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  1. #1
    Join Date
    Feb 2005

    Problems all over

    I don't want to be labeled negative, but I think we ought to remain aware that despite all the rah rah stories we get fed from the right, there are financial problems being faced by some pretty big corporations. Didn't these guys get some kind of big tax break or were they overlooked? What the heck is supposed to "trickle down" if they fold?
    ************************************************** **

    I.B.M. to Freeze Pension Plans to Trim Costs

    I.B.M., which has long operated one of the nation's largest corporate pension funds, said yesterday that it would freeze pension benefits for its American employees starting in 2008 and offer them only a 401(k) retirement plan in the future.

    The company said that the shift, which is expected to spur still more major companies to move away from traditional defined-benefit pension plans, would save it as much as $3 billion through the next few years and provide it with a "more predictable cost structure."

    I.B.M.'s announcement came at a time when a number of large employers have been freezing their pension plans, meaning that employees no longer build up retirement benefits to reflect higher pay and additional years of employment. Verizon, Hewlett-Packard, Motorola and Sears are among those that have recently frozen pension plans for many employees.

    But the move by I.B.M., a financially healthy company, shows that even some of the most secure businesses in the country no longer want to bear the risk or the expense of providing a firm promise of a lifetime pension.

    While I.B.M. expects to reduce its labor costs substantially, its action bears little resemblance to the recent efforts to cut or freeze pensions at troubled companies in the steel, airline and auto industries. Those companies say they are unable to generate enough cash to have any reasonable hope of making good on their pension promises. I.B.M. has pumped about $6 billion into its pension fund in the last four years and says that its plan is fully funded.

    The change will affect its 117,000 current employees in the United States. The benefits flowing to 125,000 American retirees who are already receiving pensions will not change.

    I.B.M. provides the nation's third- largest corporate pension plan, with about $48 billion in assets. It said it planned to make similar changes across its international operations, but did not indicate how many people would be involved. The company said it held about $79 billion in its worldwide pension funds.

    It had already taken the smaller step of closing its pension plan to new employees at the end of 2004. Those employees were instead offered 401(k) plans similar to the one I.B.M. now intends to give to all employees as of 2008.

    In freezing a pension plan, a company stops letting employees build up their benefits with every additional year of service. Employees still get the benefits earned before the freeze, and the company operates a pension fund to pay for those.

    The sponsor of the biggest American corporate pension fund, General Motors, has not signaled an intention to freeze its plans, and the United Automobile Workers union could be expected to mount fierce opposition if it did. Officials at General Electric, which has the nation's second-largest such pension fund, did not return a phone call asking whether the company was considering a freeze.

    I.B.M., which competes against other technology companies that in general rely exclusively on 401(k) plans, said that the move fit into a broader strategy aimed at avoiding financial risk to its long-term future.

    J. Randall MacDonald, the senior vice president for human resources, said I.B.M. thought that the change to a 401(k) plan would give it competitive advantages both in attracting employees and containing labor costs. "This is all about what we started five or six years ago," he said, "a global strategy of shifting from defined-benefit to defined-contribution plans."

    In a defined-benefit plan, a company promises employees a predetermined benefit when they retire, and invests money ahead of time to make sure that it can make good on its promises. Such plans are covered by a government guarantee. Defined-contribution plans are not.

    In a defined-contribution plan, employers provide a framework in which workers set aside money and invest it for their own retirement. In some cases, including I.B.M., the company matches those employee contributions to some degree. The employee, though, is responsible for investing the money.

    I.B.M. projected that it would save $2.5 billion to $3 billion over the next five years as it carries out the change worldwide. It will take a $270 million charge against earnings in the just-completed fourth quarter to account for costs in freezing the pension plan.

    Mr. MacDonald said that even though the new benefits would be cheaper for I.B.M., they would "far exceed any average benchmark" in their attractiveness to employees.

    Dallas Salisbury, president of the Employee Benefit Research Institute, said I.B.M.'s planned 401(k) program appeared to be "in the top 5 percent in generosity, and probably in the top 1 to 2 percent" of all 401(k) plans offered in this country.

    The proposed plan is attractive because of certain unusual features. One is automatic contributions to employees' retirement accounts, which I.B.M. proposes to make even for those employees who choose not to put any of their own money into the accounts. The automatic contributions are to be a percentage of each worker's pay, which will vary depending on the type of benefits that he or she has.

