortfall shrinks.


A growing number of analysts believe that the Detroit carmakers cannot survive this burden, that they will go bankrupt, disappear, be taken over by Asians. I don't happen to believe this, but okay--if it is a problem, let us solve it.


First, let's dismiss the laughable idea that the United Auto Workers union will recognize the problem and willingly cut the burdens, freeze the already-rich pensions and make workers contribute far more to pensions and retiree health care. The union probably would see the factories closed and men starving on the street first. You don't get reelected to union office (or to Washington, either) by telling the members to pay for their own benefits.


Any plan should have these parameters: The promised pension and health care benefits must be paid. They shouldn't drive GM or Ford or Chrysler under. The taxpayer shouldn't have to pick up the burden.


Here is a proposal. It would result in some loud squawking, but at least it would work.


Every automaker--foreign ones, too--would collect a $500 assessment--for political reasons let's not call it a tax--on the sale of each new car and truck in the U.S. The amount would be built into the sticker, like a destination charge. At 16.5 million sales, that is $8.25 billion a year for the fund. This money would pay benefits for the retired workers of the three U.S. companies. If $500 isn't enough, up goes the levy.


Prices needn't rise. The carmakers set aside $500 to $1,500 a vehicle now to fund the pensions and health care. To the extent they are now allowing for more than $500, they could cut the car price. Or they could keep the difference as profit. I'd prefer that. Detroit has next to no profit on vehicles right now.


That screaming you hear is coming from Toyota, Honda, Nissan, Mercedes and all the other foreign manufacturers. This plan makes them share the burden of promises that their competitors GM, Ford and Chrysler have made to workers.


Unfair? I will tell you what's unfair.


It is unfair that someone should get a competitive advantage of $1,000 a car because he hires young workers and the other guy is doing the right thing paying pensions.


It is unfair that hundreds of thousands of workers be put on the street when companies go down because of this unfair age advantage. GM has 28% of the U.S. market, 177,000 active employees in the U.S. and 440,000 on pensions, including widows. Toyota has 11% of our market, 34,000 employees in the U.S. (the heart of the empire is still in Japan) and a grand total of 65 U.S. ex-workers on retirement.


It's unfair that ordinary Americans will have to pick up that huge pension burden if Detroit falls. They will have to, in some degree, because the government is pledged to pick up busted pensions through the Pension Benefit Guaranty Corp.


You may recall that when Chrysler was in danger, the government guaranteed a $1 billion loan. Facing an imminent bankruptcy of the Detroit companies, Congress might come up with $20 billion in loan guarantees to save them. But there's a big difference this time. The U.S. Treasury got back the money it effectively lent to Chrysler in 1981 and even pocketed an equity kicker. But this time around the guarantees might cost taxpayers real money. They don't make 'em like Lee Iacocca anymore.


The German and Korean makers that send cars here would argue that they shouldn't pay because most of their workers are not here but in their homelands.


Get off it. They have use taxes in Europe, up to 15%, a sort of sales tax on wholesale stuff. Send a Detroit car over there and they slap on the use tax, which goes to pay for their social welfare programs. Why can't we slap a tax on their cars to pay for our citizens' health benefits?


If you can figure out a better plan, send it in.

 

Maybe they can use some of that Iraq money

Can you imagine if they never went to automated producting and kept all those people that once did the robots work At least when a robot retires you can sell it for scrap and make a buck or two

 

for this idea to work, this topic has to be blown wide open. national news coverage, everything. otherwise, it just gets swept under the rug.

 

Let me put this in a context I don't think anyone is considering:

GM now outsources more of it's engineering than ever before to private contractors. It takes far fewer factory workers to put together a vehicle than ever before. GM is running on far fewer support employees than ever before.

What happened to all those people who used to assemble the cars, engineer the vehicles, and provide support in other roles? Forced or voluntary retirement!

So now, GM realized that all these years of increased efficiency, downsized work force, and outsourcing all just to increase profit margins (it certainly hasn't gone into cars till very recently) leaves them with fewer workers needed to create & assemble a car or truck, and fewer workers to support the ones retired!!

Now..... re-ask the question.

 

I must be confused--are you saying that this is a good reason to make other competing companies pay for GM's underfunded pension? It may explain why it's underfunded, but it does not explain why it should be made everybody else's problem.

 

On the contrary. I want to keep this in perspective before anyone starts blaming imports, a poor car market, or a bad alignment of planets, therefore begin to unnecessarily pittying GM.

Taxing imports is a very, very bad idea if it's to fund manufacturers employee reductions, which is exactly what this all boils down to. I'm not even taking into account the underfunding of these retirement plans in the 1st place (primarily brought about by using large portions of the money set aside for these plans to invest in the stock market to farther increase the company's bottom line... till the market tanked).

When these retirees begin to die out in a decade or two, and retirement plans begin to balence out again, are the employees left going to end up with better or worse retirement than those before them? I'd wager worse since they are going to be under a far less generous plan, meaning much cheaper packages to the automaker than ever before, and even bigger profits in the future.

That's all well and good as long as CEOs aren't getting paid 8 digit salaries and the extra cash is going back into vehicles, which we know neither is going to happen.

Finally, there is no such thing as taxes earmarked for a special purpose in the Federal Government (yes, I resemble that remark). Fuel taxes are supposed to pay to maintain roads & highways, postage fees are supposed to finance the post office, and FICA is supposed to pay for current retirees. Instead, it all gets dumped into the Federal Treasury, anything that turns a profit gets "paper IOUs", and congress still decides how much to spend on each program.

Not an issue when we're in a surplus like we were most of the 90s. But with the deficit we're looking at now, you're more likely to see Congress take the money and underfund the program even worse than GM (Congress can make up the laws, GM can only follow it).

 

Thats a good point that I forgot about.. down to the local government.. They always try to make tax cuts sound necessary, but claiming its for the children's education, or for public safety, blah blah blah.. everyone says something else..

but when you actually go in there and read it, it says nothing about education, public safety, elderly people, etc... Its just money that goes in the treasury fund..

If education is so important, then fund that first! Knock something else off, like healthcare for illegal immigrants.. or state aid on abortion..

Basically, nobody is really held accountable for how money is spent in government.. thats where our problems lie..


Even if the money does go back to the companies, it still doesn't guarantee its used properly....

 

Don't the foreign governments pay the health care and pension costs of the foreign automakers? I don't think they should be unfairly penalized, but free trade should also be fair trade.

Say what you want about the steel industry, but when you can ship iron ore from the US to Brazil or China, turn it into steel, and then ship it all the way back to the US FOR LESS MONEY than the US companies then something is wrong. The labor cost difference is not that much. So what is it?