Auto manufacturer bailout...

[ForeverAutumn]

Is it unreasonable for the Union to be asked to play a part in saving the auto companies?

http://ca.news.finance.yahoo.com/s/1...lion-auto.html

I understand the need to protect the workers, offer a fair wage and all. But isn't it better to take a pay decrease and keep your job than to shut down factories and lose it?

I'm sure this is not nearly so cut and dry. But I've always thought the auto unions to be unreasonable. I'm not sure how they're run in the US, but the leaders of the Canadian Auto Workers Union (CAW) always seem to be completely unreasonable bullys and the auto makers cave to them. They remind me of the worst kind of politicians. I say congratulations to the Senate for not blindly spending tax payer dollars to appease a union that, IMHO, has too much power and knows how to abuse it.

[kexodusc]

Is it unreasonable for the Union to be asked to play a part in saving the auto companies?

http://ca.news.finance.yahoo.com/s/1...lion-auto.html

I'm sure this is not nearly so cut and dry. But I've always thought the auto unions to be unreasonable. I'm not sure how they're run in the US, but the leaders of the Canadian Auto Workers Union (CAW) always seem to be completely unreasonable bullys and the auto makers cave to them. They remind me of the worst kind of politicians. I say congratulations to the Senate for not blindly spending tax payer dollars to appease a union that, IMHO, has too much power and knows how to abuse it.

While I'm not anti-union, I have had....personal dealings with the UAW and professional dealins with the CAW. I cannot think of 2 more perfect examples of where the unions have missed the boat.

I can't say I blame then now or ever, they try to maximize value for their membership, and you know what, for decades now the threat of job losses attributable to their greed has proven to be a false one. And I suspect if a bailout does finally go through, overall workers will still have profited from having a union on the aggregate than if they otherwise hadn't had one.

But damn, sometimes the sheer audacity of their positions defies all logic.
When thousands of people are losing jobs in this industry because it's so screwed up, it's hard for them to watch a union with compensation levels 2-3 times what they make refuse any concessions now.

I understand the need to protect the workers, offer a fair wage and all. But isn't it better to take a pay decrease and keep your job than to shut down factories and lose it?

Whenever those jobs have been threatened in the past they've either been doomed regardless of union concessions ( because of external forces), or the Auto co's or government dug the industry out of whatever hole they were in at the time, and the unions persevered. In those cases, it concessions weren't maximizing value for the union. They're just keeping the same strategy that's got them this far, maybe it'll work again, maybe it won't, but it's hard to change that organizational culture.

I suspect there's a deal to be made, and the UAW is just holding out as long as it can to keep as much as it can for its membership. I wish our politicians fought so hard for us.

[Groundbeef]

I am not a blue collar worker. In fact, I have a rather white collar government job.

That being said, this vote was a DISASTER. Lets put some things in perspective here.

3 of the US largest employers were asking for a bridge loan of $14Billion. Not a grant, give away, a LOAN.

AIG (Nations largest insurer got $144 BILLION)

Check out this link here for the banks, and the totals they are getting:
http://money.cnn.com/news/specials/s...t/bankbailout/

(Higlights)
Wells Fargo $25 BILLION
Citi $25 BILLION
J.P. Morgan Chase $25 BILLION
BOA $15 BILLION

Now, that was an "initial" infusion of cash. With the exception of the CEO having his pay limited, there is NO oversight on the usage of the capital infusion.

Why is is suddenly appropriate for the US Senate to decide the paygrades for thousands of UAW workers and deem them "too high"? And then to add insult, they appoint a "Car Czar" to oversee the minutia of the loan?

Why didn't they (Congress & Senate) seek to lower commisions, and compensation of all front line workers in the financial industry? They throw out 100X the cash with little/no oversight on financial workers, and DEMAND wage consessions to save one of the last manufacturing bases of this country?

It is also important to note that the largest whiners in the fight are Republican Senators from states that employ workers in Auto industries that are NOT represented by the UAW. (Toyota, Honda, Hundyi). That is a total conflict of interest, and they should have recused themselves from the vote.

The hipocracy is overwhelming, and disgusting.

[Feanor]

Is it unreasonable for the Union to be asked to play a part in saving the auto companies?

http://ca.news.finance.yahoo.com/s/1...lion-auto.html

I understand the need to protect the workers, offer a fair wage and all. But isn't it better to take a pay decrease and keep your job than to shut down factories and lose it?

I'm sure this is not nearly so cut and dry. But I've always thought the auto unions to be unreasonable. ....

For decades in Canada and the U.S. auto workers extract huge wages and benefits from the auto companies. A completely unskilled worker could get an assembly line job and receive a wage higher than a skilled tradesman, plus rich benefits and pension plan. These the unions demanded, and because the auto industry was profitable for so long , for a long time the companies were willing to pay them.

The current storm was visible on the horizon for a long time but the unions and companies too were unwilling to prepare for it. Today the North American companies are uncompedative on account of current wages and benefits, but also and much more so, on account of the rich pension and post retirement benefits they agree to pay decades ago.