    Such a feature is almost unheard-of among employers with 401(k) plans. The promise of an automatic company contribution "overcomes one of the primary criticisms that there has been of 401(k) plans," Mr. Salisbury said. "With most 401(k) plans, you have people who choose not to participate so there is no asset buildup whatsoever."

    In addition to the automatic contribution, I.B.M. proposes to match employees' contributions dollar for dollar up to 5 percent or 6 percent of their pay, depending on the worker's hiring date. Dollar-for-dollar matching has become infrequent among employers with 401(k) plans in recent years; most companies provide no more than 50 cents on the dollar in matching funds.

    I.B.M.'s pension plan is closely watched not only because of its size but because of a lawsuit, filed against the company by a group of employees, over changes it made to its pension plan in the late 1990's. The employees contended that the changes deprived older workers of benefits they had previously been led to expect.

    A federal judge found that I.B.M.'s plan illegally discriminated against older employees; the company is appealing the decision.

    Other companies with that type of pension plan, sometimes called cash-balance plans, have complained about the legal uncertainty and warned that it might make them decide to drop the plans altogether. Mr. MacDonald said that I.B.M.'s decision to freeze pensions had nothing to do with the legal problems.

    "Quite the contrary," he said.

    I.B.M.'s treasurer, Jesse J. Greene Jr., said the company's current financial climate had been an important factor in its decision to freeze pensions. Unexpectedly low long-term interest rates made the American plan cost about $100 million more in 2005 than I.B.M. projected at the end of 2004, he said, and about $300 million more in other countries where it operates. Federal Reserve increases in benchmark short-term interest rates in 2005 caused $200 million more in unexpected costs.

    The cash-balance design that I.B.M. adopted is more vulnerable than traditional designs to rises in short-term rates, even though it was promoted by actuaries in the 1990's as cost-effective. Lawsuits at companies like I.B.M. with cash-balance plans were motivated in part by the anger employees felt at seeing the companies increase profits and executive bonuses at the expense of their own retirement benefits.

    Mr. Greene said that demographic changes affected costs as well.

    "These plans were never designed," he said, to cover obligations that "run as long as people are now living.

    "It's important for companies to take actions to deal with this before these plans drag them into trouble."


  2. #2
    Join Date
    Feb 2005

    Re: Problems all over

    Ford's Debt Is Lowered Two More Steps

    DEARBORN, Mich., Jan. 5 - Even before Ford Motor introduces the turnaround plan it is calling The Way Forward, Standard & Poor's clearly thinks that it may not be.

    S.& P. put Ford's debt rating two notches further into junk on Thursday, less than a month after a similar move at General Motors. It warned that problems at G.M., which S.& P. said might be forced to seek bankruptcy protection, could make a Ford comeback more difficult.

    The agency reduced its rating on Ford and its Ford Credit financing arm to BB- from BB+. It said the outlook for both was negative, meaning the ratings could be cut again if the company's prospects did not improve. Ford has $141.7 billion in outstanding debt.

    Late last year, S.& P. cautioned Ford that it could reduce its rating by more than one notch, so the move was not a surprise. But it was a historic blow to Ford, which boasted investment-grade ratings from May 1984 until October 2001.

    It used that sterling credential, which meant it paid lower borrowing costs, as a competitive tool, only to see its rating cut when its sales and profits fell earlier this decade.

    On Jan. 23, Ford is set to unveil its second turnaround effort in four years. The plan is expected to include plant closings, the elimination of thousands of hourly jobs and several automobile models, and a renewed emphasis on cost-cutting.

    A Ford spokeswoman, Becky Sanch, said, "We remain committed to accelerating our business plan." She declined to comment further.

    In its report Thursday, S.& P. said the lower rating "reflects our increased skepticism about Ford's ability to turn around its North American operations," a process S.& P. said could take several years at best.

    Ford executives met with S.& P. analysts late last month to outline the plan and explain how it would improve the automaker's performance. Ford's 2002 turnaround effort, which it called its revitalization plan, helped reduce costs and led to corporate profitability, but it did not reverse a slide in Ford's market share.

    Ford, which held about a quarter of American automobile sales at the start of the decade, ended 2005 with 17.4 percent, a level it was last at in the early 1980's.

    The popularity of its big sport utility vehicles, which fueled its earlier market share, has faded, and while Ford has won good reviews for new cars like the Fusion, a midsize sedan, it does not earn as much on cars as it has on sport utilities. It also faces strong competition from several rivals, from Chrysler to Hyundai and Toyota, all with new car models.

    On Thursday, an S.& P. analyst, Scott Sprinzen, said Ford was in danger of being hurt by the financial problems at G.M., which also plans to close plants, cut jobs and reduce spending under a restructuring plan.

