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RichM

You Heard It On Hpc.co.uk First

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On a "Newsnight" programme some 2 or so years ago a representative from a Chinese ministry said that China could make everything in the World and still not have enough jobs for all it's citizens.

That is the scale of the changes happening in this globalised economy.

Those figures about pensions deficits are horrendous, as here in the UK, and will probably only get worse.

Can a USA Government, of either Party, afford the collapse of such an up to now potent symbol of American manufacturing? I don't know.

How long will the USA workers tolerate job losses, reduced benefits and wage reductions?

Times ahead are going to get very interesting and of course, potentially, frightening.

I note the £20 DVD player everywhere now.

To help pass those unemployed times?

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I believe GM are sitting on about $20bn in cash, so burning $4bn a year they have 5 years to turn the business around.

But all those pensioners aren't going to go away.

GM has become another massive pension fund, that happens to make cars.

In the same way that BA is just a pension fund that happens to run an airline.

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I believe GM are sitting on about $20bn in cash, so burning $4bn a year they have 5 years to turn the business around.

But all those pensioners aren't going to go away.

GM has become another massive pension fund, that happens to make cars.

In the same way that BA is just a pension fund that happens to run an airline.

The accounts show $9bn. The current issue is not however GM but whether Delphi (the GM owned parts firm that GM sold off back in the 90s which went bankrupt in September) goes on strike or not.

If they do (and it seems likely that they will) GM will become Rover very rapidly. With no parts arriving to allow cars to proceed down the factory floor they $9bn won't last very long.

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I believe GM are sitting on about $20bn in cash, so burning $4bn a year they have 5 years to turn the business around.

But all those pensioners aren't going to go away.

GM has become another massive pension fund, that happens to make cars.

In the same way that BA is just a pension fund that happens to run an airline.

What happens to the current pensioners when such a company fails?

Do their pensions just stop or is there some kind of insurance?

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I was at Cisco when, for a brief moment, Cisco became the richest company on the planet overtaking GM. To my American colleagues it was an enormous kudos 'thing' and I can't help thinking that if GM does go under that the effect on Americans will be deep and long-lasting.

GM going to the wall though will have dire consequences for the West as it will begin to focus attention on the can of worms that Governments have been trying to keep the lid on. Sadly, the bottom line is that GM appears to be making cars that no one wants.

I frequent several US car forums and what has struck me in the past year or two is the big increase in the number of posts from people seeking info about Hondas, Toyotos, Mazdas, etc. Interestingly, many of them are raving about small Japanese hatches and how us Europeans had wised up to the benefits of hatches years ago.

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All of this just goes to show the fragility of the economic base upon which speculative house prices rest.

House prices rest on opinion, as Mervyn King of the BoE said, and opinion rests on confidence. If GM (and Ford) go belly up the ripple effect will be devastating to confidence. GM may be the trigger event to send US house prices hurtling back to reality with the UK, OZ and other bubble markets to follow.

Edited by Realistbear

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Why wouldn't GM want to go bankrupt? They could then dump all their pension liabilities on American taxpayers and go back to making cars again rather than being a pension company.

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With no parts arriving to allow cars to proceed down the factory floor they $9bn won't last very long.

Don't GM lose money on every car they sell though? So if they sack everyone and close down the factories, they could become more profitable :).

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Don't GM lose money on every car they sell though? So if they sack everyone and close down the factories, they could become more profitable :).

No, lets suppose you have a fixed cost basis (unavoidable costs that most be paid of $100 million). Provided you cover you marginal costs and make a contibution towards that $100million you are better off manufacturing rather than not manufacturing (i.e. you make $80million towards that $100million so you only lose $20m).

so, although they lose say $500 on every car they actual earn say $10,000 towards their fixed costs. Hence, while each car costs them $500 not producing them would cost them $10,500 per non-existant car.

Of course this is an irrelevence. As until they have cars that people want to buy and engines that people want to use (have you seen the fuel economy on the latest Zafira and compared it to Renault's (40% better by the looks of it)) they simply won't sell enough covers the fixed costs from the $10,000 per car marginal cost profit.

