Having destroyed our standard of living, the CAW now wants us to bail out theirs?

So GM and the CAW want Canadian taxpayers to take on the pension liabilities of GM’s 34,000 Canadian retirees?

What a complete non-starter, especially given that 75% of Canadian taxpayers have no such pension entitlement themselves. And what utter nonsense, given that the CAW was complicit, for reasons best known to itself, in destroying the pension assets of those very Canadians taxpayers, who had invested in income trusts, as their means to generate retirement income.

The CAW were instrumental in causing Canadians (without pensions) to lose $35 billion of their life savings. The CAW were instrumental in killing an investment product that placed Canada in a strong competitive position in terms of funding Canadian enterprise.

Now the CAW wants us to forget their prominent role in that fiasco, and bail out them out, and provide their retirees with government assistance? Have you no shame? Having destroyed our standard of living, the CAW now wants us to bail out theirs?

What motivated the CAW to weigh in on the income trusts issue is totally beyond me. Furthermore the CAW weighed in on this issue with ZERO command of the facts. The CAW claimed that income trusts were costing the government the loss of taxes and that income trusts were negative for our economy. The CAW provided ZERO evidence for such views. Meanwhile both of these propositions have been totally debunked by the work of credible groups like PricewaterhouseCoopers, Deloitte, BMO Capital Markets. RBC Capital Markets and HLB Decision Economics.

The governments of Canada and Ontario have no business whatsoever in bailing out the pension liabilities that General Motors has created with its past employees. Just like the Governments of Canada and Ontario has no business nuking retirees investments in income trusts. Meanwhile the past GM employees should realize that their pensions are nothing more than contracts with a commercial entity called General Motors, and the days of “What’s good for General Motors is good for Canada” are long since over.


GM pension bailout is a tough sell
DEREK DeCLOET
Globe and Mail

February 19, 2009

General Motors of Canada and its union are about to engage in combat over how to cut costs to qualify for a government bailout, but there's one thing on which the two sides already agree: That dog of a pension fund should be someone else's (read: the public's) burden, too.

GM wants the federal and provincial governments to step in and help absorb some of the costs of its pension and health-care plans (see story on page B1). The Canadian Auto Workers union thinks that's a swell idea, especially since GM's pension fund for hourly workers, the one that secures the retirements of their members on the line in Oshawa, Ont., is so far in the hole it can't even see daylight. At the end of 2007, that plan had $6.5-billion in assets to pay for more than $10-billion in liabilities. The deficit's larger now after the market meltdown.

So, for all those who aren't familiar with the intricacies of the plan, care to guess how much those hourly workers throw into the pension pot? Five per cent of their pay? Ten per cent?

The answer is zero. They make no contribution. The company pays the whole shot - or, in this case, doesn't, as shown by the size of the pension shortfall.

So let's just slide the bill over to you, Ms. Taxpayer. Yes, you - the one without any defined benefit pension of your own, if you're like nearly 80 per cent of workers in the private sector in Canada. Yes, you, whose RRSP is down 20 or 30 or 40 per cent or more in the past year. Yes, you, who may struggle to put together the savings to pay for a retirement stipend that's anything like the $2,000 a month that an auto worker with long service can receive.

It's going to be a tough sell, not necessarily for the politicians but for the public. (And anyway, if the federal or provincial treasury is going to backstop GM pensions, shouldn't the people who'll enjoy those pensions, you know, pay into them, too?) The pension mess illustrates the impossible task that faces Ken Lewenza, who took over the presidency of the CAW from Buzz Hargrove one week before the Lehman Brothers collapse (nice timing, Buzz).

"The problem is not our work force. The problem is not our product," the new CAW chief protested the other night at a news conference. "The problem is the global financial crisis," which has taken a U.S. auto market that used to sell about 17 million cars a year and turned it into one that's closer to 10 million.

But the flip side of being the blameless victim of global forces is that, by definition, you're powerless, too. The biggest decisions are being made in Washington and Detroit. A few are being made in Ottawa. At Queen's Park sits the Canadian Auto Workers' biggest ally in government, but it's a small player in the larger drama. And every level of government is pushing in the same direction - to cut benefits and "legacy costs."

In Mr. Lewenza, some of the old Buzz bluster remains ("What more can they do in Canada when they've been in constant restructuring in the last 10 years?" he asked). But it's fainter, undermined by the cold reality that the union has no leverage and that, when it comes right down to it, only the U.S. Congress can grant the kind of money - some $20-billion (U.S.) - that GM and Chrysler say they need just to keep going. And there probably isn't a single congressman who could locate Oshawa on a map. In the long run, is there even any need for GM to make vehicles here? Mr. Lewenza wishes the answer to be yes, but even he had to admit that the operation would be a rump, employing perhaps 8,000 unionized workers by 2011.

You might ask why so much public money and effort has been pledged to protect such a relatively small number of jobs. GM Canada has already been offered $3-billion (Canadian) from Ottawa and Ontario and there's the promise of more. The obvious answer is that it supports many more jobs (suppliers, spinoffs), but the less obvious one is the pension. The Ontario government would be on the hook for a big chunk of the unfunded liability if GM ceased operations here.

Better, perhaps, for it to keep the enterprise alive, at least for a while, and hope that improving stock prices and interest rates will make the pension problem a less expensive one. "A comeback in the market is not unachievable," said Sym Gill, the CAW's pensions and benefits director, which may be the most optimistic thing we've heard on the financial markets in months.

Still, he would be glad to see some politician, any politician, step forward with a tax-funded solution. So would GM, its executives, and the company's tens of thousands of retirees - just about everyone, in other words, except the people who are being asked to pay for it all.

ddecloet@globeandmail.com