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    Highlights—February 11, 2006

  • Wall Street Journal: GM's Decision to Cut Pensions Accelerates Broad Corporate Shift. Benefits Curb Follows Path of Other Companies On Worker Guarantees. The End of Retirement? By David Wessel, Ellen E. Schultz and Laurie McGinley. Excerpts: General Motors Corp.'s move to dilute salaried workers' pensions and make them shoulder more medical bills in retirement is a milestone in the erosion of a deal big American companies struck in the prosperous years following World War II: They promised to provide loyal employees with a comfortable retirement free of worry about running out of savings due to old age or ill health.
    "Our employer-based social-welfare system is collapsing," says Alicia Munnell, director of Boston College's Center for Retirement Research. "GM itself is not a big deal. It's GM on top of Verizon and IBM" -- which both recently froze some of their pension plans -- "and then there's everything that's happening in weak companies like airlines." [...]
    International Business Machines Corp. last month told 117,000 workers in U.S. defined-benefit pension plans that they will stop earning additional benefits after 2007, saving the Armonk, N.Y., company more than $2.5 billion over five years. And in December, Verizon Communications Inc., New York, announced it was freezing the pensions of 50,500 managers, saving $3 billion in the coming decade. Workers at both companies still will get pensions at retirement but won't accrue benefits with additional years on the job. Circuit City Stores Inc. and Sears Holdings Corp. have done the same. [...]
    Health-care systems in some countries, such as the United Kingdom and Canada, are financed through general tax revenue. In Germany and several other European countries, all employers and employees pay for health care through a payroll tax. The per-person health-care tab is smaller, and the systems provide universal coverage. "Retirees aren't singled out as a separate category," Mr. Hoskins says. "They are part of the pool of workers. That provides certain advantages, because you can spread the cost between the active and inactive, and the sick and the healthy. You are spreading the risk so it doesn't fall so heavily on any one employer." (If link is broken, view Adobe Acrobat version [PDF--58KB].
  • Yahoo! message board post: "Sam's Pension" by "ibmmike2006". Excerpts: You can find this information in the IBM Stockholder's 2005 Proxy statement on Page 20 in the table 2 Supplemental Executive Retention Plan (SERP) chart. http://www.ibm.com/annualreport/2004/annual/proxy.shtml links to: ftp://ftp.software.ibm.com/annualreport/2004/2005_ibm_proxy.pdf
    It appears Sam will be making $5 million at age 60 to get his $3.8 million a life pension or $10,000 a day projected based on 2004 wages. He could, if the board grants him increases, as much as $8.125 million a year pension or $22,265 a day pension for life. Let's hope the IBM board of directors acts responsibly and keeps Sam's pension to $10,000 a day. Boy would I feel ripped off if he was getting $22,265 a day. I figured that, if Sam were to retire at age 60 with 35 years of IBM service and get the $8.125 million, he would probably live to age 85 and receive over $300 million in that 25 years of retirement from his SERP defined benefit pension plan. [...]
    Oh, only $165,000 annually comes out of the IBM pension trust fund per a law from Congress, the rest will come out of the Company profits and General Fund annually. Of course, with the freezing of the IBM pension trust fund, that should be no problem. The surplus money that will not go to regular IBM retirees cost of living adjustments can be funneled out of the IBM Pension Trust fund to pay for Sam's pension because there will be enough Trust surplus to fund the IBM profits and General Fund to pay for Sam's non-qualified SERP from the interest in the $48 billion IBM pension trust fund. That coupled with raising health insurance premiums retirees have to pay annually, should do the trick.
  • BusinessWeek: K Street's Heavy Hitters. The top 20 companies with in-house lobbyists. Excerpts: These are the companies that employ the greatest number of in-house lobbyists on issues involving the federal government, according to the Web site www.lobbyists.info, which tracks lobbying data. (Editor's note: IBM is listed in third place in terms of the number of government lobbyists).
  • AlterNet: Trouble in Cubicle Nation. By Joe Robinson. While big business racks up historic profits, workplace life is becoming more unbearable for the people who make the products and services. Excerpts: It was a great year for labor -- if you worked at a call center in India, made your living as a CEO or sold real estate to big-box stores. But deep in Cubicle Nation, the average American worker remained on a fast track to the Industrial Revolution, with soaring workweeks, declining wages, and health, pension and vacation benefits vanishing faster than you can say job security.
    Add to the siege outsourcing, cutbacks, the dismantling of ergonomics rules and forced overtime -- all while business is racking up historic profits, the most in 75 years -- and even a nearsighted dingo could see that the trends are unsustainable for families, personal health, company medical plans or an informed and involved citizenry. And completely unnecessary.
    As all the productivity research shows, we can get the job done without finishing ourselves off. So let's fire some of the worst habits that got us here and ring in resolutions for a sane workplace in 2006...