Whatever the niceties of the company versus worker balance may be, from taxpayer prespective if is absolutely fair the the two groups share the pain in present circumstances.

I might be left-winger but I'm by no means an enthusiast for unions. In my opinion the other area of the economy were union members had enjoyed excessive wages and benefits at the expense of customers, other workers, and taxpayers has been in the public sector, public utilities, etc.. Perhaps a day of reckoning will come for these workers too though it will be a lot longer coming.

[Rich-n-Texas]

Is it unreasonable for the Union to be asked to play a part in saving the auto companies?

http://ca.news.finance.yahoo.com/s/1...lion-auto.html

No, it's not unreasonable. It worked for the Airline industry.

I understand the need to protect the workers, offer a fair wage and all. But isn't it better to take a pay decrease and keep your job than to shut down factories and lose it?

See above. I'm told UAW workers pay zero deductibles and co-pays on their health insurance. Seems quite unrealistic to me.

I'm sure this is not nearly so cut and dry. But I've always thought the auto unions to be unreasonable. I'm not sure how they're run in the US, but the leaders of the Canadian Auto Workers Union (CAW) always seem to be completely unreasonable bullys and the auto makers cave to them. They remind me of the worst kind of politicians. I say congratulations to the Senate for not blindly spending tax payer dollars to appease a union that, IMHO, has too much power and knows how to abuse it.

I agree 100% with this. Unions promote mediocrity, and that's the main reason why Japanese automakers beat us time after time in our own market. And let's not even talk about the amount of corruption that has been a trademark of some unions through the years.

[Groundbeef]

And let's not even talk about the amount of corruption that has been a trademark of some unions through the years.

Can you please link us to some articles where a union has cost the US Taxpayers 700BILLION?

Are you suggesting that somehow the sins of the UAW are worse than those of say Enron, Worldcom, or Tyco? Executives in those companies have destroyed the financial futures of millions of citizens.

Look at AIG- they gambled BILLIONS on finacial instruments that are not even regulated, and you want to lay the nations ills on a line worker who may/may not pay a premium on his healthcare? Please. That is sour grapes, and completly innappropriate.

Lets keep the focus on the inequity of the financial bailout so far.

Irresponsible, overpaid financial CEO's can make/made terrible decisons and completly froze credit markets across the globe, causing massive uncertainty throughout financial markets.

Get $700 BILLION w/out strings other than the CEO's cannot make more than $400,000 per year. No oversight.

Thick headed, overpaid auto exec's that made poor decisions in years prior. Ask for $14 Billion in LOANS, and are denied unless the workforce agrees to massive wage concessions. Chiefly driven by GOP as "payback" for union workers voting Dems into office. Must also subject their compaines to a new government "Car Czar" who has the sole discretion to decide how the money is spent.

This is clearly bull****.

Hate the union if you want. But if the car compaies go under, you and are are screwed. Canada, you make plenty of cars, kiss those wages, and the people that go with it away. You can go back to fishing, and ice sculpting.

[3-LockBox]

Unfortunately, in the US anyway, unions take the biggest slice of the pie, and put a barbed wire fence around the rest of it.

But I do agree that the GOP run government was taking a swipe at the Democratic demographic by requiring workers to take wage hits. Definitely a cheap shot. I wasn't for any bailout, because I know that the money will be used to pay high ranking officials' salaries and year end bonuses. Many of those institutions that recieved their bailout have announced layoffs. Its a total sham.

[kexodusc]

Just some perspective on the whole Union thing...I used to work in marketing research for Honda...I know for a fact that with GM, Ford, and Chrysler - over 70% of each vehicle and the costs associated with it are attributable to non-union labor - car parts are built by the same outsourced factories and really are mostly "assembled" now, rather than manufactured by auto companies. For some cars, it was well over 90%. I doubt that's changed in the last 5 years...if anything it's higher now.

That means any cost structure differences between the Big 3 and the likes of Toyota and Honda are reduced to whatever that less than 30% of union work costs vs non-union work.
Long story short- take union wages and benefits out of the equation and these companies would be in the exact same boat...cars nobody wants that aren't profitable, a credit crisis that has seen their operating cash disappear, and 2 of them on the vergeo of bankruptcy.

The reality is the Big 3 are getting hit hardest by factors outside of their control at a time when their product is competitively weak. If one believes the union is to blame, then they also have to accept the fact that the US and Canadian public elected governments implictly supported a legal framework that has given disproportionate bargaining leverage to large unions that lead to these woes. That is not GM or Ford's fault. They have been the victims of collective bargaining the last quarter century - each round there was no win possible for them, it was only a question of concede a whole lot of billions to the union, or just a few billion to the union. A situation they'd wash themselves of if it was legal to just close shop, fire everyone, or walk away without massive fines and penalties. The only reason I don't have much sympathy for Ford and GM and Chrysler is because given the chance, they would take advantage of their workforce like they each have at one point their histories.

