Mr. Liddell said it is “reasonable to think we’re in an interest
would help GM to fund its pension. He said GM “is not relying on that.”
As
General Motors has shrunk, its pool of U.S. retirees has swelled.
Today there are almost 700,000 GM retirees and just 70,000 active
workers, a 10-1 ratio. The company’s $100 billion pension fund is twice
the market capitalization of the automaker itself, and keeping up with
funding obligations acts like a ball and chain on GM’s core car-making
business. Small swings in the value of the pension plan can have
massive effects on the value of the company. “That’s no way to run a
company,” said GM’s chief financial officer Christopher Liddell.
I
met with Liddell during the Detroit auto show this week, and he talked
extensively about GM’s more conservative financial philosophy since
emerging from bankruptcy in July 2009. GM’s objective is to carry no
debt, fully fund its pension plan, and pay for its day-to-day
operations using cash generated from the sale of cars and trucks. It
sounds so simple, but that’s not the way GM has been run in many years.
GM
took a big step in that direction Friday, announcing it had
contributed $2 billion in newly minted GM stock to its U.S. pension
plan, on top of $4 billion in cash it had contributed a couple of months
back to try to bring that pension fund closer to fully funded status.
As of the end of 2009, the portfolio was $17.1 billion short of what it
should have, under government rules, to cover its current and future
pension obligations.
The gap likely
closed some in 2010, thanks to strong market returns, but the gains
could be offset by further swelling in the retiree ranks. GM plans to
give an annual update on the health of its pension plan next month when
it announces its fourth-quarter financial results.
Three
factors determine the health of any pension fund: asset returns,
company contributions and the discount rate, which is used to calculate
the present value of pension liabilities and is tied to interest
rates. In the past, market swings and interest rates would cause GM’s
pension fund to fluctuate wildly between being overfunded and
underfunded. In the 1990s, GM borrowed heavily to pay off its pension
plan, saddling itself with hefty interest payments. As long as the stock
market remained high, the value of the assets in GM’s portfolio
exceeded its liabilities. But even a change in the discount rate could
cause big swings in the plan’s funding status.
Between 2005 and
2007, GM’s pension plan was in great shape, and the company didn’t need
to make any contributions. But then the equity and credit markets
collapsed, coupled with declines in the discount rate (which made the
present value of GM’s pension liabilities rise significantly) and more
early retirements at GM, increasing the number of beneficiaries.
Suddenly, the pension plan was $17.1 billion in the hole.
“We’ve
got to get this company to where the economics, everything, is driven
around designing, selling and producing cars,” Liddell said. “Things
like the pension plan don’t enter into the equation.”
Liddell
said he believes GM can fully fund the pension plan within three years
at which point, he plans to “de-risk” the portfolio by investing less
in equities and real estate, and more in fixed income assets, which
generally provide a lower rate of return. “Perfection to me would be
where the assets exactly equal the liabilities in both their maturity
and their risk profile,” he said.
He’s not expecting perfection,
but he is expecting GM to operate debt-free in the future. It seems
like forever that GM has been up to its neck in debt, including its
pension and health care obligations to retirees. But it’s only in the
past 15 years or so that GM has been highly leveraged. Before that, it
was a AAA-rated company.
Now it’s working to get back there. It
off-loaded retiree health care to a union trust fund in 2009, is
working on the pension problem, and restructured the rest of its debt
during its government-controlled bankruptcy. In 2010, GM lowered its
debt from $14.2 billion to $5 billion, and reduced its $9 billion
preferred share obligation to $7 billion. It obtained a $5 billion
revolving credit loan, but Liddell said he doesn’t think GM will have
to tap into it.
Perfection? No. But progress, yes.
For the stock to pay back the loan to the taxpayers, it would have to be near $45.00 a share.
GM the giant of America..........whoda thunk, it would have come to this.
sick. GM management putting GM stock into the GM workers' pension plan? sick
it is all the proof one needs to know beyond the shadow of a doubt that GM management is scum
and the company will fail again
f**kers
I hope the pension fund sells the stock quickly before the GM stock ponzi collapses.
I hope the pension fund sells the stock quickly before the GM stock ponzi collapses.
I hope the pension fund sells the stock quickly before the GM stock ponzi collapses.
more eye wash for the masses .. more gravy for the train,
piss on main street , defang the states union .. and throw a life line to a govenrment rake off.
more suck the us citizen dry ,,
Cash is King! If I were a GM pensioner I'd say stick the stock up your ass & pay the fund CASH, we don't want none of that worthless stock.
