I waited and waited for someone to jump on this news nugget but can't find a thread about it. So I'll have to start it. Quoting http://edition.cnn.com/2005/BUSINESS/10/08...hi.bankrupt.ap/ "DETROIT (AP) -- Delphi Corp., the largest U.S. auto supplier, filed for bankruptcy Saturday, sending shock waves through an American industry already weakened by high labor costs and falling market share. . . . Delphi Chairman and CEO Robert S. Miller said the company hopes to emerge from Chapter 11 in early to mid-2007. . . . Miller said Delphi will continue to pay its employees and suppliers and will ship its products on schedule, although the company's former parent, General Motors Corp., said the filing could cause supply problems. . . . While Delphi reported $4.3 billion in unfunded pension liabilities at the end of 2004, GM said in a statement released after the bankruptcy court hearing that it could have to assume $10 billion to $11 billion in retirement benefits for union-covered employees who transferred to Delphi as part of the 1999 spinoff." Quoting http://moneycentral.msn.com/content/CNBCTV...hes/P132195.asp After Delphi's Chapter 11 filing, GM shares tumble 10% as one analyst sees a 30% chance the auto giant will also seek protection. It's been more than 50 years since Charles Wilson, then-president of General Motors, said "… for years I thought what was good for the country was good for General Motors and vice versa." . . . GM closed at $25.51, its lowest close since January 1993. The stock is down more than 36% so far in 2005. Banc of America cut GM to "sell" from "neutral," and analyst Ronald Tadross increased the chance of the automaker filing for bankruptcy to 30% from 10%. Tadross also cut his price target to $18 per share from $32 per share. "We think GM's biggest supplier's recent bankruptcy filing should raise GM's retirement liabilities by at least $6 per share,'' he said in a research note." Talk amongst yourselves
Tony: We should all be VERY worried about the Delphi Chapter 11. True that more than likely it will just be used as a ruse to ditch the pension liability, but somebody will have to end up paying for that pension liability. That "somebody" will more than likely turn out to be us, the great unsung taxpayer. Sure GM may be more pressured to also pull a Chapter 11, especially if they have to cover a portion of that looming unfunded pension liability. This could create a ripple effect that could tank many pension funds, causing a severe recession or worse. jay
I completely agree, Jay. In almost the same vein, I said on another thread that it scares me how many retirees and current GM employees have their entire pensions resting on the company's success. How many of them have tons of accumulated GM stock which is now at a 12-year low? In some regards, I veiw GM's dropping stock price and sagging SUV and large trucks sales in the same way that some see high gas prices. Let's face it, we change when there is considerable pain. Without the pain, there is no need for change. Some say that higher gas prices will create more energy conscience consumers. Perhaps GM will rethink some of their vehicle offerings as they emerge from Chapter 11. : editted for bad spelling :
Let me PERSONALIZE this. My mother just retired about 20 months ago from Delphi. Her retirement has all but vaporized along with all of her benefits. Now two years into what should be a peaceful time in her life she's trying to decide which medicines she can (quite literally) live without and she's looking to go back to work. Worried about Delphi and GM - YOU BETTCHA!
I'll throw this in as well, if the general goes down, Ford will also go chaper 11 as well, why be left holding the large end of the pole. If that happens I predict that within 8-10 months the stock market will have collapsed and we'll be back to a drepression like the early years of the last century. Only this one will have war's to try and stave it off. That I think is the reality of this situation. I also agree with Jay that the whole pension industry will go down as well. The beaners in that industry are going to just say "why should we be left holding the bag" It'll be ugly if it happens. we can all move onto Jay's hobby farm and ride it out
Oh sure, the More the Merrier. Bring your own groceries though, buddy. I'll have a new sign right at the gate to my driveway: "No groceries, no admittance." Though I suppose you could always sleep in the neighbors barn and keep the cows company
My Aunt and Uncle who live in Santa Rosa, California, retired from United Air Lines back in 1994. For the first few years it was great, their retirement "dream." Guess what happened to their "dream?" They recently sold their home and moved into a MUCH smaller condo, to at least have some money in the bank to make up for the pension shortfall.
