Professor Elam

Tuesday Dec 22, 2009

Pension plans helped sink GM and are now doing the same to YRC. YRC is the remnant of Yellow Freight and Roadway, now drowning in debt, and pension obligations. Seems that the surviving company is on the hook for all the laid off Teamster drivers of failed companies. Mish Shedlock takes an extensive look in his Dec 22 2009 post. 

The chapter on pensions is far too detailed in my opinion, it fails to give students the big picture of what is really happening in terms of liability to the employer, we will all be reading this column in Intermed II next semester. 

2010 will be characterized by these types of failed promises. Our template for the near future is 1968-82. This period was a series of ups and downs for the stock market, politicians and everything else. NYC actually defaulted because of its difficulties with municipal worker contracts. Now cities and states and employers have all made similar agreements that cannot be kept. This will come crashing down in spectacular fashion. Mish details how a congressman is trying to move the target on calculating the pension obligation. But there is no way all this can be paid. Expect pension funds to ask for bank status and TARP or other federal assistance.