From the Eau Claire Leader Telegram Editorial Page: Pension, health guarantees are now impractical
(5-5-09) Analysis Below the Fold
"Our view: Many factors hurt car sales, but high "legacy costs" put domestic automakers at a huge disadvantage.
Everyone has their theories as to what led to the problems at Chrysler and General Motors, and to a lesser extent (so far) at Ford: short-sighted management, overly aggressive and inflexible unions, outrageous executive bonuses, high gas prices, more and better competition, the recession - or a combination of all of the above.
The blame game can go on forever, but it's not going to solve the problem at hand: saving U.S.-owned auto companies from extinction.
U.S. Sen. Judd Gregg, R-N.H., appearing Monday on CNBC, made a good point. He said as long as U.S. automakers spend 60 percent of their budgets on labor and 40 percent on materials to make better vehicles, and competitors spend 40 percent on labor and 60 percent on materials, the U.S. companies will lose.
If the recession has taught us anything, it's that pyramid schemes can't work forever. And frankly the guaranteed pensions autoworkers received are an example. The system works fine as long as the company they retired from has strong profits. But when the economy softens and people buy fewer new cars, the prior promises made to retirees can no longer be met.
That's why guaranteed pensions and health care benefits for life aren't viable, as nice as they are to have. Most employers now set aside a percentage of their workers' wages for retirement, which workers are encouraged to match with their own money. If the company is successful, they get more; if it isn't, they get less.
Wisely, a deal between Ford and the United Auto Workers to take effect next year will make retiree health care the UAW's responsibility. That will put Ford's labor costs much closer in line with its Japanese competitors.
Ridding domestic automakers of burdensome legacy costs should help level the playing field. Any other organizations - public or private - still operating under "guaranteed" retirement systems are courting disaster."
- Don Huebscher, editor
Now, there is one very obvious solution to this problem, but the conservatives who are lamenting the "legacy" costs and defined benefit pensions designed to provide security for workers that made the automobile manufacturing industry great will likely fight it tooth and nail: government provided or subsidized health care. So, people would rather complain than actually take proactive steps to take care of America's working families. We see this a lot in the editorial section of the Leader Telegram...
As far as forcing people into defined contribution programs (i.e. 401K)...that is simply unacceptable. People made life plans based on the guarantee of a defined benefits (pension) programs. You simply can't change the rules this late in the game--whether it jives with your political ideology or not. Conservatives need to embrace a government-sponsored health care system in order to bring solvency back to pension programs. Workers have sacrificed enough!
(5-5-09) Analysis Below the Fold
"Our view: Many factors hurt car sales, but high "legacy costs" put domestic automakers at a huge disadvantage.
Everyone has their theories as to what led to the problems at Chrysler and General Motors, and to a lesser extent (so far) at Ford: short-sighted management, overly aggressive and inflexible unions, outrageous executive bonuses, high gas prices, more and better competition, the recession - or a combination of all of the above.
The blame game can go on forever, but it's not going to solve the problem at hand: saving U.S.-owned auto companies from extinction.
U.S. Sen. Judd Gregg, R-N.H., appearing Monday on CNBC, made a good point. He said as long as U.S. automakers spend 60 percent of their budgets on labor and 40 percent on materials to make better vehicles, and competitors spend 40 percent on labor and 60 percent on materials, the U.S. companies will lose.
If the recession has taught us anything, it's that pyramid schemes can't work forever. And frankly the guaranteed pensions autoworkers received are an example. The system works fine as long as the company they retired from has strong profits. But when the economy softens and people buy fewer new cars, the prior promises made to retirees can no longer be met.
That's why guaranteed pensions and health care benefits for life aren't viable, as nice as they are to have. Most employers now set aside a percentage of their workers' wages for retirement, which workers are encouraged to match with their own money. If the company is successful, they get more; if it isn't, they get less.
Wisely, a deal between Ford and the United Auto Workers to take effect next year will make retiree health care the UAW's responsibility. That will put Ford's labor costs much closer in line with its Japanese competitors.
Ridding domestic automakers of burdensome legacy costs should help level the playing field. Any other organizations - public or private - still operating under "guaranteed" retirement systems are courting disaster."
- Don Huebscher, editor
Now, there is one very obvious solution to this problem, but the conservatives who are lamenting the "legacy" costs and defined benefit pensions designed to provide security for workers that made the automobile manufacturing industry great will likely fight it tooth and nail: government provided or subsidized health care. So, people would rather complain than actually take proactive steps to take care of America's working families. We see this a lot in the editorial section of the Leader Telegram...
As far as forcing people into defined contribution programs (i.e. 401K)...that is simply unacceptable. People made life plans based on the guarantee of a defined benefits (pension) programs. You simply can't change the rules this late in the game--whether it jives with your political ideology or not. Conservatives need to embrace a government-sponsored health care system in order to bring solvency back to pension programs. Workers have sacrificed enough!
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