    Last month, Mr. Sprinzen startled the industry when he said G.M. could be forced to seek bankruptcy protection to reduce its labor, pension and other costs.

    A G.M. bankruptcy "could be a huge problem for Ford," Mr. Sprinzen said, enabling the company to win lower rates from the United Automobile Workers union than Ford could persuade the union to grant outside bankruptcy.

    Mr. Sprinzen said a weakened G.M. might try to take buyers away from Ford with another program like the employee discount plan it offered customers last summer. While the deals led to record industry sales, buyers quickly disappeared once the offers were gone.

    "G.M. is one factor in the marketplace that Ford has to consider in setting its own restructuring plan," Mr. Sprinzen said.

    S.& P. executives said they were encouraged by a recent plan approved by union members that was aimed at reducing Ford's annual health care costs.

    But on Thursday, three U.A.W. members said they planned to ask the union to review the procedures used during balloting on the plan, which passed by only 51 percent of those voting. Workers at big Ford factories in Kansas City, Mo., and St. Paul rejected the cuts.

    The effort by the workers - two from Michigan and the other a retired union member from Ohio - could lead to a new vote on the plan. U.A.W. officials have said the vote was conducted fairly, although most ballots that are approved pass by a far wider margin. In October, G.M. workers voted 61 percent in favor of similar cuts.

    Chrysler and VW in Deal

    DETROIT, Jan. 5 (AP) - Volkswagen said Thursday that it would collaborate with the Chrysler Group of DaimlerChrysler on a VW minivan for the North American market that will start production in 2008.

    The chairman of VW, Wolfgang Bernhard, told reporters at the Los Angeles Auto Show that Chrysler would build the minivans at a plant in Windsor, Ontario, or a plant near St. Louis. The minivan will be based on the next-generation Dodge and Chrysler minivan platform, but VW will design the interior and exterior.

    Mr. Bernhard predicted sales of around 10,000 minivans a year once the vehicle hits the market, a fairly conservative estimate. The deal allows VW to save production costs on a vehicle for which North American dealers have been clamoring.

  3. #3
    Join Date
    Feb 2005

    Re: Problems all over

    Retailers Find Little to Cheer

    The nation's merchants, trotting out deep discounts before Christmas, lured enough last-minute buyers to deliver a decent, if unspectacular, sales gain of 3.2 percent in December.

    The results, released yesterday, showed that retailers, like Target, that waited until closer to Christmas to flood shoppers with ads and markdowns had the strongest December.

    If there is any lesson for retailers in the results, it is this: the early bird did not catch the worm.

    Indeed, chains like Wal-Mart that focused on getting a jump-start on holiday sales before Thanksgiving instead fell behind last month.

    Wal-Mart, in particular, "had a competitive advantage in November which they suddenly lost in December, when other companies stepped up," said Bill Dreher, a retail analyst at Deutsche Bank Securities.

    Wal-Mart's sales at stores open at least a year rose a meager 2.2 percent. Because of its size - 10 percent of retail purchases are made there - its performance dragged down the entire industry.

    According to the International Council of Shopping Centers, consumers spent $93.2 billion at retailers in December, up from $90.3 billion a year ago. The 3.2 percent increase beat last year's 2.7 percent gain for December, but fell below a 4.3 percent rise in 2003.

    "Not bad, kind of average," was the verdict from John D. Morris, a retail analyst at Harris Nesbitt.

    But marketing tactics did not tell the whole story. With home heating costs rising, retailers that cater to lower- and middle-income shoppers, like Kohl's and Sears, turned in largely disappointing results. But higher-end chains, like Neiman Marcus and Nordstrom, with shoppers who are more insulated from energy prices, once again thrived.

    A complete picture of the holiday season will not emerge until the end of January after millions of Americans redeem gift cards and retailers can then register them as sales.

    What is more, monthly same-store sales, as they are called in the industry, do not factor in online sales. Web sales rose 25 percent this holiday season, to $18.1 billion, through Christmas, according to ComScore Networks. (Two of the nation's largest electronics retailers, Best Buy and Circuit City, will not report December sales until they announce annual earnings later this month.)

    Wal-Mart's performance struck Wall Street as particularly sluggish, given the chain's considerable holiday marketing campaign, which included television commercials with Garth Brooks, $400 laptops and a pledge to match competitors' "doorbuster" prices on the day after Thanksgiving.

