Car manufacturers must have recognized methods approved

Car manufacturers must have recognized methods approved

In January the Security and Exchange Committee sent a letter to the chief financier of major automakers who informed them that their current accounting policies did not comply with generally accepted accounting principles. The SECs plan was to change these methods from retail finance and lease agreements. Instead the SEC wanted automakers to report these leases correctly in the future of the business and also present three year value of back information about previous effects.

Car dealers like Ford and General Motors now have to have their accounting methods approved by the Security and Exchange Commission before any employment benefits can take place anymore. But last year the automakers negotiated with United Auto Workers agreed to take a certain amount of money into a healthcare fund that would be responsible for pensioners in the healthcare industry. The result of this would be to remove these debts from their books. By having this argument between the SEC and companies automakers are the ones who know the effect of this problem the worst. For employees who work for a share of their funds given to them through health care it is important to know that these funds are available and sufficient. The past way meant that car companies had an advantage by having healthcare funds constantly available. With SEC crackdown on how these companies report car companies feel an effect.

According to the report the SEC does not consider that any accounting fraud has taken place or calls on them to restore their previous results. Chief Financial Officer Carol Stacey of the SEC Business Division told Dow Jones: Its just the classification thats wrong. However the change would ultimately reduce net cash flow from operations which is what investors and buyers look like. Meanwhile the SECs plan would be that companies could show that cash flows from retailers finance and rents do not come from investments that have been practices in the automotive industry for years. Instead the plan would be that these cash flows came from operations.

Part of the problem that is most felt is that the healthcare procedures of retired car manufacturers can not affect their bookkeeping by federal officials. If these officials oppose the new procedures current employees could terminate the deal at short notice. According to the contracts of the workers agreement with United Auto Workers if the officials reject these plans negotiations can resume to suit the Secretarys needs or completely terminate the agreement. A spokesman from General Motors stated that if the agreement is terminated the company can immediately terminate the agreement if in discussion with the SEC the terms underlying the accounting treatment considered by General Motors are satisfactory.

This is a contract that can go both ways for the employees of these companies. The terms of the agreement definitely help the companies by giving direct debts on their books. The real question is whether this process would affect the employees and how much the SEC will want to change the plans for this contact. The SEC takes time to review these guidelines and the process that large companies like these take in their accounting policies show how the need for accounting recommendations is needed today. The retired drivers are the hardest people who know the effects of this growing turbulence by having our medical care put in the air. This was an agreement that these people wrote as current employees to have executed when they retire from the company. From the SECs view car companies are wrong in this case but from the automakers view employees are robbed of an advantage they worked for.

From now on the only thing that can be hoped that negotiations between companies and the SEC will be settled in an early pattern and employees will be able to maintain their care. If the car factories find that the new SEC custom accounting practices are satisfactory then employees do not need to withdraw from the agreement. Until this time we will only have to wait and see what terms are agreed upon.

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