AUTO BAIL-OUT AND PENSIONS TOO

HERRICKREPORT.COM

Observations by Mel Ingram:

There has been a terrific amount of negative news stories and articles that mislabel as a "Bail-out" the auto industry request for a $25 billion "bridge loan" to cover the time gap between now and whenever the initial $25 billion incentive program actually reaches the manufacturers to retool plants and finish the job they've invested in to produce new fuel-savings and other advanced technologies.

The government must share in responsibility for past money-burning requirements that helped put domestic auto companies further behind the economical 8-ball for mandated safety features, gasoline cafe standards and other unfunded mandates. These loans will take time to reach the car companies and even then they will only provide support for future investment.

Can there be any doubt in the minds of Americans that it was the domestic auto companies that put America on wheels, fired the post-war (WWII) economy that moved rural America to Detroit and other cities, churned out the tractors and farm implements that allowed farmers to move into town where their need for suburban homes promote the construction boom?

Do we dare play Pontius Pilate by washing our hands of any responsibility for past contributions the domestic auto industry played in advancing the most powerful economic engine the world has ever known? And must we bury the hatchet in the backs of the union members, many of whom paid with their lives for the advancements brought about by the philosophy that workers are entitled to some of the largess harvested by the auto companies?

Oh yes, the Unions are indeed in need of a serious attitude adjustment in response to realistic requests the industry makes to help curtail spiraling wages and benefit packages. But to allow floundering auto companies to go belly-up and force them into bankruptcy only serves to mitigate their responsibility for repayment of past loans, paying their suppliers and employees and making continued payments into contracted promises to fund pension and insurance packages for retirees who planned for their future by choosing to give-up current salary increases in lieu of retirement benefits.

In their hast to disclaim any responsibility for these economic problems, the people must not allow their government to skip-out on the affects that past mandates had on the industry. Tax payers must keep in mind that not all Auto company retirees were represented by unions. The white collared workers kept their powder dry and cooperated for the economic soundness of their employers. And they not only contributed part of their salaries, they also gave-up raises in order to build their retirement pensions and benefits which they EARNED.

Will we really be gleeful and say they got their just deserts when both union and non-union workers alike suddenly go jobless after these auto giants declare bankruptcy? Just remember, folks, that Uncle Sam MUST STILL PICK UP THE TAB FOR THEIR PENSIONS UNDER THE RETIREMENT under the longstanding Federal Government's guarantee!

One way or the other the government is on the hook for most all of future pension payments by virtue of the Federal Pension Guarantee Plan to which BANKRUPT auto companies will surely be allowed to discontinue funding.

Wouldn't the country be better served to keep the auto domestic auto companies in productive business rather than facing the loss of thousands of more jobs and tax revenues?

Think about it, and if you agree it's worth the gamble for the government to belly-up to the table and fund a $25 million bridge loan to the domestic auto industry to tide them over, then write to or call you Congressman and Senators.

If one or more of the auto companies successfully continues, they will be obligated to pay back every nickel of such loans! Moreover, I hope as you read the following articles you will be pleased to find that Ford alone has invested more than $22 billion in research and development (2005-07) and that there are four other good reasons to predict that FORD will make good on its promises to repay the bridge loan.

Respectfully submitted for your consideration,

Mel Ingram, Ford Credit Retiree

Tuesday, November 18, 2008 4:52 PM

More commentary from Mel Ingram:
For those of you who would hasten the day the domestic auto companies declare bankruptcy, there's a lot of suffering that will take place... All the creditors must line up for their share of dollars the judges proclaim will be used to pay them...... among them are:

* Vendors & supply companies that have already delivered services and/or parts & supplies that have not been paid for.... They have liens on the dollars available for disbursement.
* Current employee payrolls that have not yet been paid, including un-reimbursed hours plus earned vacation time.
* Bond holders and holders of commercial paper (loans)
* Preferred stock holders
* Retired employee obligations that remain unfunded will probably never be considered
* Common stock holders

Let's see now..... jobs lost due to bankrupt car companies, plus vendors & suppliers that either go belly-up or who must layoff most if not all of their employees... (The foreign brands who manufacture domestically already have their suppliers lined up, so don't assume these folks will have an easy time of getting jobs.)

And let us not forget those retirees (especially me!!!) some of whom (early outs) may have to go back to work, further hurting the job market. And I haven't even mentioned the after effect of IRA investors who may have purchased car company corporate bonds, or the common stockholders that loose everything they invested, nor peripheral companies who rely on the "Big 3" for their business and have to close up shop and/or lay off their workers.

Is it any wonder that the catastrophic consequences bantered about by many economists, the folks connected to the car business, the finance industry and others are warning about the folks? How easy it is to simply dismiss the facts out-of-hand.... such as:

* Would the economy be in this mess had Congress not passed laws and encouraged, yea even insisted, the banks and loan institutions make stupid home loans to the unemployed, underemployed and other non-credit worthy recipients?
* What responsibility have the legislators who failed to reining these institutions way back before the balloon was so big, especially the ones who took large contributions from those institutions, shouldered and confessed?
* Would the auto companies still be in the race had the housing bubble not been created?
* In "normal" times (before the balloon burst) would the auto companies be in this kind of squeeze to raise operation funds, or could they have raised the funds by selling more bonds and commercial paper or making other arrangements to fund operations until such time as they were able to stream their low gas-using products into the market place? (By the way, both Ford & GM have cars RIGHT NOW that beat Honda, Toyota and the others, but they were very late into the market with them.)
* What responsibility did Wall Street shoulder for the invention of derivatives and the wholesale repackaging of sub-prime mortgages taken -- and what about those who handsomely profited by these shameless shenanigans?
* What responsibility did the legislators AND GREENIES shoulder when they continued for years to mandate more and more unfunded requirements and hoops for the auto companies to tack-on to the price of their cars & trucks -- making them less and less competitive?
* What responsibility did the legislators and prognosticators take when they passed laws that made it easier for labor unions to negotiate excessive terms?
* Last but not least: How would you respond when facing the loss of a large share of your pension when you worked 30 years or longer for those funds?

Just thought I'd ask,

Mel Ingram

Kent M. Herrick, Editor in Chief, 2008

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