  • New York Times: Benefits Go the Way of Pensions. By Eduardo Porter and Mary Williams Walsh. Excerpts: For those who were counting on G.M. to care for them for life, the company's recent moves to pare back, in different ways, the pension and health benefits of union and nonunion retirees amount to a breach of a promise that was at the core of the nation's labor relations for much of the post-World War II era: workers would give their productive years to the company; the company would care for workers when they got old.
    "The thing that annoys me about G.M. is that when I retired I had a letter that said I would receive health care for life at no cost," said Chester Clum, 79, a former sales and service manager at G.M. who retired in 1981 after 38 years of service. "They never brought up that they could change that at will." [...]
    Companies have also noticed that, in many cases, offering a secure retirement package is no longer essential to attract formidable younger talent. I.B.M. found this out after closing its pension plan to new hires in December 2004. It hired about 7,500 employees last year, and observed that none of them seemed perturbed to be getting a rich 401(k) plan instead of the pension plan that was closed to them. [...]
    Given all the flux in today's corporate environment, many workers — especially younger ones — are rolling with the punches. According to a survey in 2004 by the Employee Benefit Research Institute, only 5 percent of workers consider retiree health care to be their most important benefit, and only 4 percent put a defined-benefit pension at the top of the list. And 9 percent put either of these benefits in second place.
    • "west_coast_retired_guy" comments. Full excerpt: It would have more interesting to see how many of those which were offered a job by IBM and then turned it down did so at least partly due to IBM's lack of a defined benefit program. By only referring to the opinions of those that actually took the job (it must be noted that their statements may not be accurate in any case), they've heavily biased the result.
      Times have changed a lot since I was last looking for a job, but I know I did pick the company I went with to a large extent due to its very rich defined benefit program and other health and 401K benefits (a much better 401K than even IBM's new one--they had a 4 to 1 match on the first 3% of your contribution along with a better health plan and defined benefit program than IBM had even in 1991), since these benefits were heavily tax advantaged and very meaningful to me at my then age.
      If a company is essentially only hiring young employees, I accept that few will pay much attention to a defined benefit program. But if you're trying to hire older professional workers, its going to make a significant difference to most of them.
  • Yahoo! message board post by "Mike Germano". Full excerpt: You don't get it. It's a con game. The economy is doing great everywhere except where you are, so you figure your area must be an exception. But, in reality you have plenty of company in areas with people who are not doing well. The GNP is doing well between large corporations, war chest spending, and the very rich reaping big dividends, so the per capita as an average looks and sounds great looking at the big picture. Meanwhile a bit lower to earth, local and state taxes keep going up to cover federal mandates and other shortages to the states and costs in general are going up. People are being outsourced and getting re-employed at lower wages. Personal debt and bankruptcies are increasing at alarming rates and personal savings are non-existent. The only "savings" for the future people have are their pensions, 401(k)s and IRAs and those are in in the gun sights for the next round of pillaging. So, yes, the economy is getting much better, but the peasants have to watch the big party from outside in the cold since they can't afford the price of admission.
  • Yahoo! message board post by Janet Krueger. Full excerpt: You left out the people who are actually doing things outside these boards. Yes, I know you don't believe they exist, but that's ok; your cries of doom aren't making them stop!
    Congress has been hijacked by corporate lobbyists who have convinced many of our senators and representatives that the only way to 'save' our voluntary American pension system is to weaken ERISA (the Employee Retirement Income Security Act) to a level that allows corporations to do anything the please to our pension trust funds.
    Since we do not have large amounts of funds at our disposal, the only way to counteract this insanity is with our voices and our votes.
    Have you written a letter to the editor of your local paper within the past month? Have you written to your representative and senator in Washington? Have you called and left a phone message about how angry you will be if they make it possible for companies like IBM to legally reduce the pension checks of their retirees?
    If the answer to any of those questions is no, then there is something you could do that would be much more constructive than spreading the message of the old prophet in Ecclesiastes to these boards... Following are the talking points I recommend using when you ACT:
    1. We are concerned about upcoming pension legislation in both houses of Congress as it could seriously hurt workers. We want Congress to strengthen ERISA pension protections, not weaken them.
    2. Early retirement subsidies, once vested, and especially once being collected, need to be fully protected.
    3. Plans that are underfunded need to be fixed by forcing companies to increase their contributions to those plans, NOT by forcing them to cut benefits to current and future retirees.
    4. Do not reduce the size of a lump sum distribution that can be offered in place of a promised annuity. Make sure the promised annuity stays an option.
    5. Strengthen plan termination rules so that excess funds have to be used for the sole benefit of plan participants and cannot be returned to the company or to the corporate executives.
    6. Currently, neither the house nor the senate bill retroactively legalizes cash balance conversions. We will be outraged if we lose a large share of the Cooper settlement because Congress retroactively legalized what IBM did. If Congress must legalize cash balance conversions, they should include all of the protections for older employees that are in the senate bill.