LMFAO!! That noose is permanent. Loosened a bit just so that it can be retightened by market events and the UAW.
where's my new GM vehicle ? I've never been a GM employee, have never purchased a GM auto of any sort in my entire life; in other words, I've never had ANYTHING to do with GM ........ except that the government STOLE money from me & my kids & gave it to this private company with shareholders ............... as far as I'm concerned : WHERE'S MY NEW CAR ? My 24-year old is having such a hard time getting started in life, no good jobs to be had, her junker car keeps bleeding her dry with repairs ........... I'd LOVE to see her get a free auto so she wouldn't have any payments !
RESPOND PLEASE : I heard that GM used that $57billion of TAXPAYER MONEY to build a plant in BRAZIL .......... is this true ? In other words, they used TAXPAYER MONEY to make the transition from U.S. jobs to BRAZIL jobs. ....... someone set me straight, is this true or not ?
"someone set me straight, is this true or not ?"
Looks like one of two plants in Brazil...this one was around one billion of your/our money for jobs in Brazil;
http://www.cbsnews.com/stories/2009/07/15/business/main5161848.shtml
Altogether now...thanks crony's.
The unions are selling their GM shares, about $3B worth, to buy an investment with much better returns. They're starting a balls-to-the-wall campaign to unionize all those holdout factories in the south. Besides putting a big smile on the face of Mr. O, expanded UAW membership will give them even greater leverage to win more pension and health care concessions.
Given how the South is, that part of the country deserves to be broken in that manner.
"Given how the South is...
How is the South in your opinion seth?
A word of advice when you bring your baseball bats to break knees down here...well...on second thought...no advice for you seth ;-)
With respect to labor relations in the South and not the people in general:
That region never gave up on the whole idea on slavery; they just turned it into the current concept of "business friendliness".
"That region never gave up on the whole idea on slavery..."
Well, I live in "that region" and I can assure you we have. By the way, you did know that RI built quite a few slave ships and a Confederate flag never flew over any one of those slave ships don't you? When you have time research the Wolf family of Boston or mostly any other famous name in the NE...just sayin.
"they just turned it into the current concept of "business friendliness".
If you mean lower taxation for businesses & employees, then yes, it's true.
Guilty as charged ;-)
Well, I live in "that region" and I can assure you we have. By the way, you did know that RI built quite a few slave ships and a Confederate flag never flew over any one of those slave ships don't you? When you have time research the Wolf family of Boston or mostly any other famous name in the NE...just sayin.
I'm not from the states in the NE, but from a more manufacturing-oriented state that isn't Michigan. This state has recognized that a balance between wishes of businesses and non-business individuals (for which does not appear to exist in the South).
If you mean lower taxation for businesses & employees, then yes, it's true.
What I meant by "business friendliness" is that businesses are given preference over the wishes of employees and regular (non-business) individuals. Taxation is only a part of it, how the businesses treat their workers and non-business individuals is important as well.
"What I meant by "business friendliness" is that businesses are given preference over the wishes of employees and regular (non-business) individuals."
I don't understand what you mean by "wishes of employees and regular individuals" as it relates to attracting business. The government is once and always looking to expand it's taxable base of people to draw revenue from. And no one is forcing anyone to work for any particular business. As a point of my reference for you...I have quit more jobs than I was ever fired from (one in fact, I told the boss he was stupid...which he was...LOL)...and conversely laid off from more jobs than either of those two examples.
So, if there are no jobs because of unfriendly business preferences how does this help the unemployed or government coffers?
You ask that as if it was "how dare you question business?". That is a very rare situation you are in where you have such luxury to quit. Not everyone can.
What would help the unemployed is giving them a bit better ground to stand on, when they need it. Now is a good time as ever to give that, and not force a genuflection upon business.
"That is a very rare situation you are in where you have such luxury to quit. Not everyone can."
I made the situation for myself and anyone can. It just takes motivation/drive and maybe some curiosity of something outside your normal field of expertise. And you may have to give something up to make things happen for you.
Now I'm considered white collar...but I'm blue collar through & through...I think the thread is pretty far down...I'll share one with you before I leave it.