On the pensions, LTD, and health benefits stuff - this is where the media propogates misinformation to sell a story. Reporters should do a few courses in actuarial science before commenting on how foolish UAW or GM, Ford, and Chrysler were for agreeing to those benefit plans. Yeah, the unions get paid way too much, but their salaries and health benefits were negotiated by the executives of those companies in good faith. Nobody forced GM and Ford and Chrysler to sign those (though they didn't have much option other than shipping manufacturing overseas), but when they did design those plans originally, interest rates were 10 times higher than what they are now and had been high for years. Without reducing my post to a lecture in actuarial assumptions, a quick rule of thumb used when valuing future liabilities on a going-concern basis for LTD and pension plans is that every 1% drop in interest rates increases the value of liabilities by 13-15%. What has happened to interest rates the last 20 years, or even since 1999? (when the Auto co's were recording record profits). Since 1999 they have fallen over 5%. That's a 75% increase in liabilties. The global markets losing 25-40% this year haven't helped either. When these benefit plans were designed rates were in the double digits and had been for decades and nobody saw 2% interest rates as a possibility. Nobody. The result is the cost of maintaining those contractually promised plans has soared unpredictably through no fault of the Auto co's or the UAW, without sufficient investment options available to offset that increase.

So these companies are getting pounded by 4 factors all at once, only 1 of which is their direct fault:
1) Bad product
2) Disproportionate legal framework giving far too much bargaining leverage to large unions in critical industries (granted UAW needs to take a cooperative approach for its own long-term viability)
3) Unimaginably low interest rates that made previously affordable benefit plans too expensive (far more relevant than hourly wages), which is wreaking havoc on their cost structures.
4) A global credit crisis that has seen their ability to finance their way out of their mistakes disappear.

Like it or not, millions of jobs are dependent on these companies. This isn't a question of subsidizing thousands of union workers or padding the wallets of fat cat CEO's...this is a question of supporting a huge portion of the economy. These companies are a catalyst for millions of jobs, we've built our economy around them. I honestly believe the cost of helping them now is cheaper in the long-run than the cost of letting them die. Hopefully they can fix a lot of what troubles them.

[Luvin Da Blues]

You could always send the displaced auto workers up here to Canada, we have plenty of fish to clean and lots of ice chisels to sharpen.

[Feanor]

...

So these companies are getting pounded by 4 factors all at once, only 1 of which is their direct fault:
1) Bad product
2) Disproportionate legal framework giving far too much bargaining leverage to large unions in critical industries (granted UAW needs to take a cooperative approach for its own long-term viability)
3) Unimaginably low interest rates that made previously affordable benefit plans too expensive (far more relevant than hourly wages), which is wreaking havoc on their cost structures.
4) A global credit crisis that has seen their ability to finance their way out of their mistakes disappear.

...

What am I hearing here? Do I sense it's blame the government time again? Those poor unions just forced to make unreasonable demands? Those poor auto companies just forced to accept them? Sorry, not really.

There was a time when the auto companies where hugely profitable. Yes, you have to go back quite a while, the '50s and '60s. But in those days unions felt free to demand and the companies felt comfortable accepting extravagant wages and benefits. For decades the North American unions & companies lived in denial about the threat of foreign competion or that their industry could return to low, or even normal, profitability levels. For a time this inevitability was staved of by the minivan and SUV innovations and the popularity, (mysterious to me), of trucks, but foreign competion responded in due course.

Kex, thank you for pointing out the actuarial aspects -- for my part, I'm poised to reap the rewards of a defined benefit pension plan and relatively generous post-retirement health benefits: eat your hearts out, folks! (not really ). But interest rate volitility is nothing new and actuaries were at hand back in the glory days of North American auto profitability. The unions and the companies share the blame for the current situation, not laws and unpredictable luck.

But I agree it isn't about blame today but about what is necessary to sustain the industry long enough for strategic alternatives to be found. We need much "greener" options than huge trucks, SUVs, and mini-vans that have been the most profitable auto products for years now.

[Ajani]

There's more than enough blame to hand out to everyone from the Unions and CEOs to the Government and Banks... Hell, we could probably even blame Saddam Hussein and his weapons of mass destruction while we're at it...

The real issue is how to fix it... and while trying to shaft autoworkers by cutting their salaries and benefits will somewhat improve the profitability of these auto-manufacturers, the real problem is that they are selling uncompetitive, crap products...

What needs to happen is for America to start producing more cars that Americans want to drive... and eventually ones that the rest of the world would like to drive....

[kexodusc]

What am I hearing here? Do I sense it's blame the government time again? Those poor unions just forced to make unreasonable demands? Those poor auto companies just forced to accept them? Sorry, not really.

Unreasonable demands? Maybe to an outsider. Not to the paid union staffer who's hired to extract the most out of the contract they can every 3-5 years. They weren't unreasonable when they knew they'd be accepted, and if push ever came to shove, the governments would bail out the auto companies.

