Thousands of General Motors retirees in the Tampa Bay area are watching the unthinkable unfold.
Their paternalistic former employer, financial lifeline and symbol of America's once-dominant manufacturing base is in its toughest fight for survival ever.
GM has warned it could run out of cash next year, and creditors could force the company into bankruptcy if it violates terms of some of its debt next month. Short of a massive federal bailout, the automaker's stock could be worthless by next year, analysts have predicted. Even a Chapter 11 bankruptcy reorganization may not help unearth new financing because of the global credit crunch. That could mean liquidating the 100-year-old company.
Marian Fabi of Indian Shores, who worked at a GM Cadillac factory in Detroit for 30 years along with her husband, Fred, said she fears for her family's health benefits and pension plans. But she fears more for the younger generation and a broader economic slump.
"The whole country needs to be concerned about GM's survival, not only us retirees,'' she said, "because it trickles down to everyone.''
Florida has long been a major haven for auto industry retirees, second only to Michigan, with a handful of retiree clubs scattered across the state. Two United Auto Workers' retiree groups based in Pinellas County count about 5,000 members. Fred Fabi is chairman of a UAW group that helps some 3,000 retirees in Pinellas, Hillsborough and Manatee counties, many of them part of GM's extended family.
GM, which has more retirees than active workers, has been struggling to meet obligations to its aging former workforce as auto sales have fallen dramatically. The company reportedly spent $4.6-billion on health care in 2007 for its 1-million employees and retirees and their dependents.
Ford and Chrysler are also burning through cash and angling for federal help, but General Motors has taken center stage. GM CEO Rick Wagoner has said the automaker needs help now and warns against waiting until President-elect Barack Obama takes office Jan. 20.
Before adjourning for the elections, Congress gave $25-billion in government-backed loans to the automakers to prod them to retool their factories to make more efficient vehicles. A more direct and bigger bailout may be taken up next week.
In one cutback, GM next month is phasing out its long-promised lifetime health care coverage for its approximately 100,000 white-collar retirees. (Former factory workers have union contracts that prevent the company from revoking their coverage.)
Salaried retirees across the country have rallied to voice frustration over the decision and to educate themselves on how to use Medicare to pay for prescription drugs and doctor visits.
Jack Dickinson has been hearing from plenty of them on a Web site for auto retirees that he runs called www.overthehillcarpeople.com.
"Are they bitter about losing their health care benefits? Yes. And do they think it's discriminatory to take away salaried 65-year-olds and not hourly 65-year-olds? Yes,'' Dickinson said Tuesday.
"I'm sure it has created a lot of ill will, but I'll tell you 90 percent of retirees will still stand behind GM, because it's in their blood, and they're not going to get it out. No matter what, I'll be driving General Motors' vehicles because I believe in them.''
Bob Pharis, who is now in his 27th year of retirement after working 27 years for GM at a tech center near Warren, Mich., understood why the company made the cutback. The 85-year-old Homosassa resident said the $300 a month payment that GM is promising salaried retirees to help find replacement coverage should help him bridge the gap.
And, at least for him, the timing was right. He already had quadruple bypass surgery that was covered by GM benefits. "Most of the problems I've had are already fixed,'' he said. "It's like my son says, 'You've been rebuilt.' ''
Neither is Pharis worried about his pension. The U.S. Pension Benefit Guaranty Corp. insures private-sector pension plans and pays benefits to workers if a plan fails, but the government agency does not insure health insurance benefits.
GM, Ford and Chrysler retirees currently rely on a union-run health care trust known as a voluntary employee beneficiary association, or VEBA, as insurance against losing health care benefits. The trust was supposed to help automakers avoid bankruptcy by capping how much they pay for retiree health care. But in July, GM deferred a $1.7-billion payment into the VEBA and members of the trust board said they are worried they will stand in line with other creditors if the companies go bankrupt.
Like Dickinson, Pharis thinks the Big Three Detroit automakers will survive, either by government intervention or their own devices. The failure of GM, in particular, "is just not an option in my opinion,'' he said. "They can't close the place and put all those people out of work.''
In one sign of optimism, JPMorgan credit analysts have rated GM's bonds a "buy'' saying they are confident the company still has other sources of liquidity to keep it afloat — such as an overfunded pension plan, possible asset sales, cost-cutting and government loans.
Still, many investors are wary that GM's fortunes will change anytime soon.
"Without government assistance, we believe that GM's collapse would be inevitable, and that it would precipitate systemic risk that would be difficult to overcome for automakers, suppliers, retailers, and sectors of the U.S. economy," Deutsche Bank broker Rod Lache wrote in a note to investors.
The automaker's stock is now trading at levels seen in the 1940s. Shares slumped another 14 percent Tuesday to close at $2.92, knocking down the market capitalization of the once mighty corporate titan to a mere $1.65-billion, smaller even than the Tampa Bay area's Raymond James Financial.
A year ago, General Motors was a $30 stock.
Jeff Harrington can be reached at (727) 893-8242 or firstname.lastname@example.org