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I read an article a few years back that basically said that GM considered themselves more of a finance company than a car-making company - isn't this what highly paid managers always do to good companies? - and that making cars was almost considered an annoyance by them. Apparently, they made more on car finance than on selling the cars - i.e. if you were a cash buyer then they didn't really want your business but if you took out a loan then they were happy.

If GM goes under then we could be seeing dealerships going under - not just Vauxhall but don't they also now own Saab and a few others as well? Also, UK companies that make spares for these vehicles will no doubt suffer - I seem to recall one of the Rover suppliers going bankrupt overnight with debts of several million?

There will be a lot of suffering and financial hardship and it could start a domino affect and a crisis of confidence. As selfish as it sounds - I don't care and I would welcome all of this. I am in a situation where I can no longer afford a decent house, work all hours and I am facing an old age in 25 years time where I most likely will have to keep working till I drop. Yes, I know that sounds nasty but there are so many imbalances in the UK economy currently - Public Sector workers seem to get more benefits by the day - that I have reached the point where I am thinking that I could be no worse off even if the World went into a 1920s/30s Depression. I imagine many more on this forum feel similar.

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30,000 jobs to go. 7500 in the US. Let's see if the miraculous UK housing economy puts Vauxhall in the UK as no. 1 target in Europe for "restructuring". If not that it may be the hidden inflation that puts paid to the UK sites, broad money supply was up 11.6% for the last 12 months..

Edited by OnlyMe

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What happens to the current pensioners when such a company fails?

Do their pensions just stop or is there some kind of insurance?

My understanding is that there's no back-up plan.

As with Equitable Life, the courts can't let the company get away with bad practice - that's why there was a ruling that they had to honour their interest-rate promises - and the government can't pick up the pieces. Letting them off or picking up the pieces would be too bad a precedent to set. If private insurance companies thought that either would apply they'd almost be duty-bound to off-load as much of the actual paying out of pensions as they could. So the people who lose out in the case of a Maxwell or Equitable Life or the - what was the name of that furniture company recently? - are the pensioners.

That's why, to my mind, pension provision is one of the sectors that really should be run by the state. Private companies are too preoccupied with making money to trust people's financial futures to them - people are, quite rightly, very suspicious of them and that's why so many of us don't have plans with pension firms. The only way the government could get people to put their cash in the pension companies' hands would be to underwrite their pensions and if they did that they might as well just run the thing themselves. Yes, government is often inefficient and corrupt but then so are the fund managers who cream off a fortune, spend it on porsches then don't have lose a thing when the fund loses loads or the firm goes belly-up and a bunch of pensioners are left without. Not going to happen of course.

Edited by North London Rent Girl

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My understanding is that there's no back-up plan.

As with Equitable Life, the courts can't let the company get away with bad practice - that's why there was a ruling that they had to honour their interest-rate promises - and the government can't pick up the pieces. Letting them off or picking up the pieces would be too bad a precedent to set. If private insurance companies thought that either would apply they'd almost be duty-bound to off-load as much of the actual paying out of pensions as they could. So the people who lose out in the case of a Maxwell or Equitable Life or the - what was the name of that furniture company recently? - are the pensioners.

That's why, to my mind, pension provision is one of the sectors that really should be run by the state. Private companies are too preoccupied with making money to trust people's financial futures to them - people are, quite rightly, very suspicious of them and that's why so many of us don't have plans with pension firms. The only way the government could get people to put their cash in the pension companies' hands would be to underwrite their pensions and if they did that they might as well just run the thing themselves. Yes, government is often inefficient and corrupt but then so are the fund managers who cream off a fortune, spend it on porsches then don't have lose a thing when the fund loses loads or the firm goes belly-up and a bunch of pensioners are left without. Not going to happen of course.

Neatly summing up why, for some, "My house(s) is (are) my pension".

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My understanding is that there's no back-up plan.

I believe they'd dump their pensions on the US government's pension guarantee fund: which appears to be close to bankruptcy itself after the airlines did the same.

