Pensions: The obligation belongs to GM and the CAW, not the Canadian taxpayer
GM’s Million Dollar Employees
In order to survive its present financial crisis, GM is asking for between $6 to $7 billion from Canadian federal and provincial governments. If the sum is to be $7 billion, this means that the Canadian governments will be paying at least $1 million, for each of GM’s remaining 7,000 Canadian employees.
While I am not an economist, this does not sound like a very viable proposition for the government, or more specifically the Canadian taxpayer. For it is this much-maligned, and financially burdened group which will carry the cost. The Federal government does not have a secret source of money which it can tap into. The money comes from the taxpayers, the vast majority of whom will never enjoy the kind of salaries that Canadian autoworkers have enjoyed. Is it fair to ask taxpayers who earn $50,000 or less annually to help rescue workers whose salaries are, at the very least, fifty per cent higher? Or to provide the means to rescue the jobs of workers whose entire benefit package is more than twice the average Canadian worker’s? The simple answer to these questions is: No!
And what guarantee do we have that this bailout will prove successful? What if six months or one year down the road, the company still faces bankruptcy? Already reports seem to indicate that GM may have to declare bankruptcy, in the very near future. That its debts and repayment obligations are such that even with bailouts from the American and Canadian governments, it will not be able to survive. Considering that since 2005, GM has lost some $82 billion, while unsold inventory continues to pile up, recovery will require a virtual miracle. Under such circumstances, what guarantees do Ottawa and Queens Park have that they will ever see their money or, more accurately, the taxpayers’ money again? $1 million to keep one job alive for another six or twelve months is flawed mathematics.
This is not the first time Canadian taxpayers have been coerced into providing funding to preserve jobs. Years ago, either during the Mulroney or Chretien governments, an American company literally forced Ottawa to provide funding to keep its factory open in Quebec. The threat was that, unless it received the necessary funds, it would shut down operations in Quebec and relocate to the U.S. Under pressure from both the American company and Quebec politicians, Ottawa provided the funding. However, within about a year the factory closed anyway and the company moved operations to its American facilities. Millions in taxpayers’ money was gone and I recall thinking that it would have been cheaper to provide every worker with more than their annual salary for many years, than it had cost to keep the facility going for about one year. Unfortunately, I do not recall the name of the company and no amount of research could locate it. Hopefully someone else can recall the name. Regardless, it appears that politicians have learned little from such experiences.
In addition to the $6 to $7 billion bailout, GM is seeking assistance from Ottawa and Queens Park to pay for its existing pension obligations. No-one has set a figure as to what this possible cost could entail. While those directly affected would deem such government aid appropriate, there is no obligation, moral or otherwise, for Ottawa and Queen’s Park to rescue private pension plans.
How many small Canadian companies have gone bankrupt, laying off employees because they were not big enough to have the financial clout of GM or the political clout of the CAW to warrant a bailout? How many other private pension plans have been lost in recent years, without anyone coming to their rescue? These people and the majority of Canadian workers who have no private pension plans, other than their own savings and RRSP accounts, should not be required to rescue GM’s retirees through their taxes. While it is unfortunate for the people concerned, the obligation belongs to GM and the CAW, not the Canadian taxpayer.
It is interesting how huge corporations constantly proclaim the benefits of free enterprise and oppose government interventions whenever and wherever possible. But when they find themselves in a financial crisis, who do they turn to first to bail them out of the mess they are responsible for getting themselves into? Those same governments they usually accuse of interfering in their affairs when times are good.
Both sides of the auto manufacturing sector are to blame for the crisis they are facing, to greater or lesser degrees. During the boom days, rather than ensuring that there were funds set aside for possible ’rainy days’, such as downturns in the economy, CEOs of the various automotive companies (and corporations in general) went on buying sprees, paying exorbitant amounts to take over smaller competitors, or enlarge their own companies. Now they cannot get rid of these subsidiaries fast enough to save their own bottom lines. Also, whether times were good or bad, CEOs collected exorbitant salaries and benefits. Clearly, the example of Lee Iacocca who rescued Chrysler while working for $1 a year, was not something they would seek to emulate.
Taking the example of the company CEOs to heart, Canadian autoworkers and their unions sought increasing pay and benefit packages, greater than those of their non-unionized peers. While they have made various concessions in recent years, they still remain better paid then their peers.
The financial crisis facing the auto industry, and especially GM, is a grave matter which cannot be dismissed lightly. Granted if GM collapses there are others who will be hit as well. These include suppliers to GM and all the businesses patronized by GM workers. In addition, there will be increased costs to both UI and welfare. But will these costs to the various levels of Canadian governments and public be equal to the $1 million per employee that GM says it needs to survive?
Would it not be better to simply let GM go bankrupt and save the funds to clean up the resulting mess? Following a bankruptcy, the governments could purchase GM’s assets for much less than the present $6 to $7 billion bailout request and possibly use them for the start of a truly Canadian auto industry.
| | Dr. Branka Lapajne
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Brakna Lapajne Ph.D, is a writer with Canada Free Press. She can be reached at: .(JavaScript must be enabled to view this email address)
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