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[Commentary] © 2002 Philip Hyde, The Timesizing Wire™, Box 622 Cambridge MA 02143 USA (617) 623-8080

Eroding Retirement, Oct-Dec/2002


12/26/2002   eroding retirement -

12/20/2002   eroding retirement -
  1. Using a weak pension plan as a cash cow, by Floyd Norris, NYT, C1.
    Navistar International is a grand old company, a descendant of International Harvester, founded by Cyrus McCormick. But if its heritage comes from one of the greatest inventors in American history, these days the most creative things at Navistar seem to be coming from the financial department.
    Consider pensions, for example. Its pension and retiree health plans were badly underfunded even before the stock market tumbled. Now the gap is a yawning one of $2.7 billion. But Navistar found a way last month to take cash out of its pension funds....
    The maneuver impressed Chris Strube, a director at Fitch Ratings who specializes in pensions. "I've never heard of a company selling its own stock to its pension plan," he said, adding that companies often contribute stock to plans, but don't take out cash. "It's pretty ingenious," he added,
    [or ignominious]
    speculating that some companies with difficulties in raising cash might imitate the tactic....
    [This guy obviously hasn't thought this through and his off-the-cuff blurt is a quick example of sh*tting where he eats (in the pension area). There's a reason why this is not done, but if Navistar has already deteriorated so far as to leave its pension plan $2.7B underfunded, this kind of crap can be expected of it. If we're to have an employee stock ownership plan (ESOP), call it that and give employees the choice. A company that forces employees to buy its stock has serious reasons to doubt its stock's value, and demonstrated recently by Enron and other infirm firms. Compare another item today re bankrupt Global Crossing -]

  2. Global Crossing chief funds employee plan, WSJ, B7.
    Global Crossing Ltd. Chairman Gary Winnick said he funded a $25 million pledge made to company employees 11 weeks ago. Mr. Winnick's pledge represents the money contributed by Global Crossing employees to their 401k retirement savings plan from the time of the firm's merger with Frontier Corp. in Oct/99 to Global's Chapter 11 bankruptcy-court filing in Jan/2002 [1/29/2002].
    [Again the toxic takeover-bankruptcy slide.]
    ...A spokesman for Mr. Winnick said he intended to distribute it "as soon as possible." It isn't clear how many current and former employees will receive the payment..\..
    Mr. Winnick made the initial pledge in front of a congressional committee investigating the firm, which is facing separate civil and crimiinal probes by the SEC and Justice Dept.
    [No fear - they're both puppets of the concentrated conflict-of-interest in the Bush administration. But it's a significant symptom of the deterioration of the American economy in general and employee leverage in particular that it took a congressional committee to drag out of this guy a pledge to do the basics for his employees.]
    Mr. Winnick himself is under investigation for his sale of $124m in company stock in May 2001....
    [A possibly more upbeat followup/take on this mishigas from Rochester "Frontier" Telephone's point of view, but still some unanswered questions -]
    Rochester workers to get pensions, by David Johnston, 12/21/2002 NYT, B2.
    About 5,500 employees and retirees of the former Rochester Telephone Co. will receive full pension benefits under an agreement reached today. About 95% of some $473m in pension plan assets will be turned over to the Citizens Communications Co., which bought the telephone company from Global Crossing last year. The pension plan had been threatened by the January bankruptcy filing of Global Crossing, which purchased the telephone company, then known as Frontier, in March 1999....
    The pension plan once had a $500m surplus, which Global Crossing creditors wanted to use to pay some of the $12B owed them.... With the stock market's swoon, the surplus became a $105m deficit, leaving nothing for creditors to take.
    [Why are PENSION FUNDS suddenly fair game for creditors to take in a bankruptcy??? Why aren't they COMPLETELY separate, as federal Social Security funds should be. And if the $500m surplus became a $105m deficit, where did the assets of $473m come from? The answer to this last question may be the difference between "funded" and "surplus," i.e., over-funded.]
    Last month the federal Pension Benefit Guaranty Corp., which insures traditional defined-benefit pensions, moved to take over the pension plan in a move intended to force Global Crossing to transfer the pension plan's remaining assets to Citizens....
    [Apparently it worked.]
    About 5% of the pension assets will remain with Global Crossing to cover benefits for workers remaining with Global Crossing....

12/17/2002   eroding retirement -
  1. U.S. seeks control of Bethlehem Steel [BS] pensions, AP via NYT, C2.
    The government's pension insurance program said [yester]day that it was seeking control of Bethlehem Steel's underfunded retirement plan in what would be the largest such takeover in the agency's history.
    [So the gov't is trying to stop the CEOs involved in the bankruptcy from carving up among them the employees' too-little-but-still-considerable pension funds? Does this mean that taxpayers have to make up the difference between 'funded' and 'underfunded' while all CEOs involved carry on personally 'overfunded'?]
    The Pension Benefit Guaranty Corp. estimates that BS's pension plan, which covers 95,000 workers and retirees, is underfunded by $4.3B, or 55%.
    [Possibly because of previous raids upon it? If $4.3B is 55%, that means the 45% that still exists is a whopping $3.5B, very tasty-looking to the chubby vultures in America's executive suites.]
    The move could deal a blow to a plan by BS, which filed for bankruptcy protection in Oct/2001 [10/16/2001], to be bought out by International Steel Group....
    [Ah, poor babies. If they can't cannibalize BS's remaining pension funds, they ain't gonna play, so there! So much for the sanctity of American pensions and pensioners.]
    Before BS, the largest claim [upon the govt's pension insurance program] was in March, when the agency assumed $1.6B in pension liabilities from LTV Steel....
    [Oops, dat sounz like we taxpayers are in for it, but...]
    The gov't corporation was created in 1974 to ensure payment of basic pension benefits for workers.
    [1974! Boy, it apparently didn't take long after the babyboomers started overwhelming the job market around 1970 for the sanctity of pensions and pensioners to come under attack to the point of having to drag in big gov't!]
    It is financed largely from insurance premiums paid by companies that sponsor pension plans
    [That must have started making traditional fixed-return pension plans more expensive!]
    and by the agency's investment returns.
    [Yeah, right. All OK until stocks tank.]
    Participants of a plan that is taken over receive, on average, about 94% of benefits they had earned.
    [Why isn't the other 6% reclaimed from the corporate lords at fault? They have, after all, merely damaged the consumer base further. Don't think it went to them? Check out our next story and think again -]