It is unreasonable in the sense GM and Ford in particular had little bargaining power to not accept the demands - risk losing billions in the short term and certain calamity, or accept the offer knowing you'll probably lose billions in the long-term but maybe somehow you could make it work. There was no win situation for them. They can't just close up shop overnight. Can't layoff the union workers and hire non-union labor. If you have the advice that would solve that disproportionate bargaining leverage, I'd love to hear. You could be wealthy man.

There was a time when the auto companies where hugely profitable. Yes, you have to go back quite a while, the '50s and '60s. But in those days unions felt free to demand and the companies felt comfortable accepting extravagant wages and benefits. For decades the North American unions & companies lived in denial about the threat of foreign competion or that their industry could return to low, or even normal, profitability levels. For a time this inevitability was staved of by the minivan and SUV innovations and the popularity, (mysterious to me), of trucks, but foreign competion responded in due course

. You don't have to go back nearly as far. The SUV boom was a good period of time for most of them too. Late 90's?

Kex, thank you for pointing out the actuarial aspects -- for my part, I'm poised to reap the rewards of a defined benefit pension plan and relatively generous post-retirement health benefits: eat your hearts out, folks! (not really ). But interest rate volitility is nothing new and actuaries were at hand back in the glory days of North American auto profitability. The unions and the companies share the blame for the current situation, not laws and unpredictable luck.

I'm sorry Feanor, that is incorrect. Interest rate volatilty had certainly been around, and was definitely considered. But a double digit decline in as many years was unprecedented, unimaginable. And current rates were never predicted. The entire actuary profession (which by the way required BY LAW to operate these plans) is mandated as part of their actuarial valuations to sign a statement certifying the reasonableness of the assumptions and the viability of the plan on said assumptions. You will find every plan that operated did so on the advice of actuaries who made long-term rate assumptions for their best-guess adverse conditions, even 50 years into the future. Guess what? They were all horribly wrong! And you have the audacity blame a car company for that? The best advice anyone had at the time (hindsight always 20/20) was that these plans were not only affordable, but cost-effective forms of compensation. It's a wonderful line of work when you can say "oops we were wrong, but not accountable". But that's exactly what has happened to a lot of employers. No employer in their right mind would start a defined benefit pension plan believing today's environment and regulations were a real possibility.

And yeah, I'll blame government and ill-advised laws. Your defined benefit pension plan likely has a massive unfunded liability right now due in large part to impractical and unscientific regulations forced upon the industry, as much as investment returns and funding formulae.

But I agree it isn't about blame today but about what is necessary to sustain the industry long enough for strategic alternatives to be found. We need much "greener" options than huge trucks, SUVs, and mini-vans that have been the most profitable auto products for years now.

In the late 90's those big vehicles lead to record profit runs...can't blame the industry for getting on that bandwagon. Even the foreign companies got into it (albeit too late). GM, Ford, and Chrysler have already begun substantial work towards greener, more fuel efficient, smaller cars, even 3 years ago. The problem is it takes a few years to from concept to production, and those small, efficient vehicles are far less profitable. With sales volume not likely to increase substantially, and margins being terrible, "green vehicles" aren't an attractive investment option and certainly won't be responsible for turning their fortunes around. Though I'm with you all the way that as a society, paradigms need to shift with respect to gas guzzlers.

[Feanor]

...
I'm sorry Feanor, that is incorrect. Interest rate volatilty had certainly been around, and was definitely considered. But a double digit decline in as many years was unprecedented, unimaginable. And current rates were never predicted. The entire actuary profession (which by the way required BY LAW to operate these plans) is mandated as part of their actuarial valuations to sign a statement certifying the reasonableness of the assumptions and the viability of the plan on said assumptions. You will find every plan that operated did so on the advice of actuaries who made long-term rate assumptions for their best-guess adverse conditions, even 50 years into the future. Guess what? They were all horribly wrong! And you have the audacity blame a car company for that? The best advice anyone had at the time (hindsight always 20/20) was that these plans were not only affordable, but cost-effective forms of compensation. It's a wonderful line of work when you can say "oops we were wrong, but not accountable". But that's exactly what has happened to a lot of employers. No employer in their right mind would start a defined benefit pension plan believing today's environment and regulations were a real possibility.

And yeah, I'll blame government and ill-advised laws. Your defined benefit pension plan likely has a massive unfunded liability right now due in large part to impractical and unscientific regulations forced upon the industry, as much as investment returns and funding formulae.

In the late 90's those big vehicles lead to record profit runs...can't blame the industry for getting on that bandwagon. Even the foreign companies got into it (albeit too late). GM, Ford, and Chrysler have already begun substantial work towards greener, more fuel efficient, smaller cars, even 3 years ago. The problem is it takes a few years to from concept to production, and those small, efficient vehicles are far less profitable. With sales volume not likely to increase substantially, and margins being terrible, "green vehicles" aren't an attractive investment option and certainly won't be responsible for turning their fortunes around. Though I'm with you all the way that as a society, paradigms need to shift with respect to gas guzzlers.

