FlickerFade
Well-known member
- Joined
- Jul 22, 2005
- Posts
- 239
It always makes me laugh when ALPA lumps pilots in with all of "our other union brothers". We barely cooperate between other pilots, much less other industry unions. Everyone is just trying to protect their own interests. I offer the following from yesterday's WSJ as evidence in support of this contention:
UAW Fuels Logjam on House Pension Bill
Fearing an End to Defined-Benefit Plans, Union
Fights Efforts to Make Companies Pay More
By MICHAEL SCHROEDER
Staff Reporter of THE WALL STREET JOURNAL
December 8, 2005; Page A4
(See Corrections & Amplifications item below.)
WASHINGTON -- The United Auto Workers union, with behind-the-scenes backing from General Motors Corp., has stymied efforts by the Bush administration, Republican leaders and business groups to pass legislation on the government insurance fund for corporate pensions.
After two years of debate -- and recent maneuvering that seemed to produce a compromise -- Republican sponsors of the House bill are becoming resigned to postponing action until next year even though the Senate has passed a similar bill. Fearful of losing momentum, Reps. John Boehner of Ohio and Bill Thomas of California are working to schedule a floor vote in the next few days. But internal Republican politics -- namely Mr. Boehner's rivalry with acting House Majority Leader Roy Blunt -- is adding to the obstacles.
Lawmakers' difficulty in passing a bill backed by the White House and, lately, many large companies, reflects the tension in pension legislation. Politicians want to shore up the federal pension insurance agency so taxpayers don't have to bail it out, as they did the savings and loan industry in the 1990s. But that means forcing companies to put more money behind pension promises, a move that could encourage abandoning old-style defined benefit pension plans -- that pay a set amount each month -- in favor of defined contribution plans, such as 401(k)s. A round of freezing or closing of pension plans would be unwelcome for congressional Republicans looking ahead to 2006 elections.
The legislative logjam is complicated by efforts of auto unions and auto company managers to stop legislation that has even a modest negative short-term financial effect on car companies.
The Bush administration is pushing for legislation to force companies whose defined-benefit plans are insured by the Pension Benefit Guaranty Corp. to make substantially larger contributions to their retirement plans. The PBGC, which collects premiums from participating companies, insures those benefits, and a rash of bankruptcies by steel, airline and auto industry companies has pushed the agency into the red. The PBGC recently reported long-term liabilities exceed its assets by $22.8 billion as of Sept. 30.
Although Congress may not finish work before leaving town for Christmas, companies have an incentive to press for a compromise before April 15. Without congressional action, the formula companies use to calculate payments they must make to pension plans expires on Dec. 31, and companies will have to put in much more money when the next quarterly payment is due on April 15.
Pension legislation is seldom high profile, but recent moves by airlines, auto-parts companies and others to abandon pension plans or reduce benefits has been front-page news. The legislation gained momentum in May when United Airlines got a bankruptcy court to agree to shift $6.6 billion in unfunded benefits on the PBGC. That and other factors contributed to a push for compromise. For several weeks, auto companies and others managed to keep the Senate bill from moving, but then they backed off, figuring they would work out any kinks when the legislation went to a House-Senate conference.
But in recent weeks, Democratic lawmakers, encouraged by unions, have been reluctant to sign on to a compromise, arguing the cure could be worse than the ailment because it would hasten the demise of the company defined-benefit pension system.
http://online.wsj.com/public/resources/images/na-ah102_PENSIO_20051207200722.gif
Administration officials counter that companies that can't afford to pay their promises shouldn't be permitted to pretend they will, figuring the PBGC will pick up the tab. They argued that workers would be better off if companies were required to adequately fund the plans, and rely more on 401(k) plans. "Some in Congress have said this reform is too tough," President Bush said in a speech this week in North Carolina. "I'm not going to sign a bill that weakens pension funding for the American workers."
Leading the opposition is the United Auto Workers, which is using radio advertisements and letters to members of Congress. GM is backing labor's campaign, says Alan Reuther, the UAW's legislative director, though a spokesman for the company in Washington declined to comment about GM's position. Congressional aides say GM earlier lobbied on Capitol Hill to change certain provisions, but may not want to appear to be undermining legislation many in the business community generally support.
One complaint by GM and other companies has been a provision in the House and Senate bills that would force companies with noninvestment grade rated debt to accelerate payments to pension plans that aren't fully funded. GM's bonds are junk rated, but the company has reported that its $100 billion pension plans are funded beyond 100% of liabilities as of 2004. So, under the current proposals, GM wouldn't be affected.
The Bush administration also is trying to crack down on companies' use of credit balances, or contributions above minimum requirements. Companies that have this credit can forego future cash contributions to their pension plans. Many experts argue these credit balances have been used as a legal device to avoid pension payments even to plans that are severely underfunded. Despite the fact the United Airlines pilots' plan was underfunded by $1.4 billion when it was turned over to the PBGC, the airline wasn't required to make cash contributions between 1996 and 2004 because of a credit balance.
Mark Oline, co-head of corporate finance in North America for Fitch Ratings, said if new legislation doesn't curtail the use of credit balances, "it's questionable how much teeth the new bill will have." He estimated GM, which is struggling to meet health-care costs and is losing profitability and market share to competitors, has a credit balance of $50 billion. "That would assure that GM wouldn't have to make any pension payments into the foreseeable future" thereby increasing the hole if the plan runs a deficit, he said.
The union, though, argues that the legislation gives an inaccurate picture of the effect of credit balances. "The credit balance provisions would have the perverse effect of saying to companies, don't ever contribute more than the bare minimum," Mr. Reuther said.