  • Washington Post: Health Savings Accounts Aren't Immune to Risk. By Albert B. Crenshaw. Excerpts: But while costs to employers may be restrained, it remains to be seen whether the plans truly curb overall costs. That is because they have another, less obvious feature: risk shifting. In traditional health insurance, the insurer -- or the employer, which is actually the insurer in the case of most large companies -- picks up most of the costs after a typically modest initial deductible is satisfied. [...]
    Then, too, there is the question of how much tax-preferred savings Americans can afford. Already we have 401(k) plans and IRAs for retirement and 529 plans for education, which, fully utilized, allow families to put aside tens of thousands of dollars into deductible or tax-free accounts. Indeed, the total of possible tax-preferred savings far exceeds many families' entire income, let alone the amount they can afford to save.
    On the other hand, HSAs clearly make sense for healthy, well-paid workers, especially young singles. They offer another tax benefit that, over the years, could really add up if the owner is healthy enough to avoid tapping it.
  • USA Today: Health accounts would eat up savings. Costing $59B over five years, accounts offset changes to Medicare. By Julie Appleby. Excerpts: President Bush's proposal to expand tax-free health savings accounts would cost the U.S. Treasury $59 billion over five years, more than offsetting the savings he seeks from limiting the growth of Medicare. Bush promoted health savings accounts in his State of the Union speech last week to help control growing health care costs. [...]
    Critics, including the Consumers Union, say the accounts benefit mainly the healthy and wealthy and could drive up costs for others. The $59 billion cost estimate has raised concern among some conservatives who support the accounts. Joseph Antos of the American Enterprise Institute said he likes the idea. But “to me, that's a considerable amount of money,” he said. “This is a more expansive proposal in terms of committing federal resources to health care than one could have anticipated from the State of the Union address.”
  • Chicago Tribune: Bush's Rx for insurance: Buy your own. By John McCarron. Say good-bye to your group health insurance. OK, maybe not right away. Your employer may stick with your plan for a few more years. Don't toss out that health-care card just yet. But if you've been following the business news lately, and if you paid close attention--very close attention--to President Bush's State of the Union address, you may hear a distant knell for the way most Americans get their health insurance. [...]
    So the race is on to limit corporate exposure to runaway health insurance costs. And sure enough, President Bush has a plan. In his address, the president said government has a responsibility to "help people afford the insurance coverage they need." The way to do that, his aides later explained, is to "level the playing field" so folks who buy their own insurance get as good a deal as folks who join their company's plan. Sounds reasonable. But details of the proposal, released by the Treasury Department, are causing quite a stir among the fraternity of insurance wonks who understand the implications. [...]
    Bush would let that family sock away $10,500 per year tax-free. Moreover, they could claim a tax credit equal to 15.3 percent of the amount they deposited. But it gets sweeter. If the worker buys his own high-deductible insurance policy, rather than one offered at work, the premiums he pays would be fully tax-deductible and eligible for the 15.3 percent tax credit. [...]
    So what's wrong with this picture? What's wrong with encouraging workers, and their employers, to opt out of group insurance and go it alone ... with large amounts of help from Uncle Sam? Plenty, according to the Center on Budget and Policy Priorities, a Washington-based think tank. You can read its analysis online (www.cbpp.org), but an abbreviated list of horribles goes like this:
    • If, as expected, the healthiest and wealthiest leave the group insurance pool, premiums will shoot up for the not-so-healthy and not-so-wealthy. That's if they can find a plan that will take them. What insurance company is going to want your diabetic wife or disabled child?
    • If, as expected, small-business owners, many of whom earn too much to qualify for a tax-deductible IRA, opt for the Bush HSA, which has no income limits, won't many owners simply do away with their company's group plan altogether? What's good for the boss must be good for the workers, right?
    • If, as the free-market theorists predict, people with high deductibles "shop around" for bargain health care and forgo "unnecessary" care, how are folks to decide what and when care is necessary, much less where they'll get the most for their money? Surf the Internet? Thumb the Yellow Pages? So much for your primary-care physician and his or her trusted referral network of specialists.
    No, what we have here is another Texas "two-fer," a combo better than $3 gasoline and lower taxes on capital gains. What we have here is the fig leaf behind which corporate America will walk away from group health insurance, along with the sweetest tax shelter ever invented for the fortunate few with six-figure incomes. RIP, group health insurance.
  • Yahoo! message board post by "ibm_r_crooks". Excerpt: Take a look at the picture on the Jobs at IBM web site http://www-1.ibm.com/employment/ That picture tells you all you need to know about Diversity at IBM. Male OK Female OK Asian OK African OK White OK Middle Eastern OK Over 40. Forget about it. (Heck, none of the women in the picture look over 30)
  • Yahoo! message board post by "gp1200x". Excerpts: There are many in my group (25-30 years) that will be leaving soon since most do not want to hang on once they can find a way to leave. I left last month and found out two more longtime co-workers I knew left...all before hitting the 30 year mark. I am curious to see what happens to IBM in 5 years when most of the large group hired in the late 70s start leaving.
