In spite of the economy, GM and Ford enjoyed a good year in 2011.  GM’s profit last year was $9.2 billion and Ford’s was $20.2 billion.  That’s no chunk change.

So, what better time than now to reduce some of the riskier items on their books?  Along those lines, both companies are implementing pension buyout programs this year.  GM retirees must choose to accept a buyout by July 20 and Ford has a cutoff date around November.  Those who refuse the buyout will have their pension accounts transferred to the insurance company, Prudential Financial.  Those retirees will be set up with an annuity program.  Retirees who take the buyout will be issued a fat check and what they do with it is on them.

Many of the retirees are in an uproar, seeing this as an ethical breach; the company is falling down on its commitment.  On the other hand, is it ethical to all shareholders, employees, and customers to maintain a pension program that is no longer in the best interests of business success?

GM and Ford are sharing the risk they once kept to themselves.  Not only does this put the retirees in charge of their assets, it is a major step to ensure company solvency.  And it’s not as if the retirees have zero options; they can take the buyout and become their own money managers or they can accept the transfer from the pension to the Prudential Financial annuity.  The sky is not falling here.

Granted, these kinds of decisions are never easy or simple.  But from a risk-management perspective, they are necessary.  Wise companies and wise individuals will recognize them for what they are and make the best of them.

And hey—no one ever promised us a life without risk.

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About James Meadows

Currently I serve as a training team manager for Johnson Controls at a customer-care center in Kansas City. Additionally, I am a business consultant, a freelance corporate writer, an Assembly of God ordained minister, a Civil Air Patrol chaplain, and a blogger. I believe we are living in the most fascinating times of human history. To maximize the opportunities these times present, I have a passionate interest in leadership development and organizational success, both of which I view as inextricably linked.

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