[Over the past two days, there have been two big developments, one
concerning pensions, the other concerning manufacturing.]
In the United States, its bankruptcy judge permitted United Airlines
to default on its pensions. (United Airlines is in bankruptcy.) The
default is for US$ 9.8 billion.
A US government entity called the Pension Benefit Guaranty Corporation
will assume Unitedâs pension obligations.
The default puts United Airlines, which is still operating, at a
competitive advantage against non-bankrupt airlines. They may declare
bankruptcy, too. Delta has already said it may do so later this this.
Also, the default adds to the obligations of the Pension Benefit
Guaranty Corporation. My understanding is that the Corporation gains
its revenue in two ways: one is by charging a fee to various
businesses. This fee will have to rise. The other is by charging the
US taxpayer (which I do not think it has done so far).
Both General Motors and Ford, the two large remaining US auto firms,
also have huge unfunded pension obligations. Other US companies also
have unfunded pension obligations with the total in the hundreds of
billion US dollars -- an amount near to the size of the annual
government or trade deficits, that is to say, several percent of of
total US income.
The question is how well can non-bankrupt companies can make
competitive financial returns under current circumstances when they
must pay for pensions but bankrupt companies do not and foreign
companies from countries with state provided pensions do not. (In the
US, state-provided pensions are called `social security'.)
In other words, the question is what kind of political arrangements
will be needed?
--
Robert J. Chassell
[EMAIL PROTECTED] GnuPG Key ID: 004B4AC8
http://www.rattlesnake.com http://www.teak.cc
_______________________________________________
http://www.mccmedia.com/mailman/listinfo/brin-l