    IBM has increased utilization and quotas to a point where it is physically impossible to meet the goals even working overtime and weekends. They didn't cut salaries for many the last few years but raised the bar to the point where you had to work extra hours every day and put in time on the weekends just to get the work done. I billed customers more than 2000 hours last year and was basically asked to bill even more. So any vacation time and holidays usually had to be made up at night or weekends to meet the quota (most travel time I had to eat). It's getting worse every year and young workers will put up with it for only so long before they find another opportunity, and IBM is going to have little to fall back on now that they angered the long time employees.
    Out of the 12 hires that I know of over the last 5 years, only 1 is left. I think IBM will eventually be comprised of short timers. I am curios to see what happens to the company when times get rough again since since there is no loyalty anymore to IBM.
  • Yahoo! message board post: "Boehner Rents Apartment Owned by Lobbyist in D.C." by "fhawontcutit". Excerpts: Boehner was Chairman of the House Education and Workforce Committee. Here is the "fact sheet" on HR2830 which Boehner helped push through. "Fixing Outdated Pension Rules to Strengthen Worker Retirement Security, Protect Taxpayers".
    Note the following:
    "The bill helps resolve legal uncertainty to ensure hybrid plans such as cash balance pensions, which offer portable benefits that allow workers to earn more generous benefits steadily throughout their careers, remain a viable part of the defined benefit system."
    I guess the rules that protect against age discriminatory cash balance plans are the "outdated pension rules" that Boehner felt needed to be fixed.
  • Bloomberg: U.S. Health-Care Cure Isn't Tax Breaks. By John Wasik. Excerpts: It's clear that unless the U.S. health-care system is repaired and brought under control, companies and individuals alike won't be able to afford medical care, and U.S. companies will be even less competitive in a global marketplace. And the myth that ever-higher spending on health creates a better quality of medical care isn't accurate, either. The U.S. system is the world's highest-spending per capita, at $6,280 in 2004. Yet it ranks 33rd in total quality, according to the Geneva-based World Health Organization. That's two places above Cuba.
  • New York Times: Will Your Money Last? Excerpts: Americans spent more than they made in 2005, sending the personal savings rate into negative territory for the first time since 1933. Government and business should be alarmed. Many Americans do not seem to believe they are living beyond their means, as long as the value of their houses are rising. But spending freely while the house appreciates is not saving for the future. It is betting that boom-time gains will last indefinitely. They will not. Meanwhile, traditional corporate pension plans are disappearing; half of the people with 401(k)'s have saved less than $20,000; and about one-third of households have saved nothing for retirement.
  • Computer Business Review: IBM ramps up outreach to Russian developers. Excerpts: According to Cathy Mandelstein, IBM director of developer relations, interest is huge. "We began conducting briefings last year and saw turnouts as high as 500 to 750 developers at each session, which was very high," she said. IBM plans to target 65 cities across Russia and work with 400 universities in curriculum development, focused heavily on open source. It already has an innovation center in Moscow that has worked with roughly a hundred partners to port and localize software.
  • Daniel Gross, A Moneyblog: Bushonomics. Excerpts: The death knell for the traditional company pension has been tolling for some time now. Companies in ailing industries like steel, airlines and auto parts have thrown themselves into bankruptcy and turned over their ruined pension plans to the federal government. Now, with the recent announcements of pension freezes by some of the cream of corporate America - Verizon, Lockheed Martin, Motorola and, just last week, I.B.M. - the bell is tolling even louder. Even strong, stable companies with the means to operate a pension plan are facing longer worker lifespans, looming regulatory and accounting changes and, most important, heightened global competition. Some are deciding they either cannot, or will not, keep making the decades-long promises that a pension plan involves.
    And here’s the kicker: For many workers, the movement away from traditional pensions is going to be difficult. Already there are signs that people are retiring later, or taking other jobs to support themselves in old age. Participation in a pension plan is involuntary, but most 401(k) plans let employees decide whether to contribute any money - or none at all. Research shows that many people fail to put money into their retirement accounts, or invest it poorly once it is there.
    Even skillful 401(k) investors can be badly tripped up if the markets tumble just at the time they were planning to retire. Mr. Schieber of Watson Wyatt ran scenarios of what would happen to a hypothetical man who went to work at 25, put 6 percent of his pay into a 401(k) account every year for 40 years, retired at 65, then withdrew his account balance and used it to buy an annuity, a financial product that, like a pension, pays a lifelong monthly stipend.