One of my lay-offs (when I was younger) was in construction. Can't say which field of construction. Through personal contacts I found a job in a supervisory position but it was out of town. If I wanted the job I would have to live out of town Mon-Fri and come home on weekends. The ole lady was not impressed. But I did it anyways. I supervised five different construction crews in different parts of three counties.
From this stint I now had supervisory experience on my resume' which counts for a whole lot more than four years in a community college...bank it.
As an aside (back on the South thingy)...one of these crews was what was called a clean up crew. Two whites & a black. I caught the white guys sitting on their ass as the black guy worked and told the foreman if I saw that again I would make the black guy the foreman. I guess they didn't believe me.
I rolled up on them and there they were...the black guy just-a-gettin it...the whites sitting on their ass. I demoted the foreman then and there and promoted the black guy. The former foreman said "You caint do that, he's a niiiagger". I said I just did...and you're fucking fired asshole.
He said he would see me after work, I told him I looked forward to it. I never saw the prick again.
Point is...never limit yourself. Touch as many people as you can in your life while going through it (as positively or as negatively as is required by your ethics) and good things will happen.
Right on, bro!
You're probably a scary guy in person, but I admire you from here!
There was a time (long before Ken & Barbie) when a scar, here or there, (or, oh yeah, there) was a sign of strength, of character...of a willingness to give the last measure of oneself for their own beliefs or someone weaker who could not or would not defend themselves.
I think we've all been in situations where just a word or two would do the trick...sometimes words don't work and you get what you see on first glance...a fifty one year old book, with a raggedy cover, that still might just have an interesting story or two to tell...LOL.
I do appreciate your kind words Doc...and you should know the admiration is mutual, you are intelligent, witty and level headed...a credit to your upbringing & ZH.
Here's a good one I stumbled across...sometimes rules or even certain laws have to be bent a little to make things right...which I'll be honest, I'm not above doing ;-)
http://www.theblaze.com/stories/compassionate-pilot-delays-flight-for-grieving-grandfather/
Take care.
Just another reason for any American to NEVER buy a Government Motors car.....I will try my best, to never give one penny so a union thug can retire
...and I'll continue to buy General Motors so that the anti-union thugs at transplant companies get none of my money.
Not that I'm a naysayer or anything, but I think I'd rather have MY portion of a GM pension contribution given to me in frozen pizzas than more GM stock.
But at least Uncle Samantha has found another way to slide more tax bux into bogus help for the middle class. I'm SURE this will all turn out well for retired auto workers.
I guess it would be crazy for them to hedge their bets by using actual cash and buying $2B of Apple or Totota shares. You know, just in case, God forbid, some kind of financial catastrophe should wipe out the value of the GM shares AND the value of the GM pensions.
"Not that I'm a naysayer or anything, but I think I'd rather have MY portion of a GM pension contribution given to me in frozen pizzas than more GM stock."
No doubt.
The social & financial engineering that has gone on with this company is beyond precedent. I'll never own a post-2008 model GM vehicle at any price...I mean why should I?
As a taxpayer, I have already maxed out my GM risk allocation through "forced investment"...I don't see any reason to risk even more with after taxed dollars.
The company is dead to me.
Then plenty of others will.
Not everyone wants the limited choice between a blinged-out 4cyl golfcart or an overly expensive exotic. But that's about what everyone else outside of GM/Ford/Chrysler will give you.
"Then plenty of others will."
Your definition of plenty may be different than mine. That's a lot of butts in the seats and ink on the dotted line to dig out of that hole seth.
I'm not the only one who feels this way.
The amount of people that buy their cars & trucks is plenty.
I've yet to see a compelling alternative to the Big Three, but I sure have seen a lot of turbo-laden golfcarts with flashy stereo systems. Yes, I've made sure that I'm not getting a Mexican (or otherwise, in the case of the Cruze-derived cars) one as well. If I wanted a bland, globalized-to-nothingness car, I'd have bought one.
GM would have to do worse before I'd forsake their products. Ford seems to be heading that direction by killing all their US-friendly platforms(Panther, E-***) and replacing them with bland "global platform" vehicles.
I wouldn't trade my turbo-laden golfcart of a Subi STI for anything in the American four or six-cylinder category.
C'mon now Negative Nelly, the taxpayer subsidy last year was only about $100K per vehicle sold. You should feel proud about your investment in the future of the UAW!
/s
the only bigger financial engineering than GM, is ALLAY BANK