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Old 07-23-2009, 06:57 AM
 
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$6.25b Worth Of Delphi Pensions Dropped On PBGC | The Truth About Cars

Government owned new GM will pay $70 million to govt run PBGC…..
From the left pocket to the right! Think this is what economists call ‘velocity of money’ circulation.
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Old 07-23-2009, 11:44 AM
 
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Obama to0ok care fo the UAW for services received and dump the others.
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Old 07-24-2009, 10:28 PM
 
Location: WA
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"When the PBGC was created in 1974, Democrats running Congress assured everyone there was no taxpayer risk because the agency would be funded by fees from pension plans, as well as by the assets of plans the company takes over. But like Fannie Mae, we are learning that sooner or later these government guarantees always come due. Now the PBGC has a $33.5 billion deficit even before Delphi, and more bankruptcies are headed its way. Mark it down as one more way the taxpayers are being put on the hook for GM, the UAW and Michigan’s 17 electoral votes in 2012."
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Old 07-25-2009, 04:06 PM
 
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Wait for airlines to dump their pension obligations into this bucket, stemming from decades of fare wars and red ink which resulted from total deregulation. I was in the biz of transport all my career, saw this coming when Carter went ahead with it, shifted my career from purely transport to the Info Tech side of transport. Glad I did. Many of us in the biz who had studied transport law and regulation saw this coming and predicted all this over 30 years ago. Since then countless fine airlines have bit the dust, with more to follow. Totally free markets lead to brutal competition, crime (Enron, etc), chaos, destruction, and then we get to pick up the pieces and pay to fix things.
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Old 07-25-2009, 08:59 PM
 
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i wonder how many people think that GM isn't going to wind up in chapter 7 anyhow.
General Motors Corp. CEO Fritz Henderson on Tuesday said July sales for the automaker appear to be weaker than the same month last year, but i am sure that we will be told that it will all be good as soon as that cash for clunkers program really kicks in.....
i was also surprised to hear on the radio that you could use the cash for clunkers program to lease a toyota. they had a toyota yaris advertised for 79 dollars a month on a lease with the cash for clunkers cash.
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Old 07-25-2009, 09:04 PM
 
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Quote:
Originally Posted by Mike from back east View Post
Wait for airlines to dump their pension obligations into this bucket, stemming from decades of fare wars and red ink which resulted from total deregulation. I was in the biz of transport all my career, saw this coming when Carter went ahead with it, shifted my career from purely transport to the Info Tech side of transport. Glad I did. Many of us in the biz who had studied transport law and regulation saw this coming and predicted all this over 30 years ago. Since then countless fine airlines have bit the dust, with more to follow. Totally free markets lead to brutal competition, crime (Enron, etc), chaos, destruction, and then we get to pick up the pieces and pay to fix things.
i looked into your comment on the airline pension funds and it doesn't look good. More Trouble on the Horizon: Pension Plans - Watching the Watchers

Airline pensions alone are underfunded by nearly $14 billion. And this does not take into account the massive hit the funds took in the latest stock market crash. GAO notes that in the near future, the industry's pension obligations may well exceed available cash in the pension funds.

also in the article: volatile markets have saddled U.S. companies with a $409 billion deficit on pension plans, reversing a $60 billion surplus a year earlier, and will cut into earnings in 2009. As of Dec. 31, 2008 pension plans among members of the Standard & Poor’s 1500 had $1.21 trillion of assets and $1.62 trillion of liabilities.
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Old 07-26-2009, 02:12 PM
 
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Exactly. Here's an excerpt from the link, bolded text is my doing:

"The Government Accounting Office (GAO) addressed the issue in a 2005 report titled, COMMERCIAL AVIATION: Bankruptcy and Pension Problems Are Symptoms of Underlying Structural Issues", noting:

Considerable debate has ensued over airlines’ use of bankruptcy protection as a means to continue operations. Many in the industry have maintained that airlines’ use of this approach is harmful to the industry. This debate received even sharper focus with pension defaults. Critics argue that by not having to meet their pension obligations, airlines in bankruptcy have an advantage that may encourage other companies to take the same approach. (GAO, 2005)

Airline pensions alone are underfunded by nearly $14 billion. And this does not take into account the massive hit the funds took in the latest stock market crash. GAO notes that in the near future, the industry's pension obligations may well exceed available cash in the pension funds.