    He found that if the man turned 65 in 2000 he would have enough 401(k) savings to buy an annuity that paid 134 percent of his pre-retirement income. But if he turned 65 in 2003, his 401(k) savings would only buy an annuity rich enough to replace 57 percent of his pre-retirement income.
    When a company switches from a pension plan to a 401(k) plan, the transition is hardest on the older workers. That is because they lose their final years in the pension plan - often the years when they would have built up the biggest part of their benefit. They then start from zero in the new retirement plan.
    Jack VanDerhei, an actuary who is a fellow at the Employee Benefit Research Institute, offered a hypothetical example. If a man joins a firm at 40, works 15 years, and is making $80,000 a year by age 55, he might expect to have built up a pension worth $16,305 a year by that time, Mr. VanDerhei said. If he keeps on working under the same pension plan, that benefit will have increased to $27,175 a year when he retires at 65.
    But if instead when the man turns 55 his company freezes the pension plan and sets up a 401(k) plan, the man will get just the $16,305 a year, plus whatever he is able to amass in the 401(k). It will take both discipline and investment skill to reach the equivalent of the old pension payments in just ten years, Mr. VanDerhei said.
    We're in the midst of (1) a giant cram-down, in which companies are simply walking away from promises they've made to workers; and (2) what amounts to a giant experiment that 401(Ks) will be successfully retirement-planning vehicles. Combined, they are making people feel more financially anxious--no matter what the unemployment rate alleged tells us about the job market.
  • Washington Post: Bush's Social Security Sleight of Hand. By Allan Sloan. Excerpts: If you read enough numbers, you never know what you'll find. Take President Bush and private Social Security accounts. Last year, even though Bush talked endlessly about the supposed joys of private accounts, he never proposed a specific plan to Congress and never put privatization costs in the budget. But this year, with no fanfare whatsoever, Bush stuck a big Social Security privatization plan in the federal budget proposal, which he sent to Congress on Monday. [...]
    Then he seemed to be kicking the Social Security problem a few years down the road in typical Washington fashion when he asked Congress "to join me in creating a commission to examine the full impact of baby boom retirements on Social Security, Medicare and Medicaid," adding that the commission would be bipartisan "and offer bipartisan solutions." But anyone who thought that Bush would wait for bipartisanship to deal with Social Security was wrong. Instead, he stuck his own privatization proposals into his proposed budget.
  • New York Times: Ford Offers Severance Option to Workers. Excerpts: Ford Motor Co. is offering buyouts of $100,000 each to workers who lose their jobs to plant closures if they agree to give up all benefits except their pensions. The severance option is among five being proposed to workers as Ford moves ahead with its plan to close 14 plants by 2012, a move that will affect roughly 30,000 employees. [...] Under Ford's current agreement with the UAW, which expires in 2007, the company can't permanently lay off workers without continuing most of their pay and benefits. [...]
    Besides the $100,000 buyout, other offers include a tuition reimbursement program, two early retirement programs and a preretirement leave program for those just short of the 30 years needed to retire. Workers opting for the tuition program will receive up to $15,000 per year for four years along with medical benefits and half their regular pay. [...]
    The first retirement option, for workers 55 and older who have 30 or more years of service, offers $35,000 and full retirement benefits to those who retire immediately. The second retirement option, for workers 55 and older who have 10 or more years of service, offers a lifetime fixed income that is lower than that offered through the regular retirement program. The preretirement program, for workers with at least 28 years of service, offers those who agree to take leave 85 percent of their pay until they reach the 30-year mark.
  • Communications Workers of America: Medicare Drug Scam Revealed. Excerpts: The Medicare drug benefit introduced January 2006 is shaping up as the single most cynical scam perpetrated by the Bush administration and GOP lawmakers on American consumers, according to many health care professionals. Designed to provide relief to senior Americans from rising prescription drug costs, the measure has turned into a boon for drug makers and health insurers. Immensely profitable pharmaceutical companies are reaping billions in subsidies from taxpayers to provide the benefit.
    The legislation also complied with drug industry demands that Medicare be prohibited from negotiating with manufacturers for lower drug prices, the only program in which the federal government is prevented from using its huge buying power to negotiate pricing with vendors in order to save taxpayers' money.
    Among those helping the industry pass the bill was Rep. Billy Tauzin (R-Louisiana), whose committee on energy and commerce oversaw Medicare. After the bill passed, Tauzin soon quit Congress to become president of the Pharmaceutical Research and Manufacturers of America, big Pharma's Washington lobbying group, at a huge salary. The program's implementation, meanwhile, was handed over to commercial health insurance companies to administer the government program for a profit with indifferent oversight from the Bush Administration. [...]
    Taxpayers, of course, are left holding the bag for what is now estimated to be a $700 billion program. The Bush administration sold the Medicare drug bill to Congress in 2003 by estimating its cost at less than $400 billion over 10 years. Scarcely a month after its enactment, the White House issued a new estimate: $535 billion. It soon came to light that Richard Foster, Medicare's chief actuary, had known of the higher estimate, but had been threatened that he'd be fired if he warned Congress before the vote.
