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Thread: Studebaker and the pension debate

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    Studebaker and the pension debate

    I have posted maybe 300 or so images on the South Bend, Indiana FB history site. It is quite common to receive responses to the effect that Studebaker screwed their workers out of their pensions (54 years ago). I have tried in a tactful manner to relate that that was not the case. But still the comments continue. So I posted this message (below in italic) tonight on that site along with the article that I am posting here. Just thought some might have an interest.

    Studebaker and the Pension issue - I have posted over 300 images here in the past few years. Some, maybe most, had a Studebaker connection. On occasion I will receive one or more comments re Studebaker’s failure to live up to their pension obligations when the plant closed in 1963. Sad to say after 54 years many still hold a grudge. Even my recent innocuous post re the employee publication The Studebaker Spotlight generated three such negative responses. I am not inclined to
    respond to every negative comment but feel an obligation to set the record straight when some who may not be privy to all the information make mis-informed statements. However for those who are really interested in the facts I submit the article below that appeared in the December 8, 1973 issue of the Michiana section of the South Bend Tribune. The article, I believe, explains about as succinctly as possible the facts related to the issue. I have removed paragraph four and enlarged it for special emphasis. I doubt that it will heal any wounds or appease everyone but maybe help some understand better the true facts re the unfortunate pension issue. R. Quinn

    pension info.jpg pension info2.jpg
    Richard Quinn
    Editor emeritus: Antique Studebaker Review

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    I guess this comes down to "disclosed" and "assumed." When employess were hired was it disclosed to them that this is how the pension worked? That seems a primarily union responsibility and secondarily Studebakers. Or did the employees just assume that obligations would be met because had the process run its course they should have. This might be an "I didn't ask, they didn't tell" situation.

    Ther college district I worked for cut the new hire pay rate when the economy tanked. Somehow that flew under my radar (I was already a 17 year employee). When things got a bit better and marginal raises were given I was shocked to find I received none. Came to find out that until the pay rate of the new hires equaled mine (top of scale) I would not be getting any raise. Still everytime the raises were give it was stated (in house memo's, emails, news outlets) EVERYONE would receive one. When I factored the current rate of raises (or really the lack of) and the number of years until retirement (10), added in the fact that there was no raise for 5 years prior..., I would be going 15 years without a raise to the point of retirement. Funny how "wordsmithing" works.
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    President Member Kurt's Avatar
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    The company quit making cars,but it did not cease to exist. They could have assumed the liability and met the obligation. If they would have gone bankrupt then that would be different.

    The truth is the way it was written they didn't have to pay and they chose not to.

    The workers at the Studebaker plant were not saints and the 1962 strike were events that sped up the South Bend shut down but still they didn't ruin Studebaker. The management did.

    At the end of the day, the lesson is you should save some money on your own. That way if a promise is broken or bad things happen you have your own money that you saved.
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    PBS did a little bit on Studebaker in one of their "Frontline" specials. I believe it was called "The Fleecing of America". Had a small bit on Union officials retiring to a Carribean island after the plant shut down...

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    Silver Hawk Member JRoberts's Avatar
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    Thank you for posting this information. I had always heard that employees were upset when Studebaker gave up its automobile part of the company and assumed they were correct, but I never knew all of these details. I am not saying the employees were wrong. Heck , I would have been upset too, but these details posted here show the details to the pension question.
    Joe Roberts
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    Golden Hawk Member DEEPNHOCK's Avatar
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    The attitude of a LOT of South Bend residents was not a good one after the shut down.
    Driving to South Bend for a few Int'l meets in the early 1970's was not always fun.
    If you did not know the town, and you got off known avenues, you could have rocks thrown at you.
    BTDT...
    But that was then, and this is now.
    Go to the west side and the south side of Chicago, and today they shoot at you.
    Pick your poison...
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    Thanks for providing the details Richard. Unfortunately the closing of Packard eight years earlier gave the company much experience in how to close down an automotive division with minimal loss for the corporation. For some reason the treatment of the Packard workers is not discussed much.
    As a part of our college Senior trip I toured Minneapolis Moline two weeks before it closed. It was so depressing to see 70 lathes with only two in operation and tractors being pushed by hand down the production line.
    In 1974 the government established the Federal Pension Insurance Corporation to try and prevent situations like Studebaker & Minneapolis Moline but I think the closures of the steel plants may have depleted the fund.