I've worked for a life insurance company for years, so I'm not totally ignorant of the actuarial profession. Actuaries, like other consultant, can make more or less prudent predictions -- the law doesn't tell them exactly what assumptions to use. And there are more or less conservative ways of funding pension and benefit plans. Where I worked it was common practice to carefully match the investments that backed the product with the product's actuarial interest rate calculations as far as possible into the product's life cycle. This is a far different matter from funding a plan with, say, the company's shares.

By the nature of the company I work for, all pension products, including employee plans, are reviewed every year and the funding topped up as necessary. So, no, my pension plan doesn't have massive unfunded liabilities. In fact, (if not very sensibly), my company provided a defined benefit plan to all employees until about 5 years ago. Of course this is no longer the case.

The current auto industry problems have been a long time coming and were largely predicatable. And yes their short-sigthed greed can be blame for much of current predicament. Instead of SUVs and trucks buying them a respite in which to address foreign competition and the inevidable "greening" necessity, they chose to pocket cash and stick their heads in the sand -- now they are standing with hands out and we are expected to be sympathetic? NOT!

But as you say, governments have been too kind to big labor over the years. I'll admit the main reason why I can't fully suport the NDP is its continued close connection with big labor. The public service and crown corporations have a problem similar to the auto companies in their employees enjoy excessive wages & benefits relative to private industry; consequently government programs and services can be can be legitimately viewed as "uncompeditive". As a strong believer that there is quite a range of services that ought to be provided by government, this situation is ironic.

[Groundbeef]

But as you say, governments have been too kind to big labor over the years. I'll admit the main reason why I can't fully suport the NDP is its continued close connection with big labor. The public service and crown corporations have a problem similar to the auto companies in their employees enjoy excessive wages & benefits relative to private industry; consequently government programs and services can be can be legitimately viewed as "uncompeditive". As a strong believer that there is quite a range of services that ought to be provided by government, this situation is ironic.

Too kind to big labor? Have you been asleep Rumple? In the last 8 years it has been open war, infact I'd say the last 20 years it's been open war on organized labor. The constant demand from consumers to want cheaper and cheaper goods, and the governments blind eye to tax shelters has done much to undermine the mfg base of industrialized nations.

And please define "excessive wages". What does that mean exactly. Just because private industry pays less does not make it "un-excessive". And don't give me the crap line about what the "market will bear". In these times, it's more like what compaines can get away with! When a CEO makes 400X the base pay of the front line worker, I would argue the system has gotten out of whack.

Why must you hack away at the worker, and leave out the overpaid top management? Perhaps we should eliminate all worker health and safety regulations as well. I'm sure the mining companies would love that. After all, it would be cheaper!

And perhaps we should eliminate overtime rules, that would save companies some money.

Perhaps if compaines were not allowed to shift good paying jobs overseas, while being allowed to dodge paying taxes by incorporating in the Bahamas, we would not be in this boat either.

In some contries perhaps the unions have gotten a bit large. France would be a good example of that. But in the US, and Canada, we are not even CLOSE to that type of system.

[Feanor]

Too kind to big labor? Have you been asleep Rumple? In the last 8 years it has been open war, infact I'd say the last 20 years it's been open war on organized labor. The constant demand from consumers to want cheaper and cheaper goods, and the governments blind eye to tax shelters has done much to undermine the mfg base of industrialized nations.

And please define "excessive wages". What does that mean exactly. Just because private industry pays less does not make it "un-excessive". And don't give me the crap line about what the "market will bear". In these times, it's more like what compaines can get away with! When a CEO makes 400X the base pay of the front line worker, I would argue the system has gotten out of whack.

Why must you hack away at the worker, and leave out the overpaid top management? Perhaps we should eliminate all worker health and safety regulations as well. I'm sure the mining companies would love that. After all, it would be cheaper!

And perhaps we should eliminate overtime rules, that would save companies some money.

Perhaps if compaines were not allowed to shift good paying jobs overseas, while being allowed to dodge paying taxes by incorporating in the Bahamas, we would not be in this boat either.

In some contries perhaps the unions have gotten a bit large. France would be a good example of that. But in the US, and Canada, we are not even CLOSE to that type of system.

Groundbeef, believe me, nothing I said was intended to justify big business' excutive remuneration, out-sourcing, off-shoring, or anything of sort. In particular, I hate that jobs go to countries where employees have no legal or safety protections and no benefits from either their employer or government; where there is no effective consumer protection, no environmental protection, and where, to boot, government officials are corrupt.

My only point is that there is a problem in the making when big union employees get remuneration much higher than that non-union employees get for doing the same work in the same community. The vast majority of employees are not unionized, and no, there isn't going to be an upward trend in unionization.

[kexodusc]

I've worked for a life insurance company for years, so I'm not totally ignorant of the actuarial profession. Actuaries, like other consultant, can make more or less prudent predictions -- the law doesn't tell them exactly what assumptions to use.

And there are more or less conservative ways of funding pension and benefit plans.