  • ZD-Net India: India fastest growing market for IBM. Excerpts: IBM India on Thursday said that it had recorded a stupendous 55 per cent in its topline growth in 2005 as against 45 per cent recorded in 2004, making this the fastest growing region for IBM. However, it declined to reveal specific financial figures. Dataquest reported a turnover of Rs 4,219 crore for IBM in 2004-05. Going by the, IBM's turnover in Indian during calendar 2005 should be around $1.5 billion. The company added 16,500 people during 2005, taking its India strength to 38,500. With this, IBM's workforce in India is its second largest in the world, after that in the US.
    According to industry estimates, close to 50 per cent of the workforce is in business transformation outsourcing, a practice which IBM ramped up by acquiring Daksh during early last year. [...]
    "India is also a major hub for IBM, along with China and Brazil, in housing major global delivery centres as its drives down costs and adds value for its global customers," added Annaswamy. The launch of the Application Management Services centre in Hyderabad, infrastructure management facilities in Bangalore, India Research Lab in Bangalore and IBM Daksh centres in Pune, Chandigarh and Kolkata have underlined IBM's India focus and growing business strength.
Vault Message Board Posts
Vault's IBM Business Consulting Services message board is a popular hangout for IBM BCS employees, including many employees acquired from PwC.
  • "Other options" by "wonderaboutibm". Full excerpt: But you have not considered reinvestment in the business (considering the cost to IBM of stock buybacks). Using any reasonable return on capital rate over the past ten years, that net 67b has present value closer to 100b. In terms of magnitude, that's more than IBM's annual revenue and double the total pension fund balance (that IBM claims is too expensive to bear.) In BCS, there has been virtually no training or professional development since 2001. That would have eaten only a small portion of the 67B thrown at Wall Street, and its ROC would have met IBM financial requirements. But instead, IBM has weakened its BCS workforce -- and therefore its business fundamentals -- all at the alter of stock buyback. And to look at the numbers, the buybacks, if anything, are accelerating. The buybacks no longer even inflate the stock price, though they are probably propping up the price in its present narrow trading range.
  • "How about investing in" by "Dose of reality". Full excerpt: ...people, "our most valuable asset"?! This is a services business - shouldn't we invest in our service providing capabilities? That's not too much of a stretch is it? Although technically you can't capitalize investments in people, from a cash flow perspective, you can perform the same kind of racking and stacking CAPEX analyses. How about asking these kinds of questions:
    1. If we invest another $250 million in annual compensation & benefits of the top 10,000 performers, how much incremental revenue and GM will they produce?
    2. How much will we save in recruiting & resource ramp up costs? (How about 75k average salary times 25% recruiting/ramp up cost times 7500 employees = $140mm?)
    3. What is the impact from increased productivity and utilization?
    4. How many fewer under water projects will we have?
    5. How much more repeat business will we get?
    6. How many clueless BD resources can we offload?
    7. What capabilities do we lack? What kind of industry, application or technical expertise is the market willing to pay for?
    The repurchase decision resulted from a lack of imagination and business acumen. It is the corporate equivalent of buying a money market fund in an equity bull market!
  • "Requiem for a Heavyweight" by "Tom Musto". Full excerpt: As Jackie Gleason tells Anthony Quinn - "We can't make money winning any more so we might as well make some money on the losing." The Blue Pig only makes money for its Mafia. The rest of us have to play the short side of the market. Telling the facts on this board helps get the truth out about IBM. The spinmeisters like IGSFinance are treading awfully close to Enron-style lawbreaking. Remember the flak Old Project Manager got last year for telling the truth about the Sprint Deal? Now that the contract is on the skids does anyone hear those apologists? As Ryan hurst says "Who's stupid now?"
  • "When is a heavyweight not a heavyweight?" by "Dose of reality". Full excerpt: That's what happens when deal-makers, soap salesmen, and FUMU's are consistently selected for advancement. You get commercially suspect, untenable fiascos that no one is willing to stand behind. Business is not that hard until you introduce unfettered human nature into the equation.
  • "IBM for 2 years" by "Graduate_2004". Full excerpt: Been working for BCS for 2 years... consistently disappointed with raise, bonus, and work environment.. but for some reason I have stayed for this long. This is the only company I've worked for out of college - so my question is... is it this bad everywhere else? I want to move somewhere that I feel rewarded, challenged, and that I'm constantly learning... my coworkers suggest that I get out of here while I can. Thoughts?
