How a Popular Car Company Screwed Over Its Workers and Helped End Pensions: The Financial Wayback Machine

By Josh Katzowitz, WCI Content Director

From 1875-1990, tens of millions of workers felt the comfort of holding a pension, where dollars from your workplace would continue to roll in even after you had stopped punching a time clock for good.

The pension system was much needed in the US. As noted by Georgetown University, 75% of male workers over the age of 65 were still working by the late 19th century (remember, this is a good 40 years before Social Security was implemented), and a large majority of those employees probably continued with their jobs until they died in their work boots. By 1970, 26.3 million Americans (about 45% of all private-sector workers) were covered by a pension plan, and a decade later, more than 35 million workers enjoyed that benefit.

Pensions eventually fell out of favor, and 401(k) plans soon replaced them as a retirement savings vehicle used by tens of millions. But here’s something I didn’t know: one big reason for that was because of the actions taken by a luxury car company that had its heyday when your grandparents were dating and hasn’t been heard from since the last century.

[AUTHOR'S NOTE: I’ve always loved history. I’ve always loved the idea of taking a peek into the past and studying it from the current-day perspective. The idea of time travel also fascinates me. And now that I’ve found a passion for writing about finance, I’m combining all of it together in an occasional column for WCI called “The Financial Wayback Machine.”

I want to journey back in time and look at those supposedly great ideas that now seem ridiculous, all the good and terrible predictions (crystal balls have never not been cloudy), the doctors who did great (and shady) things, and all the seemingly minor news nuggets that ended up making huge waves. It’ll be fun, it’ll be silly, and maybe it’ll be a good lesson for what not to do with your money today.

After all, as WCI Founder Dr. Jim Dahle once said, “If you've never read history, you're destined to repeat it.”

Step into the Financial Wayback Machine with me, and let’s travel back in time.]

Goodbye Pensions; Hello 401(k)s

Pensions sound pretty awesome. Recently, I met a guy in his 70s who’s enjoying the fruits of a pension, and I was amazed by him. He seemed totally relaxed, not having to worry about how to pay for his life in retirement. He had that regular pension check coming into his account, and all was well in his world. But companies who offered pensions to employees also could screw over their workers while still following their legal obligations.

As noted by Nick Maggiulli, the Studebaker-Packard Corporation closed down a factory in Indiana in 1963, and afterward, that moment in time became a major driver in the creation of the Employee Retirement Income Security Act of 1974 (ERISA) that protects private industry workers and their retirement and health plans.

Packard Motor Car Company had its biggest impact in the World War II era, but its popularity declined in the years afterward and it merged with Studebaker in 1954 to try to solve both companies' post-war problems. Nine years later, Studebaker-Packard shut down that factory.

Aside from putting thousands of people out of work with the factory closure, Studebaker-Packard also decided it couldn’t pay out all of its pension obligations. The company changed the rules on its retirement plan for the hourly workers (there were more than 10,000 people, 1/3 of whom were already retired and receiving full pension benefits).

Wrote the Journal of Accountancy:

“Four thousand employees between the ages of 40 and 59 received approximately 15 cents for each dollar of benefit they were owed. The average age of this group of workers was 52 years with an average of 23 years of service. The remaining 2,900 employees, who all had less than 10 years of service, received nothing.”

About a decade later, a few years after an NBC documentary called, Pensions: The Broken Promise, aired nationwide, people began taking notice of how pensions perhaps were a flawed system (especially since, unlike 401(k)s, the employers were in charge of funding, investing, and actually paying out the pension funds).

As the New York Times reported in 1964, Studebaker-Packard wasn’t alone in not paying out all of its obligations (about 1,000 workers lost their jobs when American Bakeries Companies closed 103 bakeries and only the older and retired employees got paid what they were due). The paper also wrote that Studebaker-Packard actually lived up to its obligations as written out in the contract with the workers’ union.

Wrote the NYT: “The union's contract provides that the money available goes first to the retired and the ready‐to-retire. The fact that this will take nearly all of the money, leaving thousands in their 40s and 50s without benefits, is a calamity but not a crime.”

As Maggiulli wrote, “Before ERISA, employees had little to no protections regarding their retirement benefits. They could be promised benefits but receive nothing. They could lose benefits for having a short stint away from work (e.g., due to a medical issue). Employers could even fire employees without cause right before they were eligible to receive benefits just to save money. The goal of ERISA legislation was to shift the power balance back into employees’ hands and protect their retirement benefits.”

Workers have that now, thanks to a myriad of retirement accounts. But never forget that companies aren’t afraid to change the rules of the game when it benefits them the most, no matter what it does to the workers who have given decades of their sweat equity and loyalty. And for those who are nostalgic about the days of pensions (most of whom were not in the workforce when they were popular) and the yearly payout they might provide, well, sometimes the black and white of the past turns to a hazy gray when you do a little bit of research.

Pensions still sound awesome but only if you actually receive what you’re owed.

