Monday, February 23, 2009

An essential prerequisite to any auto bailout

The term “legacy costs” has been conveniently redefined of late, to include the massive underfunding of pensions facing GM and Chrysler. This change is terminology is designed to present something that is intolerable to most Canadians, namely a pension bailout, in a more palatable form using more reassuring language. Even if the bailout money is ostensibly intended for the bailout of things other than pensions, it will invariably be devoted to the bailout of pensions, given that money is fungible and the pension obligation is contractual.

Recognizing that structural changes must be made to achieve viability for the North American auto industry and given GM has proven that the economics of the auto industry are such that pensions are a luxury and employee benefit that it has proven itself unable to be afforded nor sustained, then this benefit needs to be terminated.

As such, a prerequisite of any auto bailout by the Canadian government should be a cessation of this employee benefit. All existing entitlements to pensions earned to date by existing employees and retired employees should be respected in full, on an as earned basis. However no further pension obligations will be earned or accrued from the bailout date forward. Under such an arrangement, the economic viability of the auto sector will be enhanced and the auto assembly workers will become one with the 75% of Canadians, and car-buying tax-paying public, who are without pensions themselves.

Who knows, Manulife might even be able to sell some more Income Plus, and the CAW might actually garner a better sense for what it meant when Flaherty began taxing income trusts at a combined tax rate of 64%. Jim Stanford of the CAW could perhaps do some homework on the topic before blindly supporting Flaherty’s actions, as he did, and learn that tax leakage is a total fabricated hoax. Jim Stanford needn’t even lift a finger, as all the work has been done, by groups far more credible than the CAW has proven itself to be on matters far beyond its purview.

While on the subject of legacy costs for the auto companies, such as health care, I am wondering where in the supposed proportionate bailout of GM, as between the US and Canada, is the cost that is incurred by Canadian taxpayers in the provision of universal healthcare being reflected in the negotiations, as to the proportionate obligations of the US and Canadian government, given that no such tax payer subsidy exists insofar as the US workers are concerned? This is hardly chump change. Please assure me as that taxpayer, that this important distinction has not been overlooked.

1 comment:

Dr Mike said...

Two very important points in this piece.

The first is pensions--if the comany & the workers cannot afford to refund the ongoing pension plan for new workers , then this plan must be halted & coverage grandfathered to existing wokers--it should not be up to the taxpayer to fund pension plans----I was self-employed & no one will be funding me.

The second is healthcare--it must not be up to the Canadian taxpayer to fund American healthcare to car production workers--we do not have enough funding in our own country to service the citizens we have now.

Two good points in an excellent piece.

Dr Mike Popovich.