Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Politics : Formerly About Advanced Micro Devices -- Ignore unavailable to you. Want to Upgrade?

To: tejek who wrote (438617)	12/5/2008 6:50:14 PM
From: Joe NYC	Read Replies (1) \| Respond to of 1574152

Ted, Legacy costs are not costs incurred making the car itself. They are overhead costs like the rent on an office building or factory......they can not be attributed to the current labor force at GM. You are confusing things again. Look at David's posts on what legacy costs are, and how they figure into the $73 cost. No it is not. The UAW has agreed to change the terms of that contract. "Agreed to" verbally means nothing. The existing contract is still in effect. Joe

To: tejek who wrote (438617)	12/5/2008 9:14:48 PM
From: i-node	Read Replies (2) \| Respond to of 1574152

Legacy costs are not costs incurred making the car itself. They are overhead costs like the rent on an office building or factory......they can not be attributed to the current labor force at GM. "Legacy cost" is not a technical term; it is a term that is defined by the reporting entity. HOWEVER, I believe you are confused about what they have defined it to mean. "Legacy cost" as used in this context refers to direct labor costs that are not current service costs. That is, they relate to retirement and pension benefits for workers who are no longer active. They are STILL properly classified as direct labor costs, as these are ongoing charges against production. Normally, such costs are accrued as of the end of each accounting period so that you don't have "legacy" costs. However, when a new deal is struck with UAW which requires them to pay additional benefits for employees who are no longer producing vehicles, the costs are required to flow through as cost of sales, they become part of current inventoriable cost, and are expensed as the inventory is liquidated. Internally, they can cost inventory any way they want to -- that is, for manufacturing cost accounting. But for financial reporting purposes, legacy costs must flow through just as other direct labor costs do. I don't know where you got the "rent on a building" thing; this is not direct labor cost or for that matter, labor cost at all -- it is usually G&A but could conceivably be reported elsewhere in a business this size. At any rate, I don't think you have any understanding of what they mean by legacy costs. Predominantly, these costs as defined by GM are pension and health care cost for former employees.