That's why, to my mind, pension provision is one of the sectors that really should be run by the state.

Why should taxpayers be forced to subsidise poorly-managed companies?

And remember, we wouldn't really need pension companies if governments didn't destroy the value of their currency by printing more and more of it: if you could put a pound under your mattress and know that in fifity years it would buy as much as it did today, rather than less than a tenth as much, most of the financial industry would become largely irrelevant... most of what they do simply serves to compensate for rampant inflation.

The simple fact is that people want fat pensions _without paying for them_: it should be obvious that such a ponzi scam can't work for long.

Edited by MarkG

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Neatly summing up why, for some, "My house(s) is (are) my pension".

I actually do agree with you about this but unfortunately an unstable property market is not a viable alternative to a well-run pension fund the main objective of which is profit for the pensioners rather than profit for the people running it.

The best landlord I had was a guy who had sunk his pension money into a large house in Kilburn that he'd turned into flats. He had semi-retired and bought the place in the mid-90s and he managed it himself - it was his sole job. He was extrememly quick to deal with any problems. Precisely the kind of landlord I have no problem with at all and, because of when he bought it, he'll be fine. Not true for people who've sunk their pension money into property in the last year or so (at best - at worst, last five years).

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My understanding is that there's no back-up plan.

As with Equitable Life, the courts can't let the company get away with bad practice - that's why there was a ruling that they had to honour their interest-rate promises - and the government can't pick up the pieces. Letting them off or picking up the pieces would be too bad a precedent to set. If private insurance companies thought that either would apply they'd almost be duty-bound to off-load as much of the actual paying out of pensions as they could. So the people who lose out in the case of a Maxwell or Equitable Life or the - what was the name of that furniture company recently? - are the pensioners.

That's why, to my mind, pension provision is one of the sectors that really should be run by the state. Private companies are too preoccupied with making money to trust people's financial futures to them - people are, quite rightly, very suspicious of them and that's why so many of us don't have plans with pension firms. The only way the government could get people to put their cash in the pension companies' hands would be to underwrite their pensions and if they did that they might as well just run the thing themselves. Yes, government is often inefficient and corrupt but then so are the fund managers who cream off a fortune, spend it on porsches then don't have lose a thing when the fund loses loads or the firm goes belly-up and a bunch of pensioners are left without. Not going to happen of course.

Point 1, yes. Point 2, cr*p.

People trusted pension companies fine for a long, long time. That so few got into difficulty was a testimony to how well (and conservatively) they were generally run. As the equity markets picked up in the 60s, 70s and 80s, greater demand from pensioners and contributers for higher returns resulted in greater proportions of pension funds going into equity markets (which helped this countries growth and investment no end despite costing the odd Porsche). The guaranteed policies and some funds chasing to much risk are no reason why pensions should be Govt run (they were based on state of the art actuarial advice - noone thought it unreasonable at the time). That is the knee jerk response to all problems that has got this country into such difficulties over the years.

The greater failure of pensions as an attractive place for your retirement funds has more to do with the theft of £5Bn a year ACT allowance by Gordon in 1997 (some say worth over £100Bn now). It pulled the rug out from the stock market and is still causing problems.

When pension funds used to invest more heavily in Gilts (and War Bonds!) 40 and 50 years ago (my father was a member of a Hospital pension fund board) on the basis that they were "safest" the pensioners saw far poorer returns and it was only as the mix shifted more to commercial property and equities that our parents and their parents pensions started to blossom to create the expectations we have today.

If you think I would trust the Govt to run my pension scheme when all Govts have systematically emptied the nations state pension pot such that current workers fund the current pensioners on a current basis you must be joking. Who trusts the state to provide for them in old age? If you do, spend every single penny you earn until you retire and I'll buy you a pint to see how you are placed in 30 yrs....

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<snip>

If you think I would trust the Govt to run my pension scheme when all Govts have systematically emptied the nations state pension pot such that current workers fund the current pensioners on a current basis you must be joking.

<snip>

I could not agree more.

And the difference between the State Pension and a Ponzi scam is.....................? :angry:

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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