GM Bans GM Stock Purchases by Employee 401(k) Plans
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?
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I wonder how many of those 401ks are on autopilot with no annual balancing of the investment to match risk and objectives?
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.
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.