For pensions, there is great flexibility on the funding and investment side, there is a very, VERY narrow range of discount rate assumptions used which determine liabilites...funding and investments have no impact on liabilities. Actuaries the world over have national governing bodies that dictate standards for all the assumptions. Theoretically, you could find a maverick actuary who disagrees with those assumptions and would be willing deviate. For the most part, those standards become the de facto regulations - if you are a maverick actuary that uses a more liberal discount rate, you are in a very bad position when standing in front of a judge and arguing against the Society of Actuaries (or Canadian Institute of Actuaries or whatever) standard assumptions. As a Plan Sponsor, you are held to the standard of "prudent expert"...again, you are in hot water if you deviate significantly from the industry standard. To that effect, assumptions at any given time are extremely similar from one actuary to the next. It didn't use to be this way, but Actuaries were getting sued too often and they've decided to cover their butts and play it safe too. The problem is (for pensions , I'll use a Canadian example) that the Income Tax Act requires you to file actuarial valuations, and in Canada the CIA standards continue to use very conservative bond rates as a basis for the discount rate assumption, instead of other, higher yield long-term investment rates of return which would reflect the real time value of money for your average diversified pension fund. If you were to use a higher interest rate to "fudge the number", the regulatory bodies (CRA or Provincial) are likely to challenge the filing because it is so out of line. Or worse you get sued by your plan members for breaking from standard. My organization polls over 30 actuaries every month, the assumptions rates are not just usually close, they're often unanimous (for government plans, some actuaries will deviate 50 basis pts or so). And they are all very conservative - which is prudent and safe and probably right. Problem is it contradicts the more liberal attitudes and advice they offered when most plans were designed and created decades ago...it's not the actuaries who are paying now, it's the companies who acted on the advice they received. Now, I'm aware of some of the crooks and bad managers who made their own beds too, but you can't blame UAW or GM for rapid declines in interest rates when they were told it would never happen, nor can you blame them for exceptional circumstances and paradigm shifts that have had unexpected adverse effects on their cost structures.

Where I worked it was common practice to carefully match the investments that backed the product with the product's actuarial interest rate calculations as far as possible into the product's life cycle. This is a far different matter from funding a plan with, say, the company's shares.

Liability driven investing is an old tool in the pension industry. It works when you design your plan to achieve long term rates of return of X to offset the discount rate of X on the liability side. When that rate dramatically drops by half in 2-3 years becaue of extraordinary circumstances, you're liabilities shoot up 50% or more. You don't have the luxury of time to earn additional investment income that offsets that rapid rise in liabilities. Worse, chances are the decline in interest rates is a symptom of a bad economy and your investments have tanked too, as has been the case twice this decade.

By the nature of the company I work for, all pension products, including employee plans, are reviewed every year and the funding topped up as necessary. So, no, my pension plan doesn't have massive unfunded liabilities. In fact, (if not very sensibly), my company provided a defined benefit plan to all employees until about 5 years ago. Of course this is no longer the case.

If you are fortunate enough to be in the top 5% of registered pension plans that do not have unfunded liabilities then you are in great shape. If you're plan was 100% funded in January (a rarity), chances are it's 80% funded today...Someone is kicking more money in, or you're holding of filing a valuation until the markets hopefully recover.

The current auto industry problems have been a long time coming and were largely predicatable. And yes their short-sigthed greed can be blame for much of current predicament. Instead of SUVs and trucks buying them a respite in which to address foreign competition and the inevidable "greening" necessity, they chose to pocket cash and stick their heads in the sand -- now they are standing with hands out and we are expected to be sympathetic? NOT!

Predictable? Maybe, but far fewer people actually predicted the severity of the credit crisis. Or the relatively rapid rise of oil to $150. Don't know anyone who bet on sub 1% interest rates in the US either. These factors have damaged the auto co's as much or more than their crappy business practices ever did. Of course, conveniently every arm chair analyst now comes out and claims "I told ya so". Everyone knew there were problems, few predicted they were of this magnitude. For these reasons, and because of the massive black hole the auto co's will leave affecting millions of related businesses,I would support government loans and some assistance with conditions for restructuring and a plan for the future...

But as you say, governments have been too kind to big labor over the years. I'll admit the main reason why I can't fully suport the NDP is its continued close connection with big labor. The public service and crown corporations have a problem similar to the auto companies in their employees enjoy excessive wages & benefits relative to private industry; consequently government programs and services can be can be legitimately viewed as "uncompeditive". As a strong believer that there is quite a range of services that ought to be provided by government, this situation is ironic.

I don't know enough about the NDP to comment on that...Most government workers I know aren't loaded and I would take a massive pay cut working for government in my field...I suspect it isn't excessive wages for everyone there...

[Groundbeef]

My only point is that there is a problem in the making when big union employees get remuneration much higher than that non-union employees get for doing the same work in the same community. The vast majority of employees are not unionized, and no, there isn't going to be an upward trend in unionization.

First, I want to point out that I am non-union. Have never been in a union. I am a state worker. I pull in 40K a year, and have benefits. In Febuary we have been warned that we will cap out our comp time. (That's 120 hours). So I will be working approximatly 80+hours a week. 7 days a week, no time off allowed. That is so we can meet our budget/statute requirments for my state. I don't think that I am getting "excessive" pay. Cap time means that I can later take that time off. I do NOT get overtime pay.

