Are Failing Pension Programs At GM and Chrysler Now Going To Cost YOU Even More Money?

It would be impossible to blame Detroit’s decades-long decline on a single factor, but if one were to make a list, defined pension obligations to workers would be somewhere very near the top. Thanks in large part to the unionization of America’s auto industry, Detroit has groaned under the weight of crushing pension obligations since time immemorial. And, according to a new report by the Government Accountability Office, last year’s bailout of GM and Chrysler has not eliminated the existential threat that these obligations pose to the industry. In fact, the taxpayer’s “investment” in GM and Chrysler appears only to have exposed the public to even an greater risk of catastrophic pension plan failure.

The underlying problem is not even that GM and Chrysler continue to shoulder an unsustainable load of pension obligations, it’s that the bailout itself has created no guarantee that GM and Chrysler will become profitable enough to shoulder the obligations. As the report’s conclusion notes:




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thstone - 4/7/2010 4:22:05 PM

+2 Boost

No surprise here - if GM and Chrysler don't make huge gains towards profitiabilty by 2013, then its crisis time all over again.

Steve - 4/7/2010 4:30:29 PM

+4 Boost

That would be a big "yup." As I have said in the past, companies face bankruptcy for reasons *OTHER* than lack of government handouts to them. Therefore, the solution is not a government handout.

Any Enterprise that must live or die at its own hands (i.e., no prospect of a bailout in the event of trouble) will tell you, sometimes it's appropriate to cut your losses. It's rarely a good idea to throw more money at the problem. It's never a good idea to throw good money after bad.

bfghemicuda - 4/7/2010 6:39:41 PM

+1 Boost

I agree and thats what I have said all along. I don't know about GM because they were already on an uphill path, just needed some time. As far a Chryslers situation, Fiat was willing to invest in Chrysler and was on that path until the U.S. Government stepped in which basically gave the UAW more power with our tax dollars as icing on the cake. Once Corporation understand they WON'T get bailouts I believe they would be more responsible. Now the corps figure "what the hell--if we screw up-- no big deal--the government will bail us out".