Posted
by Bill Hoyt
November 20, 2008 at 9:24 a.m.
Long on Hope, Short on Math
GM retirees illustrate the American conundrum: Bankruptcy could allow automakers to slash their retirement benefits, similar to what has happened in the airline industry. Retired General Motors worker Roy Masters, 91, says he's earned the pension and benefits he receives from the automaker. "I worked there 30 years and then through a few strikes to get what we've got," said Masters, who worries that he'll lose his benefits if GM files for bankruptcy. "It'll make it a lot difficulter," he said. "I won't have near the income and the benefits."You gotta feel for Mr. Masters. Born in the depths of WWI, he grew up during the Depression, spent 3 decades screwing bolts onto cars, and at more than 90 years of age, obviously relies on what he worked very hard for, his pension, to get him by.On the other hand, you gotta realize that, assuming Mr. Masters started at GM at 25 and retired at 55 like so many of his generation, he has been drawing income for more years than he worked. And he's not alone: a scare video released earlier this week outlining the plight of the big three contained two important numbers: the big three collectively employ 239,000 workers in the US. They also support 775,000 retirees and spouses of retirees, three times as many non-workers as workers.These are impossible numbers.It doesn't matter if Congress loans the companies $25b, fully twice their current market capitalization. It doesn't matter if they develop a car that runs on hope and emits rainbows. All that matters is whether they can make enough money to pay three non-workers for every one worker. All that matters is whether they can pay Mr. Masters 40 years of not working for 30 years of working. They cannot, and they never could. Those costs are the underlying reason American heavy industry is bankrupt.It's not George Bush's fault or Barack Obama's fault or Congress' fault. It's GM's fault and Mr. Masters' fault, the result of a couple of strikes resulting in promises from the company to pay three people to not work for every one who does, to pay him longer for not working than he ever worked. Now Mr. Masters relies on the keeping of these impossible promises, afraid that math is catching up to GM and to him, because he has nowhere else to turn.Just like the rest of America. Only they don't know it yet.
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El_Borak (Bill Hoyt) says…
Sorry about the dots, all, they're supposed to be indents. It appears that our new layout has fixed a lot of bugs that some of us considered features ;)
meggers (anonymous) says…
Well, I think they should haul Mr. Masters in front of the Senate committee along with the rest of 'em! How DARE he ask for a handout...and one we KNOW he won't be able to repay?!?!?! After all, that greedy old bugger should have died six years ago!!!!
DOTDOT (anonymous) says…
Nothing wrong with a dot here and there.Mr. Masters is right. Having the taxpayers pay his pension is more honest than having consumers pay it through inflated prices for shitty cars. Never you mind that they are the same people.Capitalism is just fancy talk for socialism. Always has been.
El_Borak (Bill Hoyt) says…
Duplenty: "now they want to take his pension so some douchebag with an MBA can make that many more thousands of dollars a year?"Only the lawyers are going to get paid. Not the shareholders. Not the bondholders. Not the retirees. Not the management. Not the millions who coughed up for extended warranties. There is nothing left with which to pay them. Hope they all socked something away for a rainy day, because drops are falling.He and a million just like him going to lose pensions because this is the end of the line. This is where that train stops. The promises that were made cannot be kept, and the worst part is, they could never have been kept. But they were demanded and they were made and everyone pretended they were fine. So in a few months or weeks the lawyers will clap their briefcases shut and take one last limo ride to the bankruptcy court. For years GM has been running on empty, borrowing its way to stay in business, borrowing to avoid hard choices, borrowing from the future so everyone could beat the math for the present. And when the day came they could not borrow any more, it was all over. You know the old saying, "As General Motors goes, so goes America"? The irony will be that it will probably be for exactly the same reasons. I said the same thing in 2005, back when a change in accounting rules made it obvious that after 75 years in business, GM was worth exactly nothing:http://elborak.blogspot.com/2005/12/whats-coming-for-gm-detroit-reuters.htmlThere has been nothing but red ink since then, so I certainly see no reason to change that opinion now.
DOTDOT (anonymous) says…
Duplenty"...and now they want to take his pension so some douchebag with an MBA can make that many more thousands of dollars a year?"So you are against redistribution of wealth. Joe the plumber lost the election, but won 'em a Duplenty for the Deevil.