Again, sounds like sour grapes to me. Why should it bother you that Union worker X makes $45/hour with benefits, and Non-Union Y makes $35/hr w/out bennies?

Shouldn't it put pressure on the non-union shop to raise pay? If anything, union pay is a bit of a stopgap to keep companies from driving wages down even further.

If you need further evidence look at the lenghts that companies go to avoid paying workers. Meat packing companies are raided to get the illegals that are doing the work for far less than legal workers. That is exploitive. Belive me, if they could get legals (ie citizens) to do the work for that low wage, they would.

We don't pay migrents in CA to pick lettuce for high pay.

It just upsets me that we are trying to cut back on legitiate wage gains to balance the sins of executives. And it is being done by legislators with clear conflicts of interest.

I'll get off my soapbox now.

[Ajani]

First, I want to point out that I am non-union. Have never been in a union. I am a state worker. I pull in 40K a year, and have benefits. In Febuary we have been warned that we will cap out our comp time. (That's 120 hours). So I will be working approximatly 80+hours a week. 7 days a week, no time off allowed. That is so we can meet our budget/statute requirments for my state. I don't think that I am getting "excessive" pay. Cap time means that I can later take that time off. I do NOT get overtime pay.

Again, sounds like sour grapes to me. Why should it bother you that Union worker X makes $45/hour with benefits, and Non-Union Y makes $35/hr w/out bennies?

Shouldn't it put pressure on the non-union shop to raise pay? If anything, union pay is a bit of a stopgap to keep companies from driving wages down even further.

If you need further evidence look at the lenghts that companies go to avoid paying workers. Meat packing companies are raided to get the illegals that are doing the work for far less than legal workers. That is exploitive. Belive me, if they could get legals (ie citizens) to do the work for that low wage, they would.

We don't pay migrents in CA to pick lettuce for high pay.

It just upsets me that we are trying to cut back on legitiate wage gains to balance the sins of executives. And it is being done by legislators with clear conflicts of interest.

I'll get off my soapbox now.

I Agree... I don't buy into this nonsense that union workers are overpaid... CEOs are clearly overpaid... It is RIDICULOUS for the top 10 members of senior management to take home more money combined than the bottom 200 workers combined... yet you'd be shocked how often that happens... When you can pay 20 or more members of staff with your salary, it's time to for someone to start asking some serious questions about executive compensation...

Claiming that Union workers are overpaid is the wrong way of seeing things... non-union workers are underpaid and need their wages to improve...

[Feanor]

...
I don't know enough about the NDP to comment on that...Most government workers I know aren't loaded and I would take a massive pay cut working for government in my field...I suspect it isn't excessive wages for everyone there...

I guess I seemed to imply that all government workers are over paid; (my apology to Groundbeef). Of course this is not the case, and there are, for example, professional occupations where government employees likely under paid. Kex, if you worked for the government, would you be unionized? Just a question; I know many professionals are unionized unless they are designated management. (A friend of mine was head of Cdn Federal government's the meteorologists union for years, (likely there weren't many who wanted the job)).

Nevertheless historically there have been plenty of instance where civil servants were (or are) overpaid relative to non-union employees. One instance that sticks in my mine from quite a few years ago: indoor postal sorters were getting 2.5x the wage of a mail room workers where I worked.

[Feanor]

First, I want to point out that I am non-union. Have never been in a union. I am a state worker. I pull in 40K a year, and have benefits. In Febuary we have been warned that we will cap out our comp time. (That's 120 hours). So I will be working approximatly 80+hours a week. 7 days a week, no time off allowed. That is so we can meet our budget/statute requirments for my state. I don't think that I am getting "excessive" pay. Cap time means that I can later take that time off. I do NOT get overtime pay.

Again, sounds like sour grapes to me. Why should it bother you that Union worker X makes $45/hour with benefits, and Non-Union Y makes $35/hr w/out bennies?

...

'Beef, I'm sorry if I implied that government workers, unionized or not, are all overpaid. I'm sure it ain't so.

Incidentally, I suspect, (I might be corrected), that there are very few civil servants in Canada at the Federal or provincial level, even professionals, who are not unionized. The situation might be different in the U.S. (for example).

Why does it bother me that unionized government worker receives a lot more remuneration than non-unionized, non-goverment worker? Should be obvious: citizens ought to get the best possible value for their tax money. And it's just not going to happen that all the non-unionized workers, the large majority, are going to see their pay catch up with union members' any time soon.

The global economy being what it is, the north american worker's real pay has declined in the last twenty years, and markedly so since 2000. How can the worker, (non-unionized), see any justice in the fact that a government union worker gets nice, steady inflation-rated increases while his income remains the same or declines? Or that while he has no benefits or pension, the civil servant, (who's supposed to be serving him), retires with <35 years service and receives 2/3+ of his working wage plus health benefits for the rest of his life? Let me know.

