Pension Pulse

A follow-up to yesterday's comment on the giant experiment , someone sent me a WSJ blog article stating that Cerberus's equity stake in Chrysler's auto company to be eliminated : Cerberus Capital Management will lose its equity stake in Chrysler LLC’s struggling automotive company as a condition of the Treasury Department’s bailout deal with the U.S. auto maker, according to several people familiar with the matter. The New York private-equity firm purchased an 80% stake in Chrysler in 2007, promising to bolster the auto maker’s performance by operating as an independent company. The plan, however, collapsed due to an unprecedented slowdown in the U.S. auto industry and a lack of capital at the auto maker to weather the storm. One Obama administration official, speaking on the condition of anonymity, said Cerberus’s equity stake no longer holds value and said the firm’s ownership will come to an end. In term sheets released by the Treasury Department on Monday, the govern...

There is a lot to cover today, so let's begin with U.S. automakers. President Obama gave General Motors and Chrysler deadlines to “fundamentally restructure” or lose government aid that has kept them alive. The steps to force a restructuring by U.S. automakers drew a mixed reaction from members of Congress . In rejecting the "viability plans" submitted by the struggling automakers, the U.S. government put both the companies and their stakeholders on notice that government-mandated bankruptcy is very much a possibility : Highlights of the administration's action include: Forced the resignation of longtime GM CEO Rick Wagoner. ( My Note: Wagoner walks away with a $20 million retirement package while the rest of GM employees get a pension fund running on fumes .) Gave GM 60 days to present new cost-cutting plans and will provide funds to keep it afloat until that time. "The administration is prepared to stand by GM throughout this process to ensure that GM emer...

Before getting into this weekend's food for thought topic, I think you should all watch Secretary of the Treasury Tim Geithner's interview on ABC's This Week and the roundtable discussion where Paul Krugman expressed his concerns with the plan. Interestingly, Krugman thinks the U.S. government is not doing enough to combat the crisis and that the plan will lead to another Japanese-style lost decade. I agree and I also agree that deficits do not matter in times of crisis because if you don't get the economy working again, the deficits will only get worse in the future. But I want to take a step back this weekend and look at the historical events that laid the foundation to this global crisis. On Friday morning, I listened to an excellent interview on CBC Radio's T he Current with Bill Kleinknecht, author of the new book, The Man Who Sold The World: Ronald Reagan and the Betrayal of Main Street America . Ever since the global economic crisis took hold, people have ...

A buddy of mine emailed me urging me to write about CEO pensions. So how good are CEO pensions? I found a Forbes article from July 2007 stating that CEO pensions continue to soar : Maybe "pension" isn't the right word anymore to call what the world's top bosses are raking in after they call it quits. "Incentive" is more like it. The latest example: "Ma Bell" boss Edward Whitacre, 65, widely acknowledged as a revolutionary in the telecommunications business, will be handsomely compensated for his 43 years of service at AT&T . His total package is a reported $161 million. But is he, or any of these oft-vaunted executives, worth it? Paul Hodgson, senior research associate at the Corporate Library, believes such an award isn't warranted, considering that Whitacre, whose last day on the job is June 3, has already been paid his fair share for working the past four-plus decades for the same company. "They've been paying him salary, bonuse...

The CBC reports that Ontario will hit a record $14.1 billion deficit in 2009 : Ontario will rack up a record $14.1-billion deficit in 2009 as it commits billions to infrastructure projects and job retraining aimed at pulling the province out of a recession, provincial Finance Minister Dwight Duncan revealed on Thursday in the tabling of his $108.9-billion budget. The fiscal plan also proposes corporate tax cuts to ease costs for struggling businesses and stimulate investment in Ontario’s sagging economy, which has shed hundreds of thousands of jobs in recent years. The budget forecasts a deficit of $3.9 billion in the 2008-2009 fiscal year, followed by a deficit of $14.1 billion in 2009-2010. It anticipates Ontario will run deficits for the next seven years, with a proposed return to balanced books no later than the 2015-2016 fiscal year. The province and the federal government have also agreed to harmonize the provincial sales tax and GST into a single 13 per cent sales tax by July...

Pension funds for companies in Standard & Poor's 1500 Index met 74% of future obligations in February, down from 89% before the market crashed, Bloomberg reports : The amount by which U.S. pensions are underfunded has almost doubled since October to $373 billion, increasing pressure on companies to give more to retirement plans as the global recession saps earnings. U.S. retirement plans are able to meet 74 percent of their future obligations, down from 89 percent five months ago, after global stocks fell and contributions were delayed, according to Mercer’s Financial Strategy Group, a Marsh & McLennan Cos. unit. DuPont Co., Caterpillar Inc. and Lockheed Martin Corp. are among the companies that say they expect higher pension costs in 2009 (click on chart above to enlarge). Last year’s drop in U.S. stock prices, the deepest in seven decades, will saddle the 53 percent of companies in the Standard & Poor’s 1500 Index with defined-benefit plans wit...