Buffalo Business First, via Raw Story, reports that GM is temporarily suspending its 401k payments.
In yet another sign of its financial trouble, General Motors Corp. will halt matching payments to all employees’ 401(k) savings plans.
The temporary suspension, which would affect all 1,340 employees at GM’s engine plant in the Town of Tonawanda and the automaker’s entire U.S. workforce, would take effect Nov. 1.
The action, which a spokeswoman said is aimed at conserving cash, comes in the face of continued declining auto sales.
In a prepared statement, GM said:
"GM, like most corporations, continues to align its resources with its business needs to create a more competitive company for the long term," the company said in a prepared statement."
My interpretation - GM's most critical resource is cash. GM's most critical business need is debt servicing. GM recognizes that it is more important to avoid defaulting on its debts than it is to continue matching contributions to its employees 401k accounts.
"We remain focused on building sustainable success, not only on short-term results (and) we will continue to assess our overall staffing needs."
My interpretation - At what point in the past did GM commit to building sustainable success? Certainly not within the last 10 years. Otherwise they would have recognized that its core profitable sector (trucks) was doomed once rising gas prices robbed its customers of their tolerance for 10 to 15 miles per gallon guzzlers. GM did not have another profitable line of cars that met its customers needs in the last 3 years. So when GM says they "remain focused on building sustainable success", they mean that they are still trying to figure out what car its customers want to drive.
"Any decisions or actions will be shared directly with employees."
My interpretation - If any decision sharing is going on between GM and its unions, it is probably along the lines of GM telling its unions to accept our plan or face immediate layoffs. The unions probably thought they were gaining a concession by forcing GM to call this suspension "temporary", when it is probably more along the lines of permanent until GM finds a profitable business model.
Look for the American auto industry to emulate GM's efforts to meet its debt obligations. But what if GM's sales continue to deteriorate and the cash gained by halting its matching 401k payments is not enough to service its debt? Is health care next on the chopping block?