[Groundbeef]

Why does it bother me that unionized government worker receives a lot more remuneration than non-unionized, non-goverment worker? Should be obvious: citizens ought to get the best possible value for their tax money. And it's just not going to happen that all the non-unionized workers, the large majority, are going to see their pay catch up with union members' any time soon.

Apology accepted.

Now a response:

Your highlighted response is most galling. Who are you to decide "best possible value for their tax money?" What does that mean exactly? Perhaps it would be best if all civil servents were paid $1 UNDER minimum wage. That would be a great value! In fact, why pay civil servents at all? Maybe institute slave labor. Then we wouldn't even need to pay them.


I am non-union. My current position hasn't seen a pay increase in over 5 years. So, although I am thankful for my job in this economy, it sure has sucked that the people I work with haven't seen an increase in 5 years.

However, the union workers have seen on average a 2.5% raise per year. Does that make me hate the union? No, it makes me want to JOIN a union.

[Feanor]

Apology accepted.
...
I am non-union. My current position hasn't seen a pay increase in over 5 years. So, although I am thankful for my job in this economy, it sure has sucked that the people I work with haven't seen an increase in 5 years. ...

You've got me beat: it's been at least 7 years since I got a pay increase. In fact my cash income as actually declined because I was getting a small bonuses until about 5 years ago, now I get none. This represents about a 25+% reduction in my real income.

...
However, the union workers have seen on average a 2.5% raise per year. Does that make me hate the union? No, it makes me want to JOIN a union.

So go for it ... or could it be that you have no opportunity to land a union job??

[Groundbeef]

So go for it ... or could it be that you have no opportunity to land a union job??

Unfortunatly, it's not that easy. More and more professional jobs in the State are going Union. However, I am in one of the few offices that it couldn't/wouldn't happen in. Many of the "professional" jobs have gone though.

Right now I'm just grateful to have a job.

Like I said, I'm not in a union. And I'm not blind to some of the excesses/lagress that Union Shops (large national unions) have engaged in. However, I am not going to lay the blame at the foot of the worker. Just because private industry sometimes pays less than union shops, that doesn't make it "right" or "correct". It may just be a function of the economy (IE, I REALLY need a job, so I'll work for less than the job is worth)

[kexodusc]

I guess I seemed to imply that all government workers are over paid; (my apology to Groundbeef). Of course this is not the case, and there are, for example, professional occupations where government employees likely under paid. Kex, if you worked for the government, would you be unionized? Just a question; I know many professionals are unionized unless they are designated management. (A friend of mine was head of Cdn Federal government's the meteorologists union for years, (likely there weren't many who wanted the job)).

If I worked for a government I would not be unionized. Governments are some of our biggest clients. Their professionals (lawyers, accountants, etc) are not unionized, most business/admin positions at least. Nurses, teachers, engineers, etc are unionized, but, historically there's been overtime, working condition issues etc that brought it on.
But consider that the government always holds the power to legislate unions into contract and rarely exercises that. When they don't, that says to me "we tried low-balling you and you called our bluff". Public sector unions in Canada have waaaaay more public support than they do in Georgia, that's for sure.

Nevertheless historically there have been plenty of instance where civil servants were (or are) overpaid relative to non-union employees. One instance that sticks in my mine from quite a few years ago: indoor postal sorters were getting 2.5x the wage of a mail room workers where I worked.

That's a occurance in every organization. The difference is every tax payer likes to feel victimized and has to blame someone. I have family in government on both sides of the border. Their position on the issue is that they have been cut to such drastically low levels of staff that governments actually spend more money outsourcing to private companies when they could do it internally much cheaper. My organization would lose a lot of business, so would legal firms, actuarial firms, accounting firms, etc. I'm billed out at $800/hr. That's way more than I'm paid, I can assure you.

When I worked at Honda, the big complaint was "if you worked for Toyota or GM"...
I'm sure GM says "if I worked for Ford", etc. There's always another guy making more money. People should worry about themselves.

I worked for UPS years ago...Fortune 500 company...5th largest by employees at the time and the fewest unionized per 1000 employees of all the Fortune 500 when I was there. Why? They paid well, had great benefits, and employees never felt they needed to form one.
When I see unions, particularly ones that the employer gives concessions to, I'm inclined to believe the employer would otherwise hold back value it could pay its workforce.
The auto unions are among the few exceptions though. They hold so much clout politically and economically that they have bargained way more than their fair share IMO. But then, I can't blame them for trying if they get away with it. The playing field should just be more level, that's all.

Unions helped put my family's business under. I was anti-union when I was younger. I don't have a love for them, but the more I see the workforce dynamics in my industry, the more sympathetic I've become.

[bobsticks]

This is a public relations debacle for the unions, and it's born from the shamelessly bragadocious way in which so many of its members have openly flouted conventional work ethic.

I would bet money that, if polled, the American public would find those involved in the housing bubble and banking fiascos to be stupid or unlucky whereas the workers are assumed to be lazy. It's clear which one is less tolerable.