On the weekend, I was listening to a news report that one of the biggest problems preventing the automakers from competing with foreign companies is their legacy costs. (ie retiree benefits) Apparently, there will be 1 autoworker for every 5 retirees in a few years.
Instead of dumping billions of dollars into the automakers directly, why couldn’t the US government offer to pay the legacy costs from today forward. This would be a finite “investment”, since most of the legacy costs will end with the death of the retirees. I don’t see the value of dumping $$$ into the automakers directly, since they don’t have any incentive to improve their business. If you pay off the legacy costs and tell them to develop a viable business model or die, then it’s up to them to figure out how to compete in today’s auto market.
I thought that if the automakers go belly up then the fed govt is stuck paying the pensions under the Pension Benefit Guaranty Corp. Not sure if the feds are also responsible for the medical benefits – probably the retirees would switch to Medicare. I suspect those are cheaper to the feds than a total buyout of the legacy costs, but we’re on the hook one way or another.
Yep. The auto companies knew this when they starting giving out all the great retirement benefits a long time ago. If they wanted to bankrupt themselves, I sure as hell am not going to stop them.
On the other hand I think it is silly for retirement benefits to be supplied by companies. The federal government should do this… or no one.