[66coronet]

Chrysler freezes pension plan for 8,000 employees

 

[drew54]

Sadly, pensions are a dying breed.

 

[rapidtrans]

Sadly, pensions are a dying breed.

Yeah, the way people have had to job-hop lately it's tough to build-up much of a pension.
Imagine all these young people burdened with college loans trying to fund their 401k's also.

 

[jerseyjoe]

I have had 3 pension plans frozen on me, it's thking the glow out of retirement. The way 401Ks are set up these are not such good deals Watch out where you get an IRA and savings accounts are no good. Best thing is to become CEO and take what you save in not providing full pensions as a bonus.

 

[jerseyjoe]

I can see where where will be 8000 less families buying future Chrysler products.

 

[valiant67]

While there are disadvantages to 401k plans, the fact is you control how much is saved and where it's invested. You aren't at someone else's whim for "frozen" pensions but you are then 100% responsible for saving enough for your future needs.

 

[saltydog]

Sadly, pensions are a dying breed.

Very true at the rate I am going, I will have to work until I die!

 

[dana44]

There really aren't enough facts in the article to determine if there is a problem or screwing of the workers. Each and every person is responsible for their own future, pension plans were designed as as incentive to work for a company, not to ensure a person had money to live off of as a requirement for retirement. By the time a person reaches retirement age most everything they own should be paid off, like the home, car, all your toys. Planning ahead so you are in this situation is important, having everything paid off by the time one is 50 really helps, even the slight amount of skimping in order to make it happen really pays off in the latter years of life. Wish the article gave more specifics as to what or how the pensions were frozen.

 

[Stratuscaster]

Exactly - this type of "kneejerk" reaction to an incomplete story is quite commonplace.

As is the freezing of pensions - which the article states is a common corporate practice lately.

I'm 2 years away from 50. I have what I would call "manageable" debt at this time. I have a 401K - but I'm not solely relying on it to carry me through life after retirement. I figure I'll be working somewhere as long as someone can use and appreciate my skills until I physically and or mentally can no longer do so.

Unless, of course, I win a large lottery.

 

[Dave Z]

I don't think it's meant to screw workers, I think it's meant to avoid future bankruptcy.

I'm not saying it's a great thing for the workers but I am saying it's inevitable. Also, pensions aren't safe -- just ask the Hostess people. The employees' own contributions were stolen and the ones from the company were withdrawn. (The CEO, it must be noted, got a bonus.)

 

[dana44]

I don't think it's meant to screw workers, I think it's meant to avoid future bankruptcy.

I'm not saying it's a great thing for the workers but I am saying it's inevitable. Also, pensions aren't safe -- just ask the Hostess people. The employees' own contributions were stolen and the ones from the company were withdrawn. (The CEO, it must be noted, got a bonus.)

I agree with your first sentence, there are just too many towns that have way too many unfunded liabilities due to the public sector negotiating retirement plans that, here in San Diego, for example, equal the last year of pay, so what people do is work as much overtime the last year and were getting their pay jacked way up, into the $100-125K range, then retiring. Since it wasn't their money and the negotiations and benefits weren't being paid by the "company", just taxes, they were not as concerned with the costs associated with pensions and things got out of hand, had to do a few negotiations the last 6-8 years to get things "fixed".

As far as the second paragraph goes, I don't recall ever seeing anything like that to indicate it was true. Remember, it was the unions that basically forced the bankruptcy of Hostess not willing to have a smaller or even frozen wages and benefits package to keep their jobs, insisting on things like a union truck driver could not drive a Twinkie truck with DingDongs in it, they had to be separate delivery trucks. Not real good union practices to say the least.

At least the article says freeze, not reduce. Freeze indicates it is still a pension plan the company can maintain, which I guess is a positive thing.

 

[GuidoFL]

Pensions have been frozen for UAW employees for some time, no annual improvements or COLA. As for the 401 K plans there is a low yearly cap on them and the government is talking about taxing them. In short the future is dim for those hoping to retire in the future.

 

[dana44]

Given the fact that savings accounts earn less than one percent annually, nobody is making any interest without risk. My Father-in-Law worked for 35 years at Lockeed and his pension plan, passed to the children, was extremely small for that many years of work, and he was a saver. Nobody should plan on a job pension being enough to live on or offset Social Security. I don't think anything was done out of spite, and besides, doesn't VEBA itself have some sayso on this, along with management?

 

[Bob Lincoln]

Dana, you have an incomplete story on Hostess. They went bankrupt in 2009, and the union workers DID make concessions. Rather than use that money toward making the company more viable, it went to the top execs as bonuses. That's why they were reluctant to have it shoved up their posterior a second time.

My first pension has 16 years' credit, from my first job. The formula for this defined benefit is structured so that the payout curves upward at around 30 years. So it won't be large. In addition, they changed the payout about 20 years ago so that they reduce the payout by the amount of social security that I get. So if the formula gave me, say, $2,000 a month, instead of that, if I get $1,200 SSI, my pension will only be $800 a month.

