Crazy,
glad to see someone querying the source of data on HC! I noticed the figure reported again in the last few months on WSJ talking about the bailout, commenting that a large proportion of the cash is being sucked up by benefits. So i think it has some backing.
Yes, agree the coys need to ensure that Defined Benefit plans are funded, however believe
- partly prejudice
- partly experience
that the US car coys did not bite the bullet on several aspects of their strategy in the late 90's. Most seriously on outsourcing their production to diversify their US production concentration risk (other than exports from Korea) and (more importantly) on facing up to their power imbalance with the AutoWorkers.
OK, the union has a negotiation responsibility to their beneficiaries, but the coy has a larger responsibility to balance stakeholder interests. In this (IMO) they have manifestly failed in a period when other economies (including ours) sorted this out.
Note the guarantees GMC had to provide to AC Delco in '06 when Delco was spun out that if Delco went Chapter 11 then GMC would take back employee health care and retirement obligations. AC Delco goes ch11 in 08, triggers pass back, ACD now viable - DESPITE the reduction in volumes.
So, IMO this ridiculous figure - 30% or production cost (!!!) - is symptomatic of mgt failure on strategy not fiduciary supervision of payment ratios.
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