Rampant, undisciplined short-term thinking is what did GM in, and no one should really be shedding too many tears over it, in my opinion.
For decades, GM management negotiated with the UAW by trading future retirement benefits for concessions on current hourly wages. This was a natural thing to do if your eye is on the current numbers and you aren't going to be around for the long run anyway, right? You just pass the problem on to the next generation of managers.
If, through the years, GM management had been required to fund these future retirement promises by putting aside current investment capital, then there would have been no problem. But this would have defeated their main purpose, which was to trade off future obligations in return for current favors. So as a result, much of these future obligations are unfunded.
In the end, it was nothing more than a Ponzi Scheme. As long as GM kept hiring more and more employees, there would be no problem. Unfortunately, this just can't happen forever. And, not unlike what happened to Bernie Madoff, once GM's numbers turned down a bit, the scheme was busted.
One analyst points out that in 1962 GM had one retiree for every 11 employees, while today it has more than FIVE retirees for every single current employee! Those retirees are receiving average compensation of nearly $40,000 each, plus medical benefits, and they are living ten years longer, on average, than they did in the 1960's.
But you want to know the scariest thought? Social Security and Medicare operate in the same way, and are even more underfunded than GM's retirement program!
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