How Bedrock Promises Of Security Have Fractured Across America

[papau]

http://www.latimes.com/news/nationworld/nation/la-na-delphi30dec30,0,5984806.story?track=tottext

From the Los Angeles Times
THE NEW DEAL
How Bedrock Promises Of Security Have Fractured Across America
Companies are discarding traditional pensions -- or making government foot the bill. Delphi workers struggle with the changing landscape.
By Peter G. Gosselin
Times Staff Writer

December 30, 2005

<snip>That's when Delphi Chief Executive Robert S. "Steve" Miller, citing global competition and crippling "legacy costs," ushered the $28.6 billion-a-year company into one of the largest industrial bankruptcies in U.S. history. In short order, Miller called for slashing workers' compensation by almost two-thirds, threatened to void the company's union contracts, and hinted broadly that he would follow the playbook he had used elsewhere of pushing responsibility for paying the firm's pensions to the federal government and dumping its retiree health benefits altogether.<snip>

Before the trouble is over, some believe, a corporate icon such as Ford Motor Co. or GM could be swept from the American landscape. So too could much of what remains of the already frayed relationship between millions of working people and their employers.<snip>

Because employers promise to make fixed payments to retirees, they are known as "defined benefit" plans. Because the payments for current workers are so far in the future, grow with employees' tenure and must continue until retirees die, employers are expected to save and invest funds to ensure they can meet their obligations. But whether or not they do, the responsibility for paying, and the risk of investing, are entirely the employer's, not the employee's.

Should an employer fail to make good on its promise, the government steps in. After a series of spectacular corporate failures in the 1960s and early '70s, the White House and Congress created the Pension Benefit Guaranty Corp. to collect premiums from companies and act as a pension insurer.<snip>

Risk or not, however, 401(k)s and similar accounts are sweeping the field. Since 1980, the fraction of the full-time private sector workforce covered by pensions has fallen from 35% to under 20%, according to the Employee Benefit Research Institute, which is sponsored by big business.<snip>

Across the country, safety nets that working people once depended on to shield them from economic dislocation — for example, unemployment compensation, disability insurance, job training and healthcare coverage — have been scaled back or eliminated. At Delphi, the battle lines have formed not just over retirement, but also wages, benefits, job security, indeed the company's very survival.

For Delphi executives, the fundamental issue is how to fix two flaws at the heart of the firm. Spun off from GM in 1999, Delphi is saddled with what Miller describes as the high compensation of its former parent in what has quickly converted into a low-compensation, and largely offshore, auto parts business. In addition, though technically separate, the company still depends on GM for about half its revenue at a time when the auto giant is losing market share and hemorrhaging money.<snip>

[ixion]

1. Enron pt II

you can bet the execs at Delphi all have so-called Golden Parachute deals in their multi-million dollar contracts, as they destroy the lives of people who helped to build the company. :grr:

[DBoon]

2. Odd.

International competition does not seem to affect executive competition.

US executive pay is not being dragged down to the levels of developing countries.

Who would have thought?

[iamtechus]

3. This article is misleading

This article leaves the impression that tax monies are being spent to make good on failed pensions. Not so. The Pension Benefit Guaranty Corp. is funded entirely by premiums from participating employers. There is, however, a danger of the PBGC going bankrupt because of the large number of companies dumping their pensions. In that case, it's not clear what would happen. Last I heard, congress was considering solutions. It may be possible to save the system by having employers pay larger premiums and more fully fund their pensions.

[papau]

4. Larger Premiums leads to "converted" plans - the only failsafe is the

Congress doing a bailout - which they will do - as they did in the S&L's.

The excess liability is after valuing future premium payments - so raising premiums may have the opposite effect - it may increase the liabilities.

The more fully fund option has a lesser likelyhood of more terminated plans (meaning fewer new terminated underfunded plans) and is indeed in the current pending bill, and would help.

Tax monies are indeed not being spent - as yet.

But the game has the PBGC "get out of your funding promise" pathway that likely results in tax monies being spent.