Part of the jockeying could also stem from GM and the UAW's hope for a better deal if they hold out. In the Senate bill, for instance, several large airlines are allowed to stretch out full funding of their pension plans for 20 years instead of seven years. The auto makers may want a similar package.
Write to Michael Schroeder at [email protected]
UAW Fuels Logjam on House Pension Bill
Fearing an End to Defined-Benefit Plans, Union
Fights Efforts to Make Companies Pay More
By MICHAEL SCHROEDER
Staff Reporter of THE WALL STREET JOURNAL
December 8, 2005; Page A4
(See Corrections & Amplifications item below.)
WASHINGTON -- The United Auto Workers union, with behind-the-scenes backing from General Motors Corp., has stymied efforts by the Bush administration, Republican leaders and business groups to pass legislation on the government insurance fund for corporate pensions.
After two years of debate -- and recent maneuvering that seemed to produce a compromise -- Republican sponsors of the House bill are becoming resigned to postponing action until next year even though the Senate has passed a similar bill. Fearful of losing momentum, Reps. John Boehner of Ohio and Bill Thomas of California are working to schedule a floor vote in the next few days. But internal Republican politics -- namely Mr. Boehner's rivalry with acting House Majority Leader Roy Blunt -- is adding to the obstacles.
Lawmakers' difficulty in passing a bill backed by the White House and, lately, many large companies, reflects the tension in pension legislation. Politicians want to shore up the federal pension insurance agency so taxpayers don't have to bail it out, as they did the savings and loan industry in the 1990s. But that means forcing companies to put more money behind pension promises, a move that could encourage abandoning old-style defined benefit pension plans -- that pay a set amount each month -- in favor of defined contribution plans, such as 401(k)s. A round of freezing or closing of pension plans would be unwelcome for congressional Republicans looking ahead to 2006 elections.
The legislative logjam is complicated by efforts of auto unions and auto company managers to stop legislation that has even a modest negative short-term financial effect on car companies.
The Bush administration is pushing for legislation to force companies whose defined-benefit plans are insured by the Pension Benefit Guaranty Corp. to make substantially larger contributions to their retirement plans. The PBGC, which collects premiums from participating companies, insures those benefits, and a rash of bankruptcies by steel, airline and auto industry companies has pushed the agency into the red. The PBGC recently reported long-term liabilities exceed its assets by $22.8 billion as of Sept. 30.
Although Congress may not finish work before leaving town for Christmas, companies have an incentive to press for a compromise before April 15. Without congressional action, the formula companies use to calculate payments they must make to pension plans expires on Dec. 31, and companies will have to put in much more money when the next quarterly payment is due on April 15.
Pension legislation is seldom high profile, but recent moves by airlines, auto-parts companies and others to abandon pension plans or reduce benefits has been front-page news. The legislation gained momentum in May when United Airlines got a bankruptcy court to agree to shift $6.6 billion in unfunded benefits on the PBGC. That and other factors contributed to a push for compromise. For several weeks, auto companies and others managed to keep the Senate bill from moving, but then they backed off, figuring they would work out any kinks when the legislation went to a House-Senate conference.
But in recent weeks, Democratic lawmakers, encouraged by unions, have been reluctant to sign on to a compromise, arguing the cure could be worse than the ailment because it would hasten the demise of the company defined-benefit pension system.
http://online.wsj.com/public/resources/images/na-ah102_PENSIO_20051207200722.gif
Administration officials counter that companies that can't afford to pay their promises shouldn't be permitted to pretend they will, figuring the PBGC will pick up the tab. They argued that workers would be better off if companies were required to adequately fund the plans, and rely more on 401(k) plans. "Some in Congress have said this reform is too tough," President Bush said in a speech this week in North Carolina. "I'm not going to sign a bill that weakens pension funding for the American workers."
Leading the opposition is the United Auto Workers, which is using radio advertisements and letters to members of Congress. GM is backing labor's campaign, says Alan Reuther, the UAW's legislative director, though a spokesman for the company in Washington declined to comment about GM's position. Congressional aides say GM earlier lobbied on Capitol Hill to change certain provisions, but may not want to appear to be undermining legislation many in the business community generally support.
One complaint by GM and other companies has been a provision in the House and Senate bills that would force companies with noninvestment grade rated debt to accelerate payments to pension plans that aren't fully funded. GM's bonds are junk rated, but the company has reported that its $100 billion pension plans are funded beyond 100% of liabilities as of 2004. So, under the current proposals, GM wouldn't be affected.
The Bush administration also is trying to crack down on companies' use of credit balances, or contributions above minimum requirements. Companies that have this credit can forego future cash contributions to their pension plans. Many experts argue these credit balances have been used as a legal device to avoid pension payments even to plans that are severely underfunded. Despite the fact the United Airlines pilots' plan was underfunded by $1.4 billion when it was turned over to the PBGC, the airline wasn't required to make cash contributions between 1996 and 2004 because of a credit balance.
Mark Oline, co-head of corporate finance in North America for Fitch Ratings, said if new legislation doesn't curtail the use of credit balances, "it's questionable how much teeth the new bill will have." He estimated GM, which is struggling to meet health-care costs and is losing profitability and market share to competitors, has a credit balance of $50 billion. "That would assure that GM wouldn't have to make any pension payments into the foreseeable future" thereby increasing the hole if the plan runs a deficit, he said.
The union, though, argues that the legislation gives an inaccurate picture of the effect of credit balances. "The credit balance provisions would have the perverse effect of saying to companies, don't ever contribute more than the bare minimum," Mr. Reuther said.
Part of the jockeying could also stem from GM and the UAW's hope for a better deal if they hold out. In the Senate bill, for instance, several large airlines are allowed to stretch out full funding of their pension plans for 20 years instead of seven years. The auto makers may want a similar package.
Write to Michael Schroeder at [email protected]