  2. Treasury nominee to get big pension - Beneficiary of a trend to give credit beyond years served, by David Johnston, NYT, front page.
    When CSX Corp. calculates pension benefits for its CEO, John Snow, nominated by pResident Bush last week to be Treasury secretary, he will receive credit for 44 years of service to the company, though he has worked there just 25.
    [= a 'trend' only for top executives, not you. And as our collapse story on 12/10/2002 put it, "John Snow was paid more than $50 million in salary, bonus and stock in his nearly 12 years as chairman of the CSX Corp., the railroad company. During that period, the company's profits fell, and its stock rose a bit more than half as much as that of the average big company." Moreover -]
    Moreover, Mr. Snow's benefits will be based not just on his salary, or even his salary and bonus, but also the value of 250,000 shares of stock the CSX board gave him.
    [As we said, talk about a "Snow job"! Top execs are really in a position to declare class warfare when our failure to get the workweek down to levels that balance the worksaving and disemploying heights of our high technology allows a gross leverage-blasting labor surplus.]
    Getting credit for years not worked, and having virtually all compensation counted toward pension benefits, are two of the newest trends in pay for senior executives, said Judith Fischer, managing director of Executive Compensation Advisory Services. She calls such deals "the eternal wealth syndrome."
    [Not necessarily eternal. Giving all the spending power to those who already have more than they can spend is the classic cause of economic depression. We did it all through the 1920s when 'the boys' came home from WW1 and flooded the job market in 1919. It only took 10 years for the overwhelming centripetal forces on money to create the Great Depression a lifetime ago. Now it's taking 20-30 years.]
    Though he has renounced his claim to about $15m in severance benefits, Mr. Snow's pension improvements mean he will collect $2.47m a year [that's $206,000 a month] from CSX until he dies, according to company disclosures. If confirmed as Treasury secretary, he will be paid $161,200 annually [= "only" $13,400 a month].
    [And you think our economy still has a feedback system? Hahahahahahahahaha.... There are sooo many ideas that these guys just can't think - they just cannot even occur to them. Is it any wonder our railroads are in trouble?]
    Among the CEOs receiving pension extras are Gordon Bethune of Continental Airlines and Donald Carty of American Airlines.
    [and our airlines]
    So is Terrence Murray, chairman of Fleet Boston, the nation's 7th-largest bank.
    [And we're getting charged hgiher and higher fees for basic banking services that used to be free? Some banks now charge more for seeing a human teller than they do for using their ATMs and look what's happened to insufficient fees in the last 20 years. Even little East Cambridge Savings in Mass. charges $20. The unsustainable attitude of CEOs is, the consumer is an infinite ocean so we can tax him/her infinitely in an infinitude of ways, and perceive no noticeable difference (- until a "little" recession comes along and the "recovery" never seems to gain liftoff. And now for the real badnews for most Americans' retirement and the future of the American economy and - by extension - America's national security -]
    As Treasury secretary, Mr. Snow...would oversee new pension rules announced by the administration last week that experts say can be expected to strip benefits from older workers while benefiting younger workers and saving companies money....
    [But if the redundancy-borne powerlessness of labor is now so deep that CEOs can shaft older workers with token resistance, why would younger workers have any reason to believe the same won't happen to them by the time they are older?]

  3. [meanwhile, a story about you -]
    Bumpy market has many delaying retirement, survey finds - A smaller nest egg, well then, more years in the work force, NYT, C9.
    [Compare our story below from 12/11's Wall St. Journal, "The best advice for retirement - Don't." As we've said before, it isn't primarily the stock market that's doing this. It's hidden labor surplus, powerlessness, the deepening concentration of income and the resulting strangulation of consumer markets and growth. And delayed retirement will worsen the surplus of manhours in the jobmarket and further depress labor leverage, compensation and consumption. We are in a downward spiral that will not stop at the mild 25%-official unemployment level of the Great Depression. Not only is our workweek relengthening for those who still manage to hang onto a full-time job, but our worklife is relengthening also - at the back end - as retirement is delayed. Soon the front end of work life will cave in as well and families will have to go back to child labor a la 3rd world - if there are any families left.]

12/13/2002   eroding retirement - 12/11/2002   eroding retirement - 12/10/2002   eroding retirement - 12/09/2002   eroding retirement - 12/06/2002   eroding retirement - 11/25/2002   eroding retirement - 10/11/2002   eroding retirement -

For earlier retirement stories, click on the desired date -

  • July-Sept, 2002.
  • June, 2002 & previous.
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