November 22, 2011

SEAGATE CEO PREDICTS MAJOR SUPPLY-CHAIN DISRUPTION

SmartBrief on Leadership
Seagate Technology's factories in Thailand escaped the country's devastating floods almost unscathed, says CEO Stephen J. Luczo, but many of its 130-odd suppliers are still underwater. It will take time to find other sources of parts. Bloomberg Businessweek

NAM RETIREMENT SECURITY TASK FORCE UPDATES PENSION BENEFIT ACTIVITIES AND CONCERNS
Carolyn Holmes Lee, Senior Director, Tax Policy, NAM
The NAM over the past several months has worked with an informal coalition of companies, associations and organizations in lobbying the bicameral and bipartisan Congressional leadership as well as Super Committee member offices on the issue of pension plan premiums which were being discussed during the Super Committee's negotiations.

As you may know, the Pension Benefit Guaranty Corporation (PBGC) has proposed that lawmakers raise the premium amount that companies pay to fill what the PBGC calls their long term funding deficit, which we recognize is mostly a result of today’s artificially low interest rates. Our efforts have focused on 3 messages:

1) increases in pension premiums (potentially up to 2x or 3x of what some companies now pay) would be a huge burden for companies and would pull resources away from other priorities;

2) that the PBGC's funding deficit is due to the low interest rates and is not an accurate measure of the actual funding status since rates are artificially low, and;

3) if Congress decides to review the issue of premiums then it should be part of a comprehensive review of PBGC and Congress should also consider a proposal written by the American Benefits Council which would alter the interest rate used to determine funding obligations from the current interest rate to one that looks at historical interest rates - which would smooth out the fluctuations in interest rates and be a more sound and less volatile basis for companies to base their obligations on.

In late October, we also worked with the informal coalition to circulate a sign-on letter to the Hill to our members opposing PBGC premium increases and which also references the need to stabilize pension funding rules and cites the impact of artificially low interest rates on pension plans. We appreciate all those companies and organizations who signed on - in all there were over 85 signatories on the Nov. 2nd letter. That letter can be found here.

The increase in PBGC’s premiums was originally included in the President’s FY12 Budget Proposal this past March and that proposal indicated they were seeking a $16 billion increase in premiums to the PBGC. In April, the NAM joined a number of other associations in sending a letter opposing this proposal to the Chairmen and Ranking Members of the Senate Finance and Health, Education, Labor and Pensions (HELP) Committees. That letter can be found here. The business community also sent another here to the full Congress on the topic in June.

Status: Now that the Super Committee has announced that it will not be able to agree to a deficit reduction package, the immediate threat of increased PBGC premiums has passed. We were particularly concerned in the context of the Super Committee because raising premiums would count as raising revenue for the Treasury and therefore was reportedly considered by some on the Super Committee as a way to raise some revenue as they sought to draft a package.

Outlook: While the immediate threat may have passed, because the PBGC proposal is already part of discussions and it is considered to be something that would raise revenue and thus can be used as an “offset” for other spending, this is likely to be something that we will need to continue to lobby against into the New Year. The NAM will work with our members and other associations to continue to educate policymakers as to the burden of increased premiums, the cause for the funding shortage and the need for funding stabilization. We will continue to look for your support in our efforts and will continue to update members as to our activities and developments.

EQUIPMENT FINANCERS MORE CONFIDENT ABOUT ECONOMY
Quick Manufacturing News
According to the Equipment Leasing & Finance Foundation's November 2011 Confidence Index, confidence in the equipment finance market is 57.4 -- up from the October index of 50.7. Click to continue

FEATURE: REBALANCING GROWTH WITH MORE INVESTMENT
Today in Manufacturing
A report says that investment in businesses will drive economic growth, but companies are still shaky about another recession ... continue

Q&A: THE STATE OF MATERIAL HANDLING TODAY
Today in Manufacturing
Nick Wilson, CEO of Morrison Container Handling Solutions, has seen material handling change drastically since 1971, like speeds increasing four times ... continue