GM wouldn't buy pencils from a blind man without a contract, but its salary 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, a Cracker Jack-size buyout prize.
Salaried retirees will be offered one lump-sum payment in lieu of their monthly checks. The amount offered will vary according to age and health, according to plans the company announced Friday. Rumor has it that union hourly retirees are next.
GM claims it will add $3.5 billion to the now-underfunded pension fund to help buy out retirees, under new laws that permit the company to offer “an equivalent economic value to the stream of monthly pensions they replace.” Under the old law, companies had to pay a higher amount if they offered this kind of lump-sum buyout. More companies will follow suit, because the new law makes it a lot cheaper than before to offer a lump sum.
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.
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.
But if the choice is cash in hand or an underfunded annuity sold to Prudential (which in 2010, Bloomberg News reported, skimmed additional profits by holding back payment from families of American soldiers owed life insurance benefits), you might take your chances that GM overestimated your life expectancy by accident.
Prudential has made a reputation with this kind of thing. The SEC discovered that the company had defrauded 400,000 individual investors on "deals" in the 1980s.
GM CFO Dan Ammann claims getting rid of pensions will help him concentrate on “building cars and trucks.” But what is he talking about? GM outsourced all its pension and benefit programs to Fidelity years ago.
GM expects to save $26 billion. In which column will accountants inject this hypodermic of savings? Will hourly workers get a bigger profit-sharing check next year? Guess again.
Then ask yourself, who was it who first said, “Never trust the deal”?
UAW Is Next
United Auto Workers retirees are next in line. UAW President Bob King wasn't available for comment, but the 2011 UAW-GM contract says union and company “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.”
Don’t find too much comfort in 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.
The point is, these two parties have already agreed to “mutually agree” all over the place, like untrained puppies at a pee-on-retirees party, and now they have legal justification to amend the pension plan.
The UAW agreed to help GM “de-risk” the pension. De-risk is a code word for shift the risk to retirees. On every whirl of the slot machine, The House wins, even when they pay out. Don't take my word for it; just look at the size of The House compared to your own over-mortgaged shack.
I have a button from 1979, the year I was hired in at GM, that says, “UAW Members Want Cost of Living on Pensions.” What did we get instead? The "Christmas bonus," which the UAW agreed to give up in 2011.
Guess I won't be buying one of those new GM cars that CFO 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's 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.
Gregg Shotwell is a retired member of UAW Local 1753 and author of Autoworkers Under the Gun (Haymarket Press).
