I’m not a numbers geek, but there was one number in last week’s Chrysler deal that grabbed my attention.
For those who missed it, the deal had Cerberus Capital, a private investment group, buying 80 percent of Chrysler for $7.4 billion.
That’s not the number that intrigued me.
After all, Daimler paid $36 billion for all of Chrysler about nine years ago.
But that tremendous skid in value also wasn’t the most interesting number.
What interested me was that Cerberus had agreed to take over the responsibility of worker pensions and health care, which was estimated at about $17.5 billion.
Think about that.
Four-fifths of Chrysler is considered worth well less than half of what it will cost to look after the company’s retirees.
In discussing their earnings a few days after the deal was done, DaimlerChrysler officials were almost salivating over dumping the worker costs on Cerberus. Bodo Uebber, chief financial officer, said the company was now in much stronger financial shape without the pension and health care liabilities.
“We clearly state today we have excess liquidity in our hands … which is a good issue,” he said. “It is something that shareholders should enjoy.”
Shareholders, perhaps, but not workers.
While United Auto Workers officials say they have received assurances that the pensions will be protected in the sale, the deal is clearly a bad sign of the times.
Once a reward for employees who spent long years working for just one company, pensions are now considered an albatross by many if not most major corporations.
And they can’t wait to get it off their necks.
A recent Associated Press story noted that the nation’s largest companies are continuing to move away from such plans, with 40 percent not offering them to new employees.
Basically they’re creating two classes of workers. One for older, long-term employees who still have a guaranteed pension and another with defined contribution plans for younger and newer workers.
During a survey last year, it was learned that only 31 of the 100 largest companies in the nation still have pensions. That’s down from 35 in 2005 and 89 in 1985.
The downward skid isn’t shocking news. Companies have been drifting away from pensions for a long time. But I would expect to see the shift come even faster as companies trying to compete in the international marketplace find the pension a bigger liability and a lesser worker incentive or reward.
The news of lost pensions comes during a period when studies show that workers aren’t saving enough in their company 401(k)s or in other retirement programs to fulfill their future needs.
That’s especially true of younger workers, who are struggling to make ends meet or to meet other goals such as buying a house.
Workers should take more control of this issue. Those who start saving early will likely find it relatively easy to pay for retirement.
That’s the beauty of compound interest. Early savers will find their nest eggs growing strongly over the years as they get paid interest on interest on interest.
While it’s clear that the responsibility for retirement now lies with the workers, companies need to play a stronger role.
Some companies already have, educating their workers and starting to enroll them automatically in retirement savings plans.
More need to adopt the same strategies. Dumping their pensions may relieve companies of a liability, but they still have a responsibility to inform their employees and make sure they get the best advice on how to save for their future.
Mike Benbow: 425-339-3459; benbow@heraldnet.com.
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