The U.S. government is going to end up supporting some part of the pension plans of The Big Three. No one is saying that out loud, but it is likely nonetheless.
According to The Wall Street Journal, "The government agency that protects pensions for Americans is raising fresh concerns about the repercussions if one or more of the U.S. auto makers were to collapse, saying 1.3 million workers and retirees could see their pensions slashed if that were to happen." General Motors (NYSE: GM) probably will not fail, but Chrysler probably will. Its sales were down over 50% in December. It cannot stand many more months of that.
The pension obligations of Detroit are well above $40 billion.
The government could say "tough luck," but it won't in a deep recession. If the plans failed, those receiving pensions would move from being net consumers to people who might well need government financial assistance to finance their homes and daily living costs. With unemployment moving toward 8%, there are only so many people the government can directly support.
The Big Three pensions will be another example of the government left holding the check.
Douglas A. McIntyre is an editor at 247wallst.com.
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Reader Comments (Page 1 of 1)
1-12-2009 @ 1:04AM
Duke said...
This is scary stuff. I am retired from GM and have never been on welfare. I have always worked. I have applications in all over my city for any kind of work, partime or full time, any shift, and since May I have not received one call for employment. I do not hold out any hope for sales to increase or even keep GM's head above water. I still have a mortgage, so my house can go back to the mortgage company. I believe I will qualify for subsidized housing though since I will be getting below poverty wages. What a depressing retirement. The only thing is that there are millions of Americans that have busted their butt for 35 to 40 years in a companies factory and had a good pension plan only to have it taken away. I won't be alone. Those folks end up living in crime riddeled neighborhoods and become easy targets for the victimizers.
1-15-2009 @ 8:24PM
Kenny said...
I have been a purchaser of GM cars and trucks for a many years . I have a question that seems to me the people in charge may want to think about in this economy. At what point do you decide to just lower prices to sell the cars , is it after or before bankruptcy ? I know that that is a hard question for you so I will give you a hint long before .