• Trouble logging in? Send us a message with your username and/or email address for help.

Job losses and real-estate

New posts
Pensions. From The Motley Fool, October 2004:

Here comes the piper
Pensions were a win-win situation when introduced in force after World War II. Benefits were exempt from wage control laws instituted during the war, so employees were happy to accept higher future guarantees for lower current pay. Plus, pension income isn't taxable until collected sometime in the far distant future. Management liked pensions because the plans didn't require 100% funding, so more profits dropped to the bottom line. Besides, when the day of reckoning finally came, this generation would be long retired and resting eternally. Just like Social Security, defined-benefit pension plans were a pyramid scheme from the start, enriching the current generation at the expense of future ones.
Things have finally caught up to U.S. companies. Airlines have been hit hardest, though for reasons other than just pension obligations. UAL's United Airlines and US Airways are both in bankruptcy, and Delta (NYSE: DAL) is teetering on the edge. Part of these companies' survival strategy has been to stop, or threaten to stop, funding their pension plans. Automakers likewise face huge liabilities. Last year, General Motors (NYSE: GM) issued $17.6 billion in bonds, using $13 billion of the proceeds to fund its pension plan. GM's interest expense on those bonds is 7.54%, and the auto manufacturer expects to earn 9% on the funds, possibly by following a rainbow to the pot of gold.
When the assets in a company's pension plan don't generate enough cash to cover annual payouts, the shortfall comes right off the bottom line. To understand just how damaging this can be, let's turn again to the automobile industry. A Prudential Financial study estimates that pension and other retiree benefits contribute $1,360 to the cost of every General Motors vehicle, $734 of every Ford (NYSE: F), and $631 of every Chrysler (NYSE: DCX). Compare this to Honda's (NYSE: HMC) $107 and Toyota's (NYSE: TM) $180, and you see why Japanese companies can sustain higher profit margins.
Click to expand...

http://www.fool.com/investing/general/2004/10/11/the-perils-of-pensions.aspx
 
This is a classic globalization issue. Back when we were isolated, GM could cut deals like this with the unions, but now the Japanese are destroying them on costs. Really the only way to combat this is to bite the bullet and compete, causing lower wages and poorer benefits, or enact draconian fair trade laws, which ultimately cause retaliation on the part of our trade partners in other sectors. It's a no win situation short term. Long term, get the government to pay for basic benefits like healthcare, and force future workers to save for retirement so they don't have to rely on a pension check.
 
Last edited:
30ashopper said:
This is a classic globalization issue. Back when we were isolated, GM could cut deals like this with the unions, but now the Japanese are destroying them on costs. Really the only way to combat this is to bite the bullet and compete, causing lower wages and poorer benefits, or enact draconian fair trade laws, which ultimately cause retaliation on the part of our trade partners in other sectors. It's a no win situation short term. Long term, get the government to pay for basic benefits like healthcare, and force future workers to save for retirement so they don't have to rely on a pension check.
Click to expand...

That's the pinpoint issue. It seems like protectionism or isolationism or any other 'ism would help the imbalance, but it can't. It's no political party's fault, it's an economic fact. Globalization was inevitable and it will move through the world with with an adjustment and leveling of finances.

The only real valuation left on a country by country basis is: cost of living compared to quality of life compared to personal economic opportunity.
 
Busta Hustle said:
Isn't it ultimately managements job to have a good working relationship with its employees? Do you happen to know the income of execs and how it compares to those assemblers?
Click to expand...

a lot of plant workers could make more than the white collars when in a good production mkt now production has slowed or shut down in some cases because of standing inventory on lots...car lots are full of 08 vehicles.the temps are usually the first to go...but with suppliers it has a domino effect. vw was suppossed to open a plant in chatanooga..toyota in mississippi...honda in indiana
 
30ashopper said:
So you're saying the high cost of hiring a CEO is the reason GM is insolvent? Guess what, it's a combination of things - ineficiency, high cost of labor, and pensions -

http://www.npr.org/news/specials/gmvstoyota/

So what's the solution? Cut the CEO's salary in half, one third? Honestly, do you really think that'll fix the problem?
Click to expand...

I'm not saying that would solve the problem, although I do believe that CEO's in general shouldn't get a "performance" bonus when the company is spiraling into the toilet.

I am against the idea of cutting the pay/benefits of the lowest employees. Would you want to hop in a GM vehicle that was produced after the assembly line workers received a huge pay/benefits cut? I'll bet the product would remain the same or better if upper management received pay cuts.
 
The number of homeowners caught in the wave of foreclosures in October grew 25 percent nationally over the same month in 2007, data released Thursday showed.

More than 279,500 U.S. homes received at least one foreclosure-related notice in October, an increase of 5 percent over September, according to RealtyTrac Inc. One in every 452 housing units received a foreclosure filing, such as a default notice, auction sale notice or bank repossession.

More than 84,000 properties were repossessed in October, RealtyTrac said.

A nasty brew of strict lending standards, falling home values and a tough economy is filtering through the housing market. By the end of the year, the company expects more than a million bank-owned properties to have piled up on the market, representing around a third of all properties for sale in the U.S.
Click to expand...

http://news.yahoo.com/s/ap/20081113/ap_on_bi_ge/foreclosure_rates;_ylt=AjjY4lluvAbjLRBgTNXYkBoEtbAF

One of the ironies in this is that, even banks are asking too much for some properties. I've seen listings by banks well above 2003 averages, some even higher than sale prices in 2005. :blink:
 
You must log in or register to reply here.
New posts


Sign Up for SoWal Newsletter









Share this page




                               
Back
Top