"Never Trust the Deal"
GM wouldn't buy pencils from a blind man without a contract, but salaried workers never needed a contract with the company because they were family.
Now GM is offering the old and infirm members of the family a deal. Not a gratuity or a bonus after a record breaking year of profit, but a cash-in-your-chips kiss-off for a Cracker Jack-size buyout prize. Those who don't take the deal will get an annuity from Prudential, the company where GM decided to spin-off the pensions for die-hards.
Get this, while the amount offered may vary according to age and health among other factors, GM expects to save $26 billion on "the deal."
In which column will accountants inject this hypodermic savings? And where will the boost come from, if not from retirees who bought the deal?
Will the savings on salary pensions mean hourly workers will get a bigger profit sharing check next year? Guess again. Then ask yourself, who was it who first said, "Never trust the deal."
All we know for sure is that if it was a good deal for retirees, GM CEO Dan Akerson would have tucked it [$3.5 billion] up his golden parachute and ducked out.
GM claims it will add $3.5 billion to the currently underfunded pension plan to help buyout retirees under new laws that permit them to offer "an equivalent economic value to the stream of monthly pensions they replace" rather than a "higher premium value" per the old law.
Is this new law a change we can believe in? Perhaps. If you'd rather make your last lap around the casino than the chemo lab.
But if the choice is cash in hand or an underfunded annuity sold to Prudential, which according to Wikipedia manipulated "the payout of life insurance benefits due to the families of American soldiers in order to gain extra profits," you might take your chances that GM overestimated your life expectancy by accident.
Prudential, the company originally named, "The Widows and Orphans Friendly Society," made a pirate's fortune at the turn of the 20th century by charging industrial workers in poor urban areas double the rates others paid and learned its lesson well. The SEC investigated Prudential at the end of the 20th century and discovered that the company defrauded 400,000 individual investors on "deals" in the nineteen-eighties.
GM CFO Ammann claims "the deal" will help him sleep better so he can concentrate on something he knows absolutely nothing about: "building cars and trucks." But what the hell is he talking about? GM outsourced all their pension and benefit programs to Fidelity years ago. Has Ammann been asleep at the wheel?
UAW retirees are next in line for "the deal." Bob King as usual wasn't available for comment but the UAW-GM contract ratified in 2011 states in part: “The parties further discussed the possibility of amending the Plan to provide additional options for certain current retirees that would help GM manage its pension risk and benefit such retirees that voluntarily agree to participate. To this end, the parties agreed that the National Parties may mutually agree during the term of this Agreement to amend the Plan to add retirement options for some or all existing retirees that help GM reduce the volatility and risk related to the Plan and benefit existing retirees by providing an additional voluntary option.”
What troubles me, a GM retiree, is that the “parties” have given themselves legal cover “to amend the Plan” during “the term of this Agreement.”
Perhaps, dear reader, you are comforted by the word “voluntary.” It connotes a certain safety for those who don’t wish to walk the plank. In my experience parties that seek volunteers are inclined to influence choice with persuasive tactics that resemble a sword in the back. But the point is: since UAW members ratified this contract, the “parties” have legal justification to amend the pension plan and they have already "agreed" to "mutually agree" all over the place like untrained puppies at a pee on retirees party.
The UAW Concession Cons already agreed to help GM "de-risk" the pension. De-risk is a code word for shift the risk to retirees. GM expects to de-risk $26 billion on "the deal." With every whirl of the video slot The House wins even when they pay out. Don't take my word for it, just look at the size of the The House compared to your over-mortgaged shack.
I have a button from 1979, the year I was hired at GM, that says, "UAW Members Want Cost of Living on Pensions." You know what we got instead? The "Christmas bonus" that the UAW agreed to give up in 2011 along with the Social Security Age Creep Patch which, since I turn 62 this year, cost me over $18,000. Guess I won't be buying one of those new GM cars that Ammann will be focusing so hard on now that he doesn't have to tinker with other people's pensions.
GM is betting that W.C. Fields' old saw, "A sucker is born every minute," will outlive the older maxim, "Never trust the deal."
You may be laughing at my humor, but I don't think it's funny.
sos, Gregg Shotwell
Social Security Age Creep and UAW-GM-Ford-Chrysler Contracts
Whenever a contract is front-loaded, beware the busy little backhoe with the smiley face. It’s not loading a dump truck destined for any worker’s bank account.
Most UAW members understand that profit sharing promises and signing bonuses are warning signs not down payments. Whatever the company gives upfront will be taken off the back end—tenfold.
But future retirees should also beware of Social Security Age Creep, a phrase which insinuates either the loathsome gait of osteoporosis, or the sneaky trait of those who would defraud senior citizens.
UAW-GM-Ford-Chrysler agreements require retirees to begin collecting social security at age 62, if they retire early. Since the age of full social security benefits is creeping up from 65 to 67—and perhaps even higher if the frauds in Congress get their way—the amount that UAW-GM retirees may lose accrues accordingly.
Here’s how it works. If you begin collecting benefits before you reach full retirement age, Social Security will reduce your payments. For example, if your full retirement age is 66 and you start drawing benefits at age 62, your monthly benefit will be about 25% less than if you waited until age 66.
The percentage creeps up as your full retirement age creeps up. It used to be that at age 62 one would get 80%. But since the age of full social security has crept up, the percentage an individual collects has crept down from 80% to 79% to 78% and so on depending on your age.
Past UAW-GM-Ford-Chrysler contracts included a “social security age creep patch” which helped make up the difference. But the patch was only negotiated for those who became eligible to collect social security (turn 62) within that four year contract. Since the Social Security Age Creep Patch was contractual rather than part of our actual pension, the UAW was able to negotiate it away in return for helping the company.
Here’s how the age creep patch worked. When a UAW-GM-Ford-Chrysler retiree begins collecting social security, the supplement to his or her pension ends. But the patch allowed the retiree to collect both social security and the supplement for one more year. It helped offset the loss caused by social security age creep, that is, the advance of full retirement age from 65 to 67 and the subsequent reduction in social security payments for those who begin collecting at age 62.
In summary: Social Security Age Creep Patch permitted retirees to collect both the supplement and social security payments for an additional year.
sos, Gregg Shotwell