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Column: Don't let company loyalty fry your nest egg

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Some lessons are really difficult to learn. Just ask John McBaine, who is holding on to nearly 40,000 shares of General Motors Corp. stock that in the past nine months fell from more than $42 to less than $10 a share. Last week it was back up to $12.00 but still trading at levels not seen since the 1950s. • "More and more, I am asking myself why I didn't apply the lessons learned from the collapse of Enron and the airline industry stocks to my own 401(k) investment choices," he said. • Enron Corp. employees lost more than half their 401(k) money when the Houston company went bankrupt in 2001. More recently, employees of Bear Stearns saw the value of their retirement savings plunge.

But McBaine, who has homes in Largo and Indian Shores, has held on to GM through it all.

"I've added to it since retirement," said McBaine, who was a senior human resources administrator when he retired in 1999 after nearly 40 years with GM. "I still haven't learned the lesson even though I should have. My wife thinks I'm completely crazy."

Employer stock holdings have declined to a little more than 10 percent of 401(k) assets, showing some people have learned the Enron lesson. However, others still have too many eggs in one basket. In fact, when companies offer their own stock as a 401(k) plan option, more than 7 percent of employees put 90 percent or more of their money in that option, according to the Employee Benefit Research Institute.

McBaine, 63, doesn't just own GM stock. He owns GM notes for income, drives a GMC Envoy SUV, has a GM pension and gets his retiree health benefits from GM. (The company recently announced it will take away those health benefits when retirees turn 65.) Overall, about a fourth of his net worth and about 30 percent of his income are tied to GM, he said.

So why can't McBaine let go?

"My entire work career was with General Motors," he said. "They were the largest industrial corporation in the world." He said he always felt that the company's strength wasn't adequately reflected on its balance sheet but that some day investors would recognize its value. Now he's hoping the company will be a turnaround story.

"Once an optimist, always an optimist," he said. "I don't think the GM tune has been played yet. If you look at all the massive cost that's been taken out of the structure, I still think we have an opportunity to come out of this."

That's not to say he's happy about the way his beloved company has been run.

"We've wasted billions upon billions of dollars," he said. "We rolled the dice for far too long on trucks and SUVs. We're just not able to hit the marketplace timingwise."

Recently McBaine fired off an e-mail message to chairman and chief executive Rick Wagoner Jr.

"I wonder if or how you are able to sleep at night," he said. "I'm happy for your $20-million plus in total compensation last year. And such a historic year it was for GM employees, retirees and shareholders. You received record compensation while presiding over the greatest financial loss ever recorded by any corporation; the largest downsizing of employee levels and plant operations I can recall; and the most incredible loss in value ever suffered by GM shareholders in the history of the company."

If you're overloaded in company stock like he is, McBaine has some advice for you: "I would urge others to learn the lesson quicker and act upon it much more quickly than I've been able to do."

Column: Don't let company loyalty fry your nest egg 07/26/08 [Last modified: Monday, July 28, 2008 4:06pm]
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