  • "Yours is a common plight" by "Dose of reality". Excerpt: Our entire resource management strategy relies on two fundamental precepts:
    • Candidate ignorance of what it is like on the inside and playing up the "luster" of the brand to lure them in
    • Mind-control of hired "mice" to get them to race around a virtual maze for some cheese that simply isn't there. Along the way we try to get you to believe that it is the same all over. If we get 3 years out of you, we are happy. All the while we use artificially limiting comparisons like "it is the same at ACN", as if that is the only other alternative you have. BTW, it is not the same at ACN, though it is no paradise there either.
    There are hundreds of excellent companies out there that are willing to pay good money for good people, and reward them for good work. The only reason to stay here is if you have no externally marketable skills. If you are in that category, then spend some focused time on upgrading your skills, forget about wasting effort trying to please your managers, and get out as soon as you can. The odds of finding a better career opportunity are about 90% Think much more broadly - well outside the big x consulting market. Companies have been doing a lot of insourcing of development and operations. The industry doesn't pay the same market premiums that we used to, yet the visceral desire to "get into consulting" is still there.

New on the Alliance@IBM Site:
  • Alliance@IBM: Attention IBM employees: IBM is blocking e-mail to and from the Alliance@IBM e-mail address endicottalliance@stny.rr.com from inside the company. Please send your job cut information and other correspondence from your home e-mail. You can also contact us the following ways: Phone 607 658 9285 or Fax 607 658 9283.
  • UK Union Amicus on IBM pension (PDF). The union says the pensions changes announced to its UK workforce will slash the pensions earned by employees and force people to leave the final salary scheme early. IBM to close final salary pension schemes by back door says Amicus.
  • PBC's and 2 "3"'s equal stealth job cuts. IBM employees are once again being forced out the door. If you are being forced out please contact the Alliance: endicottalliance@stny.rr.com from your home computer. Let us know your location, name, age and time of service. Information will be held in strict confidence. We will put you in contact with someone that can give you advice on challenging your force out.
  • From the Job Cuts Status & Comments page:
    • Comment 2/06/06: Dear ISC and Procurement employees, I am one of you but moreover I am the Massachusetts Representative of the Alliance@IBM. I was one of the very experienced procurement employees who trained his replacement from India. I am now dealing with my second resource action since 2003. Frankly, I believe each and everyone of you should fight the Resource Actions, file an appeal today with the Plan Administrator, at the address in your package. Read the Resource Action Tool Kit on the Alliance web site and by all means write to me if I can help you in any way.
      Whether you are in Massachusetts or anywhere else in the US. Furthermore, if you are dealing with a chronic or debilitating medical condition seek the support of the ADA, find out if you have a disability or discover if your disability is a reason for your termination. I have been speaking to many people at IBM who may be eligible for protection under the LAW. Talk to your local human rights commission, or state disability commission, they will direct you to the proper people.
      Let's not call it a resource action, or being laid off, we are being fired! Take these actions on the first day that you receive the "package". I did reject a severance payment a few years back and I received a few more years of pensionable earnings, I even reached my 25th anniversary. The struggle you undertake may be tough, use the resources of Alliance@IBM. The services of reduced attorney's fees are available for dues paying members. You also may want to look into the newest suit over OT. Join me at the Stockholders Meeting! Let's take a stand together. Join the Alliance! Steve Bergeron, IBM employee MA Representative at Large. Alliance@IBM MA Rep. @ Large-
    • Comment 2/06/06: I am another one of those who, after two 3 ratings, was offered a "mutual" separation package. I am also one of those who repeatedly gets calls from a contracting company to go BACK to IBM and do the same job, even in the SAME group for significantly less $$$. If my performance warranted poor performance ratings and a separation package, why would they want me to come back in any capacity other than to collect the trash (and there's plenty of that there)?? It's criminal and unethical what they do to people. -Anonymous-
    • Comment 2/08/06: I am another one of the 62 ISC Procurement employees who were "fired" rated a 3 twice as well, however was told it was merely a staff reduction. I am seeing an Attorney tomorrow, and I am filing an appeal. I encourage everyone to do the same. I wonder how many of us are women? Please contact the Alliance if you have ben fired as well. -Anonymous-
    • Comment 2/08/06: Guys, if you are certain that your job is going to be outsourced to India and like me were scheduled to train someone from India, look for a job and just bolt out. I feel soooo good, because I left IBM hanging, I am an owner of this critical program, that only I have a good understanding of, I was lucky enough to land another job quickly, and gave IBM only a 5 day notice and told them see ya, and good luck in training the person from India on my duties next month. Gave them a taste of there own back stabbing medicine. For me it was easy to just leave because I've been there 3 years and don't have all that pension and benefits vested yet. If possible we need to show IBM, that we can't just be undervalued to meet managements financial goals and I don't know how others feel about it, other than a teammate. I have no desire to give some foreign worker all the tips and insides and outs that I took years of experience to gain, through some stressful experiences and long hours on my own mistrials and research to get to where I am today. Best of luck to you all, missing the good ol IBM -Anonymous-