Airline defined benefit pensions are underfunded by approximately $13.7 billion, according to airline financial reports filed with SEC.30 This underfunding is down from $21 billion at the end of 2004 as a result of the termination and transfer of US Airways’ remaining pension plans and all of United’s pension plans to PBGC. Under existing law, minimum pension contribution requirements for the remaining legacy airlines that still operate plans are estimated to be at least $10.4 billion from 2005 through 2008.

These minimum contribution requirements contribute to airline liquidity problems. Estimates suggest the combined costs of the minimum pension contribution carequirements, long-term debt, capital leases, and operating leases will exceed available..... "


The report alludes to "underlying structural issues" and if we follow that back to it's root, the true issue are fare structures, which are far too low to support ALL the costs of running a vital industry. The apparent success of SW Airlines is an outlier and like all outliers SWA needs to be discounted since they are anomalies in their industry. As I've said for years, the low air fares people rave about are going to cost them later; that time is upon us.

In a larger context, one could also view the very concept of pension plans themselves as a structural issue, given that most large industries traditionally provided pension plans for employees; it was the thing to do and it fit the mold of American prosperity, lifetime employment and a reward for years of faithful service. However, I do not think that pension plans should be viewed as a generic structural issue, because if we do, then we are essentially saying that pension plans, per se, are generically wrong.

As a nation, I think we're heading towards a future of no pension plans of the sort in the above controversy. In place of that I see a regime of forced / enforced employee contributions to Social Security PLUS a 401-k type schemes; one that does NOT include today's abuses of forcing employees to put it all into the stock of their employing company. Worst example is the Enron disgrace, where employees lost all of their 401-k value when Enron collapsed.

I lay the blame on Congress for a long-term failing to run the nation IAW sound fiscal practices and succumbing to the siren song of deregulation of many industries (not just airlines) and for not putting reasonable limits and boundaries on potentially dangerous forces of "free markets" that many people love to cheer about. Totally free markets always lead to chaos, destruction and horrendous problems, with us picking up the pieces. And the damnable costs.
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Old 07-26-2009, 02:28 PM
 
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i think our pension plans are failing because of demographics for one thing. the work force is aging and there are fewer workers trying to subsidize more pensioners. it worked at one time because people did not live long past retirement age and there was a higher workforce compared to the retirees. i blame congress for not dealing with the situation years ago. they have always had the numbers but have chosen to ignore them, just as they ignore any potential problem and sweep it down the road for somebody else to deal with. i also blame government for encouraging people to invest in stocks as a "retirement plan" (giving them the deduction) with the expectation that these people do not have to manage their money themselves, and infer that they will have a nice "nest egg" when the time comes. we can see that this did not play out for many americans, and certainly not for the enron employees.
i agree that we are going to be dealing with some huge numbers at some point. i think they are printing more money now for yet more treasury auctions......
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Old 07-26-2009, 06:18 PM
 
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The problem of aging populations and fewer current workers is especially true for Social Security, lesser so for airlines who cut fares below the level where they could fund all of their obligations. Fare / price wars are endemic where there is no regulation, a minimum of which should have been left in place to assure airline profitability. The old maxim was "a profitable airline is a safe airline."

Putting the 'rate floor' back under airline fares would bring up fares to the level where profits return and obligations are met, and that can be done despite the demographics.

Threads like the one called "Is China Hollow" and many others discuss demographics and birth rates, etc. An excellent discussion is found in the very readable book by Ben Wattenberg called "Fewer" which is a great read. Of all the large industrial nations, the USA is closest to having a birthrate near the replacement level. Europe and much of Asia are WAY below the replacement level, which raises huge issues in the 2050 timeframe, but I'll be gone then....
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