Washington is proposing new rules regarding the funding of pension plans, including how fast underfunding plans must be brought back into balance. This reform has automakers and suppliers rather scared, as the auto industry is collectively thought to have underfunded pension liabilities of $45-50 billion (that may be an gross underestimate, given what GM alone might owe). Any plan that forces those plans to be funded more quickly will cause a further erosion of profits - you know, profits that don't currently exist. The federal Pension Benefit Guaranty Corp. was created to cover such liabilities in case of default, but it also faces a huge underfunding situation that could leave us taxpayers on the hook for tens of billions of dollars, thanks to pie-in-the-sky return-on-investment assumptions and poor business decisions. Interestingly (and ironically) enough, the PBGC was created after the fall of Studebaker-Packard - I didn't know that until reading the linked article.

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