    • Comment 2/09/06: Ditto. When they told me I had to train my foreign replacement during my last 30 days, I only gave the basic information and withheld any extra info that wasn't already documented. As we all know, there are curves and fixes that occur, often, but not enough to document since they aren't repeatable enough and are unique to the situation. We handle those through our experience with tools and projects. Next time one comes up, my replacement will be screwed and really have to scramble to figure out how to respond. If IBM wants to call me back as a high priced consultant, they have my number, but I know they won't. They'll just throw more lower priced people at it until they cover all the holes I left. They screwed me out of a lot of retirement money and anything I can do to offset that by hurting their bottom line is fine by me. -Anonymous-
    • Comment 2/10/06: A few weeks ago, I was told, during my PBC review, that I was being placed on Notified Re-deployment. This, for those of you that don't know, is when you're told that your skills aren't needed in your group any longer and that you have limited time to try and find yourself another opportunity within IBM. Of course, that failing, you'll become part of the next resource action. Interestingly enough, my PBC review never covered my work for the past year, it referred to a project that I had problems with, 2 years ago and under another manager. It said that there were situations that I couldn't be assigned to because I was 'weak' in some areas and this held the whole team back. I've been on the same project, for over a year, and the overall PM hadn't even been consulted regarding my activity during the year. If I'm unable to find something, I intend to look into my legal options -Anonymous-
  • From the General Visitor's Comment page:
    • Comments 02/06/06: Good grief! Did you see the number of insider transactions for IBM for the last 2 weeks? Scary the way the execs are dumping their stock. I'm on of those (un)fortunate ones in Canada who with a PBC of 2 and being one of a few who won groundbreaking deals in 2004, got marched out like a criminal. Went to drop off my laptop on last day and saw bunch of kids with tattoos lining up for IBM access cards. Should I dump my stock now or remain forever hopeful? Maybe it's already too late! -Anonymous-
    • Comments 02/06/06: Since the pension debacle, from what I can see, most employees are simply going through the motions and could care less about the company or its results. Palmisano and this management team are in for a big surprise in the coming quarters because the majority of employees will do nothing for them. Why should they? IBM management has proven that they have utter contempt for the employee and employees are not important to good results. In the end, that will be the death nell. Expect Sam to be gone by the end of the year. -Anonymous-
    • Comments 02/06/06: IBM retirees should check their prescription drug plans. I called in during the enrollment period to change my plan from the old plan, for which they were now charging $251/mo. to the Medical/Prescription Drug Supplement at $37/mo. because the prescription only plan would cost much more than buying our prescriptions directly at full price. When I received my pension stub from Fidelity and my first prescription at the same time, I discovered that they had not made the change I requested. I assume this is a mistake on IBM's part and that they will correct it when I call in on Monday. However, the mistake is much to IBM's benefit. The $251/mo. charge is about 5 times the price of a commercial plan through AARP (United Healthcare) for a plan which, although different, is potentially better. Obviously, IBM is not paying any of the cost of the plan and probably is making a profit from it. They cannot legally reduce the amount of the pension, but they can do it indirectly by charging full price, or even excessive charges for benefits. I believe this is what they are trying to do.
      Each year, we receive a statement concerning the financial condition of the retiree benefit plans. Until a few years ago, this was accompanied by a statement that these benefits are part of your compensation as an IBM employee. Since this is true, they are retroactively reducing our compensation by denying these benefits. Why can't this be enforced legally? Also, I have an official publication of IBM (probably from about 25 years ago) which seems to infer that they will continue to provide benefits for life. When many of us started with the company around 1950, we were being told that we would have full medical benefits, paid by IBM, for life, both for ourselves and our spouse. Doesn't any documentation of this exist? Why can't this be enforced as a contract?
    • Comments 02/07/06: I am a procurement buyer that received a ratings of 2+ for the last two years. However, I received the resource call on 1/19. I also had to train an India replacement so that they could move my job to india. I ended up staying on for 1 1/2 years working with the india team as they can't do the job. I have been guiding them and fixing their mistakes. Now the support will crash once I am gone. Pay based on performance is just a slogan. It is not true in IBM. Customer support is horrible now that India is taking the jobs. Executives should be ashamed, they are slowly ruining the IBM name. Of course as long as they get their bonus all is well. -Anonymous-
    • Comments 02/07/06: If you respect employees, they become ambassadors of the business. If you disrespect employees, you have a dissatisfied customer for each person that they interact with outside of the organization. IBM - It IS possible to turn a profit without being disloyal to employees who stuck by you in thin times. It is a choice and if you make the right choice your vendors and business associates will applaud you for years for having the business acumen to succeed. Any company could succeed in the 1980s. IBM needs to model their treatment of people within the organization in order to have them treat customers likewise. To do anything less is just plain stupid and will ultimately result in negative organizational and financial consequences. -Anonymous-
  • Pension Comments page

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