    Analysts said Wal-Mart's early advertising blitz, which tapered off in December, left it vulnerable to competition in the final weeks of the season. Unrelenting negative publicity from union-backed groups like Wake Up Wal-Mart, which organized holiday protests in front of its stores, may have also hurt the chain.

    "The 2004 holiday season revealed that Wal-Mart was no longer invincible," said Bernard Sosnick, an analyst at Oppenheimer. "The 2005 holiday season did not erase that."

    After a strong showing in November, when sales rose 3.6 percent, J. C. Penney also had a rather weak December. Sales grew just 2.2 percent, below a 2.7 percent analyst forecast.

    Kohl's, which caters to the same lower- and middle-income consumers as Wal-Mart and J. C. Penney, missed analysts' forecasts, indicating that lower-income consumers trimmed their gift-giving budgets. (Sales at Kohl's rose 4.6 percent, below an expected 5.1 percent.)

    "It's a demographic problem," said Mr. Dreher, the Deutsche Bank analyst. "If you were focused on the moderate-income sector, you were disappointed."

    Sears Holding, the struggling combination of Sears and K-Mart, failed to find its footing over the holidays, with December sales sliding 11.9 percent. K-Mart delivered a 1 percent sales increase after years of falling sales, suggesting the bulk of the company's troubles rests with Sears. In a statement, Sears Holding blamed a "weaker-than-anticipated customer response to fashion offerings."

    Target, the trendy discount retailer whose typical shoppers earn far more than those at Wal-Mart, said sales rose 4.7 percent. That was a reversal from November, when Target's sales growth dipped below Wal-Mart's for the first time in two years.

    Federated Department Stores - still trying to integrate the weaker May Department Stores into its business - also turned around during the holidays, posting a 3.4 percent sales increase in December after a 3.4 percent decline in November.

    Luxury retailers returned to their generally strong growth last month after a sluggish November. Sales rose 8.6 percent at the Neiman Marcus Group, 7.7 percent at Nordstrom and 2.4 percent at Saks.

    Fickle teenage shoppers, who fall in and out of love with retailers seemingly every season, mobbed stores that sold high-priced denim and faux-fur-trimmed coats, increasing sales for the segment by 12.9 percent, Retail Metrics found.

    Sales at Abercrombie & Fitch, which shuns the deep markdowns used by its rivals, leapt 29 percent. Sales at its relatively new Hollister division, aimed at the middle-school set, jumped 36 percent.

    But the cheery news was largely eclipsed by word from the Securities and Exchange Commission yesterday that it has begun a formal investigation into sales of Abercrombie's stock. The agency has requested information from the retailer and some current and former executives.

    After a challenging fall, when it was stuck with piles of unsold denim, Aropostale said sales rose 11.4 percent, far exceeding analysts' forecasts of a 4.4 percent gain.

    Gap's hopes for a holiday turnaround, propelled by a return to the basic crew neck sweaters and knit scarves that endeared it to legions of consumers in the 1990's, did not materialize. Sales fell 9 percent across the chain: down 10 percent at Gap, 10 percent at Old Navy and 5 percent at Banana Republic.

    Mr. Morris, the analyst, said Gap's decision to skip television ads for the Gap brand in favor of a colorful magazine insert hurt business. "As much as the company said it did not drive big business, it became a ritual," he said. "You saw it and kind of felt like it was time to go to the mall, and it just wasn't there."

  4. #4
    Join Date
    Oct 2005

    Re: Problems all over

    is it me, or is this whole country going down the drain? pretty soon we'll all be living on the streets....

  5. #5
    Join Date
    Aug 2005

    Re: Problems all over

    This all started when people stared buying Jap and German cars, doesnt it seem odd that these are the very countries we fought in WWII. Then prayer was removed from our schools. We are on a roller coaster headed for disaster and there is no way to get off except to fire every one in Washington, and start fresh. We need to close our borders, kick out those who don't belong here and change many of our laws. We are still a super power, but we will lose that soon too. The world is seeing just how little we can really do, Iraq is proof once again (remember Vietnam?) that our military cannot save foreigners from there own fates. If we really want to change Iraq, we would need to nuke the entire world except for ourselves, and of course that would likely kill us too. People live the way they live and we cannot change that. Muslims are not happy killing just us; they have to kill each other also. One third of all tax revenue for the federal government comes from petroleum products and that is the main motivation for politics today. If we switch to wind or solar power like we should, the federal government would collapse due no a lack of tax revenue. These problems will not be solved by the current people we have in office, there opinions and investments wont allow for it.

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