By John Horner
October 1, 2008 -
The Associated Press report brings us the stunning news that GM’s employees have loaded up their 401K plans with so much company stock that the cupboards ran dry. Back in January, Financial Weekly published one of the many articles about the risk of loading-up on company stock. “After thousands of employees at now-defunct corporations such as Enron and WorldCom saw their retirement savings wiped out early in this decade, things were going to be different.” In case anyone has been under a rock for the past ten years, you don’t want your salary and your pension and your retirement investments all riding on the fortunes of one company. The big reason GM ran through its authorized number of shares for the 401K plan was the price plunge. GM stock is off 75 percent from its recent highs; it now takes four shares to stock to soak-up the cash which previously would have only bought one share. Between now and sometime in November when GM puts through the paperwork to print more shares, employee contributions will go into other investments. How long will it be before GM employees follow their Enron soul-mates into court over bombed-out 401K plans? Actually, it’s already happened. Workforce Management reported the January 18, 2008 settlement of a class action suit brought against GM in 2005 over the plunging value of employee 401K purchases of GM stock. Will they never learn?
Associated Press (via Yahoo) »
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October 1st, 2008 at 4:50 pm
The whole scenario is so sad I will not make comment on somebodies life work flaming out.
October 1st, 2008 at 4:58 pm
Sad, indeed. Do these workers not realize they are investing their savings in a company with negative equity? That is insolvent?
Moreover, where is the UAW? If it has the interests of its members at heart, shouldn’t it be urging members to invest in something other than GM?
October 1st, 2008 at 5:19 pm
“Sad, indeed. Do these workers not realize they are investing their savings in a company with negative equity? That is insolvent?”
Hope springs eternal, I suppose — :-(
October 1st, 2008 at 5:51 pm
Moreover, where is the UAW? If it has the interests of its members at heart, shouldn’t it be urging members to invest in something other than GM?
Of course it doesn’t have the interests of its members at heart. Like any large company/organization/government, its members are merely the expendable tools by which its “leaders” pursue their own interests.
October 1st, 2008 at 6:01 pm
I’m pretty sure that the UAW workers get primarily, if not only a defined benefits government insured pension.
It is probably mostly white collar engineers and managers that are overinvesting their 401Ks into GM stock.
If GM white collar workers are stupid enough to buy GM stock it says bad things for the company’s future.
October 1st, 2008 at 8:39 pm
Actually the UAW folks at GM do have a 401k called the Personal Savings Plan.
An investment now in GM stock is a bet on Obama/Reid/Pelosi. They will have a very synergistic relationship with the union, and by association, GM.
October 1st, 2008 at 9:30 pm
I wonder how many of those 401ks are on autopilot with no annual balancing of the investment to match risk and objectives?
October 1st, 2008 at 9:30 pm
inid500fan, I think you mean “an investment now in GM stock is throwing money into the garbage disposal.” Not even Democratic largesse can save the Big 2.5.
The most likely scenario is GM, on the verge of Chapter 11, will be bought by a foreign manufacturer, and this deal will be brokered by the government for the good of the economy.
Don’t invest your 401k into your own company, people.
October 1st, 2008 at 11:29 pm
“Don’t invest your 401k into your own company”
Unless you work for Toyota which has not had a losing quarter in 50+ years.
October 2nd, 2008 at 8:17 am
They saw that bump to 42 a share when they bought the UAW off with VEBA so they are hoping for a short term spike to make a killing with.
Not going to happen.