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  • horacebello horacebello Jul 13, 2009 10:17 PM Flag


    You're Not Set for Life
    By Rich Smith (TMF Ditty)
    July 13, 2009

    Every so often, PBS reruns its superb documentary on the history of Bethlehem Steel. One of the most poignant lines comes from the wife of a Bethlehem Steel employee, who said, "Bethlehem Steel was a giant. You knew if you worked for a place like that, you were . . . set for life."

    But Bethlehem Steel went bankrupt, and retirees who thought they were "set for life" found themselves out in the cold instead. As Lantz Metz, a historian with the National Canal Museum, pointed out, "The human tragedy [of Bethlehem Steel] is not so much the loss of jobs . . . The human tragedy is the many, many people who were dependent on benefits which they thought were guaranteed."

    And it could happen again.

    A cautionary tale
    Over a century and a half of American history, Bethlehem Steel built the iron bones of our nation. But by the 1990s, Bethlehem's own bones had become frail. Wracked by debt and beset by foreign rivals, Bethlehem struggled to earn the profits needed to pay salaries to 11,500 workers and the pensions for 120,000 retirees and dependents.

    In 2001, Bethlehem gave up and filed for bankruptcy. A year later, it transferred its pension obligations to the U.S. Pension Benefit Guaranty Corporation (PBGC).

    In one fell swoop, Bethlehem's retirees -- people who had already fulfilled their side of the social contract -- were put at the mercy of the federal bureaucracy. The problem was that mercy isn't bureaucracy's strong suit.

    The PBGC reneged on Bethlehem's agreement to let workers retire on full pensions after 30 years. When the PBGC took over, the 30-years-and-out agreement was scrapped, and workers got the standard deal: Retirement at age 62, period. Even if you were only a week away from your 30th anniversary, if you hadn't crossed the finish line, the PBGC erased it under your nose.

    Nor were retirees any safer. You see, when pensions are underfunded, the PBGC doesn't always make up the difference. In Bethlehem's case, the PBGC determined that the pension fund needed a cash infusion of $4.3 billion. The PBGC made up much of the difference.

    Unfortunately, Bethlehem's employees and retirees had also bargained -- and worked -- for the promise of health-care coverage in retirement. The PBGC calculated the value of that promise at $3.1 billion -- but didn't cover a dime of it.

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    • Reflections:
      Peeweetzu is right when he read me "soooo Bearish" and i not only understand his reasons but because of them.
      For the Americans it's very difficult to interpret what happens outside America. Your country is too big and very few americans could survive outside of America. You don't know this because never think that: In America you've all you need and rather more.
      But i also have my valid and strong reasons as those of Peeweetzu: An Argentine w/savings is -by any standard- a survivor.
      If any of you watch and remember an old Woody Allen movie called ZELIG, 'll understand better what I write .
      An Argentine can survive -suited to-in Europe, Africa and if necessary also in China, with or without the language to accommodate where we arrived. Naturally undisciplined, we confuse cause and effect.
      My reasons are historical as well as BETHLEHEM.
      And I do so with the same intention > i don't want anyone having to spend so that we spend.

      Dear Peeweetzu:
      Only in the last 20 years, the national and foreign banks (in conjunction with our populist politicians)have stolen three (3) times our savings OVERNIGHT.
      They robbed us THREE times. One, two and THREE.
      We know too well when somebody breaks the rules and just started there my "sooooo bearish" position.
      Maybe it's fear, but i don't think is only that.
      In America are a lot justifying or saying that THE SYSTEM increases and decreases, so'll have to wait until 2010 to see if Obama can pump out the unemployed.
      I don't think this might be just a purge of the system. This time it isn't, and those with real information know more than explain.

      i can't believe in currencies or equivalents (treasuries) that are only a convention for trade.
      These are my historical reasons mixed with some fears and are a part of our economy genetic malformation as argentines.

      sb HML

      (sooooo bearish Minister of Luxembourg)

    • "It could happen to you"

      Heed the prophetic words of Ed McMahon. A recent study conducted by Merrill Lynch listed 40 U.S. companies with significantly underfunded pension obligations. As you might expect, the list includes smokestack industrialists such as Dow (NYSE: DOW), Alcoa (NYSE: AA) and U.S. Steel (NYSE: X). As of December 31, 2008, the three firms' unfunded pension liabilities totaled $8.2 billion.

      More surprising are the representatives of industries you might not expect to be in this situation: massively profitable biotech shops like Johnson & Johnson (NYSE: JNJ) and Pfizer (NYSE: PFE), for example, as well as black-gold rollers-in ExxonMobil (NYSE: XOM) and Chevron (NYSE: CVX).

      What all these companies have in common is that they date from the era of the old social contract: You give your employer the best years of your life, and in return for your loyalty, and for taking a lower wage than you could have earned elsewhere, your employer will provide you a decent pension in your golden years.

      It's time to master your money
      Now every story needs a moral, and this one is no exception: The age of the old social contract is kaput.

      Whether by design or incompetence, the managements of many of America's greatest companies of yesteryear are today unable to keep their word. As Steve Miller, the man brought in to "save" Bethlehem Steel in 2001, put it: "We do not have the money to make good on all the promises made by this corporation over the last 50 years