The Spark

“The emancipation of the working class will only be achieved by the working class itself.” — Karl Marx

“Legacy costs”:
Secrets and lies

Jul 10, 2006

Get this. GM has led the whole world to believe that “legacy costs” – like high pension costs for UAW retirees at GM – have bled the company dry.

Well, the Wall Street Journal just revealed that executive benefits are what is “playing a large and hidden role in the health of America’s pensions.” The well-kept secret.

Come to find out, GM’s pension plan for UAW workers is over-funded. It contains about nine billion dollars more than is needed in years to come. GM’s UAW pension plan investments produced 10 billion dollars in income for GM in 2005 alone.

The pension plan that is under-funded at GM is the one for executives! Theirs is under-funded by 1.4 billion dollars. GM lumps their deficit in with workers’ surplus and then cries about “legacy costs.”

And what’s true for GM is true for other companies as well. An increasing share of future pension payments are going to go to executives rather than ordinary workers. Exxon-Mobil will have to pay out 1.3 billion dollars just for the pensions of a handful of executives. General Electric will be paying out 3.5 billion dollars for its executives’ pensions. Sometimes companies are planning to pay 100 million dollars in pensions to one executive!

Another widespread development is the reduction of pensions for ordinary workers and the increase for executives. BellSouth Corp. reduced what it’s going to pay for workers’ pensions by 3% since 2000, but will pay 89% more for executives’ pensions.

When a company claims its pensions are underfunded, look first at its juicy pensions for its own executives.