Since we're both 48 and have been planning, saving, and investing towards retirement for years, my husband and I have weekly conversations about what we think the economy will look like 5-40 years in the future. Dan was hoping to take early retirement, in another 5 years. The economy has changed and that's not going to happen. The Pollyanna view is that the economy is so strong that it will absorb shock waves like hurricanes, strikes, wars, massive business failures, and pandemics. It can only do so to a certain degree, of course. The worst case scenerio is our pension fund being scrounged to bail out peers who have never bothered to save towards retirement, the health care system completely collapses, and our little town becomes isolated on the edge of the Chesapeake,with whatever money we have becoming as valuable as toilet paper. Dan's parents are still alive and will be out of money in ~3 years, at their current burn rate. We've discussed options with them: sell their home to us and then continue living there on the proceeds, gift their home to all the kids (hoping they'll survive the needed 7 years!) via a trust, or just tell us what they think they'll need and we'll maneuver to come up with it. (Dan's assumed for years that he might end up responsible for their finances.) It's wise to cultivate skills that can be useful in a basic economy. I could give gardening and canning or cooking lessons at the local community college or go back to nursing, Dan could do construction engineering consulting or work on fishing boats. We don't think we'll ever be able to completely retire. And we shouldn't; our skills will always be needed by the community. I feel sorry for the folks who have retired from GM, the autoworkers union, airlines, Enron, etc. but I don't want to pay for their mistakes. I have enough to worry about, trying to avoid making mistakes of my own. It's a shame; many of the truly wealthy, the Bill Gates and Forbeses of the country, were willing to continue paying higher taxes. Their lifestyles weren't going to be hurt by those taxes and they recognized that. But the voters swallowed the anti-inheritance and higher tax-bracket laws guff. Now we can't afford to bail out the pension funds. Sigh.
I am quite sure that at least a portion of her pension is protected by the Pension Benefit Guaranty Corporation (PBGC).
There's a good op-ed. piece on pg 2 of today's WSJ regarding Delphi's filing of chapter 11. IIRC, the author stated that this was likely the first in a series of wake-up calls and reality checks for the American auto industry, and that they've all been sticking their heads in the sand pretending that globalization and aging of the population doesn't exist. The author claimed that Delphi was paying union workers about 3x what they were worth in a global work force, and that the union would be forced into choosing between huge cuts in salary and benefits (including those of retired workers), or huge loss of jobs. Anyway, it's worth a read.
read in today's Financial Post that the Bank of Nova Scotia here in Canada has a 4.2 Billion dollar exposure to the US auto industry. And several other Canadian banks have almost as much exposure. So it'll hurt this country as well as the US banking and insurnace industry, not to mention all the small investors as well. Hopefully all our doom and gloom won't come to pass and the US auto industry executives get with it to prove that they can turn things around. But they'll need a torch on their nice person to make them realize their on deaths door step. I hope they really get working on this problem.
the cities and towns that depend on auto manufacturing for tax revenue and employee payrolls are in for a wild ride.
i have long since given up on relying on any company pension plan. i have a pension coming when i turn 65 but i dont hold out any real hope of collecting it and the company i worked for is still doing fine (Weyerhaeuser) but i still have several years to go before collecting. i am investing as heavily as i can into a 401k. it wont be a lot, but it will be enough on its own sans pension and Social Security. with the financial future being what it is, i feel that relying on anything else would be a mistake
We're not depending on any pension plans to come through either, Dave. But we'd like to be able to take advantage of the health benefit package that should be coming with Dan's retirement. He'll be eligible if he can hang on to his job for another year. Of course we could get the healthcare rug pulled out from under us at any time in the future, but at least we will have tried to set things up for ourselves as best we can. When do you think Congress will begin raiding 401k's and mutual funds? If things get real bad, I can see the folks on Capital Hill dabbling in creative accounting and switching out "profits" from 401k accounts (yours and mine) into programs supporting starving retirees who have nothing set aside. Maybe they'll start with the retirement funds that young workers will have put into the "investment" part of Social Security? If that happens, I'll be one of those little old ladies marching on Washington. I'm certain you'll be joining us too. You can stay at our place, we live within driving distance of DC.
well i would hope that 401k's cant be raided by congress unless they start taxing contributions. OH OH!!! shouldna said that... hope they werent listening...gotta go now
Wow, there's an image.... Trent Lott, up late at night reading PriusChat threads... "So that's how you turn off that %^$@! backup beep!"