The Financial Savvy of Moe Howard

I love old-timey slapstick comedy films and shorts. I haven’t seen much of Buster Keaton and Harry Lloyd from the silent-film era (though some of their acrobatic stunts are incredible), but I love the Marx Brothers and the Three Stooges. It’s always fascinated me to hear about the lives of these remarkable comedic actors and how they lived their lives off the stage and screen and what they did with their money.

When it comes to the Three Stooges, Moe Howard was apparently the businessman of the trio.

According to Investor’s Business Daily, he started acting at the age of 17 in 1914 on a Mississippi steamboat, where he made $100 a week ($3,200 in today’s money) for two shows a day.

By 1922, Howard had joined up with his real-life older brother Samuel (who would become Shemp) and Larry Fine (who would become, um, Larry) for a vaudeville act, and more than a decade later, Moe, Larry, and Moe’s real-life younger brother Jerome (who would become Curly) signed with Columbia Pictures to begin filming comedy shorts.

As Larry, in his elder years, explained, the Stooges, at the beginning of their movie careers, only made eight films a year and it took them five days to make a short. Since that was only 40 days of work per year, the studio allowed them to go on the road and make personal appearances. Even when they weren’t working on a film, Columbia still paid the stooges half of their salary to go out into the world.

“It was a good deal for them, and it was a great deal for us,” Fine said in an interview, circa the early 1970s. “That was one of the sweetest deals in Hollywood. That’s why we stayed 24 years.”

They made films for decades and remain on the screen today through syndication, and though most of the Stooges didn’t become uber-wealthy, Moe was reportedly the one to keep their finances in check.

From IMDB.com:

“Moe was the business-minded one of the group. He knew that Curly liked to spend his money on partying and women, and Larry liked to spend his at the racetrack. So, he drew up an agreement where Larry and Curly turned over a certain percentage of their salaries to him. He, in turn, invested it for them. The result was that, while Larry and Curly were not as wealthy as Moe was (he invested far more of his own money and was quite well off), he ensured that their spendthrift habits did not result in their being broke when their careers ended.”

But that didn’t stop Fine’s heirs from suing Howard’s heirs in the 1990s for more than $5 million for failing to pay them profits from merchandising and marketing deals. Ultimately, the Howards were ordered to pay millions to Fine’s relatives and to the widow of Joe DeRita, the final stooge to enter the trio in the late 1950s.

The Three Stooges had some decent to solid paydays, though. According to IMDB, Moe, Curly, and Larry split $1,000 for a 19-minute short in 1934 (about $24,000 in today’s money), and for its 1962 movie, The Three Stooges in Orbit, Moe, Larry, and Joe DaRita split $50,000 ($530,000 in today’s money) and 50% of the profits.

But according to Fine, the trio never received residuals.

Said Fine: “If I did, I would have bought this hospital—and a couple of other things, too.”

TV Doctors Telling You to Go to a Real Doctor

OK, the commercial below is perhaps not as thrilling as a doctor telling you what cigarette he thinks is best, but check out the ad with actors who played doctors on TV telling you to visit an actual doctor for your annual checkup.

When you can get McDreamy and Turk and Hawkeye all in the same fake hospital giving you medical advice, it’s a darn special occasion.

Previous Wayback Machine columns:

How a Morally Dubious Dentist Changed The Beatles’ Sound

One of the Filthiest Comedians Ever Solves Mr. Miyagi’s Money Problems

A Solemn Happy Anniversary to the Doctor Who Tried to Save the President’s Life

A Doc Created the Coolest Shoe in the Whole World

The Most Athletic Doctor Ever

Money Song of the Week

It doesn’t get much more 1980s New Wave-tastic than Depeche Mode—a band that sold more than 100 million records but who, according to me, wasn’t quite as cool as Duran Duran, The Cure, or Echo & The Bunnymen. Yet, there’s no doubt Depeche Mode was fantastically successful, and to make that point even more directly, keyboardist Andy Fletcher left behind an estate of nearly £47 million (about $61.2 million) to his wife and children when he died in 2022.

One of the band’s biggest early hits was Everything Counts, released in 1983, where the subject matter is about corporate greed. Which is pretty obvious when the band sings,

“The grabbing hands grab all they can/All for themselves, after all/The grabbing hands grab all they can/All for themselves, after all/It's a competitive world/Everything counts in large amounts.”

The song was apparently inspired by a trip to Asia in the early 1980s.

“All the hotels are full of, like, businessmen and basically they tend to treat people as though they're nothing,” guitarist/singer/songwriter Martin Gore said in a 1983 interview with NME, via dm/live. “All they're interested in is their business—that's what I really hate about big business, people just don't seem to matter. Just money . . . It's no good just sitting back and hoping things'll change; you've got to actually work together. The material's there; it's, like, there's enough food in the world to feed everybody, and then half the world's eating three quarters of it and the rest of the world's starving. But the food is there. There is a solution.

“The thing is, the people in power don't care about someone with a low wage; they only care about their own power.”

More information here:

Every Money Song of the Week Ever Published

Instagram of the Week

If you’ve watched the first two seasons of The Squid Game and followed the life of Player 456, you can understand this.

[EDITOR'S NOTE: For comments, complaints, suggestions, or plaudits, email Josh Katzowitz at [email protected].]

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