I have a smaller 2nd pension from 8 years in my current job. They froze the pension, so no new contributions. However, the company took the rest of the pension contribution for that year and made a one-time pay-in into our 401Ks. In addition, they increased 401K matching from 3% to 6%.

In addition, we get to by company stock at 10% discount through the company. It has grown by an average of 20% a year for the last 10 year.

So not everyone is that bad off. I contribute a LOT of my paycheck now for my future, including savings accounts, so that I net out at near zero each month. Periodically I can take a little out of a savings account for a rainy day. It's all about planning and discipline. Unfortunately, they don't teach that in the schools.

 

[Dave Z]

What Bob Lincoln said on Hostess, plus this:

One of the agreements made between management and unions was that workers could contribute a portion of their paychecks towards their own pensions. This was not a company contribution but their own.

That money was taken by the company and put into the executives' bonus pool.

The bankruptcy court judge not only approved that but marked the CEO as too valuable to lose, though he'd only been there six months. So the CEO got millions in bonuses for abject failure, while the judge also rejected a plan that would have resulted in NO job losses... even keeping the existing union contracts... and which was pretty close in money paid to the approved plan.

 

[dana44]

Yes and no. Brian Driscoll did resign March 2012 and had about a $3.2M package, but Gregory Rayburn was hired as a Chief restructuring officer to straighten things out, took the top executives that had given themselves pay increases of 80 percent above the previous year and put them all on a $1 salary for the next full year in order to try to save the company. Yes, there were concessions done by the unions after the 2004 bankruptcy, things didn't get a whole lot better after that, but a bunch of mergers seemed to help a little bit, a bunch of people laid off, but the yes, greed did take over. Rayburn at least tried to stop the usual snatch and grab BK plan, but what does all this have to do with still not knowing what the pension freezes for 8.000 Chrysler employees means? I don't know what the current plan is, or whether it is the same as what Bob's is or what. I do know that there have to be certain limits maintained in order for a company to survive because when they get too great, well, those expensive $3500-4500 cars shot up to $20,000-55,000 cars a heck of a lot faster than my or anyone else's paychecks increased due more to legacy costs than the cost of the materials to build them. If it takes an average of 30 hours in labor to build a vehicle, when the average cost is $150 per hour ($75 actual labor and pension/work package cost per person per hour doubles it), that works out to $11,250 per car (average) to build a car (pay the labor, benefits package and retirement ), compared to 1980, that average was $21 per hour, and even if doubled for the package, the labor cost was still way down to $1386 (33 hrs to build a car). I don't think it is proper that the cost of labor increased more than 8 times in 33 years.No wonder everything is so screwed up.

 

[Bob Lincoln]

I think your figures are faulty. I saw published figures about a year ago of $29 an hour for actual labor (NOT $75), with total compensation cost approaching $71.

I think it IS proper for labor cost to be much higher than 33 years ago. Back then, houses were about 3-4x cheaper, gasoline was about 1/3 of what it was today, food costs were less than half. Starting salaries in my profession are just over double what they were then, but the college loan burden is proportionately 10x greater.

 

[Dave Z]

Right, you're doubling the doubled costs.

$75 per hour would mean autoworkers are paid $150,000 per year.

 

[dana44]

I got the numbers from several, double-checked articles from the unions and Bureau of Labor and Statistics to verify things, the double cost is because of legacy and retirement costs, and in an attempt ot justify the prices in the future that still have to be accounted for. They used to do this to us in the military by telling us and showing us that the added benefits made it out that we were essentially getting double pay if we retired, that, and compare it to the private sector value of the beneits. If it isn't added to the basic cost of the person as they work, then it has to be added somewhere, this method basically shows person for person cost. It's an accounting thing.

 

[Dave Z]

The $71 includes the pensions and such, and most of the pensions are gone now -- they were not costs incurred by current workers but by retired ones, due to all the cost-cutting and layoffs.

In 1990, Chrysler had the highest pension costs per capita of any US automaker. In 1997, they were the lowest! because instead of shrinking, they were growing.

Toyota's are presumably smallest because when they want to shut down a plant, they just put the holding company into liquidation and the US pension guarantee fund takes over.

Dana, again, the $71 figure you saw included all extra costs including pensions, vacation, medical benefits. That number is obsolete now because of the VEBA! I believe the current cost is more likely $50 per hour given the cuts in benefits coupled with cuts in pay, and that would be for full "older" employees and not the cut-rate new hires. It would not include overtime where that's given.

If it's 30 hours per vehicle, that would be $1,500 in labor costs.

I do recall at the time of Clinton’s second run for president, the automakers saying that a national health care system would save them around $3,000 per car, but I don't recall how they figured it. I think they were counting retiree benefits as well as current employees. At this time the retirees from the pre-bankruptcy companies, which is most of them, are paid via VEBAs, so the retiree health benefit cost per car is much much lower.

Again, that $71 was not "benefits to the individual worker," as the automakers implied, it was "everything we pay to all current and past union workers divided by the number of hours the current workers are working." This is why the automakers were supposed to put away money for retirees at the time they were working. Their PR people got it both ways, though.