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    I worked for Armco Steel from 73, til 90, on a 20 year retirement plan. After 17 1/2 years the company had sold out our division and all our benefits went away. What at that time was about 17 hundred a month retirement went to almost a tenth of that. I learned a quick lesson on the difference between a contributory nd a non-contributory plan. I began drawing one hundred and seventy eight dollars a month seven years ago on a plan I thought I was going to start drawing about 17 hundred on in 1993. O-WELL

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    Golden Hawk Member DEEPNHOCK's Avatar
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    I hate to hear about pension screwings......

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    Quote Originally Posted by Kurt View Post
    The company quit making cars,but it did not cease to exist. They could have assumed the liability and met the obligation. If they would have gone bankrupt then that would be different.

    The truth is the way it was written they didn't have to pay and they chose not to.

    The workers at the Studebaker plant were not saints and the 1962 strike were events that sped up the South Bend shut down but still they didn't ruin Studebaker. The management did.
    More information here: http://forum.studebakerdriversclub.c...ighlight=erisa

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    Silver Hawk Member Guido's Avatar
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    Quote Originally Posted by Cowtown Commander View Post
    Thanks for providing the details Richard. Unfortunately the closing of Packard eight years earlier gave the company much experience in how to close down an automotive division with minimal loss for the corporation. For some reason the treatment of the Packard workers is not discussed much.
    As a part of our college Senior trip I toured Minneapolis Moline two weeks before it closed. It was so depressing to see 70 lathes with only two in operation and tractors being pushed by hand down the production line.
    In 1974 the government established the Federal Pension Insurance Corporation to try and prevent situations like Studebaker & Minneapolis Moline but I think the closures of the steel plants may have depleted the fund.
    Minneapolis Moline, Oliver and Cockshutt were all bought by White in the early 1960's. Cockshutt production was shut down and they became rebadged Olivers. In 1965 they shut down Oliver crawler production and by 1975 all three brands were gone and all tractors and machinery carried the White name. Eventually White became part of Agco.
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    Silver Hawk Member Guido's Avatar
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    One of the driving forces behind ERISA (Employee Retirement Income Security Act of 1974) was the Studebaker retirement issue.
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    Studebaker Corporation's foray into diversification was profitable and protected stockholders. Was it at the expense of the workers and their pension funding?
    Is there an accounting of whether, or how much this diversification drive depleted the core Automotive Division's assets? Or added to an overall Co. debt load that negatively affected the Automotive Division's ability to obtain necessary funds for ongoing infrastructure improvement and Product Development?

    It appears to me that much of the Automotive Divisions decline was the result of a series of deliberate Corporate Boardroom decisions that effectively strangled Studebaker's Automotive Division into market obsolescence and non-competitiveness. Diversification boosted stock value and investors returns, at the expense of the workers jobs and fully funding the pension obligations.

    Can't help but wonder how Studebaker would have fared if all of that $$$$$$ and credit-line that went into engaging in years of diversification, had instead had been reinvested into the updating and improving their core product. All new bodies, updated engines and transmissions etc.
    This would have certainly had an effect on the desirability and marketability of Studebaker automobiles, as well as positioning the Company in a much stronger position regarding forming new manufacturing alliances. Could have been a much more desirable companion to MB or VW, or any of a half dozen other auto manufactures.
    The course of the path not taken will never be known.
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    Last edited by Jessie J.; 02-11-2018 at 11:19 PM.

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    The corporation had a legal obligation to make contributions into the pension fund at an agreed upon level (that is a level agreed to by the union). That contribution was made. As stated in the article and attested to by the union no money was withheld or misappropriated.
    Richard Quinn
    Editor emeritus: Antique Studebaker Review

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    Thanks for the added information.

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    Drove my Studebaker up to South Bend many times in the early 70's. Never had rocks thrown at me! In fact half the cars driven by South Bend residents back then were still Studebakers.
    Dan

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    "At the last South Bend International, there was a lengthy public discussion
    with the president of the union local that represented Studebaker employees.
    He stated that NO vested worker lost ANY retirement benefit, and you have to
    wonder what reason a UAW official would have to lie in the company's favor."


    From an attendee at a meet 30 some years ago-the president they reference is assumedly Les Fox.The Union evidently felt that the Company lived up to it's pension agreement.

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    President Member TWChamp's Avatar
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    Quote Originally Posted by ivorydan View Post
    Drove my Studebaker up to South Bend many times in the early 70's. Never had rocks thrown at me! In fact half the cars driven by South Bend residents back then were still Studebakers.
    Dan
    My first trip to South Bend and Newman-Altman was in the summer of 1971, and I was expecting to see a city full of Studebakers, but was very disappointed to only see a couple Larks still on the road. To me it appeared the city didn't even support their own car company.

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    My first visit to South Bend was in 1969 and the city was full of Studebakers but by the early 70s the salt had taken its toll and every day Studebakers disappeared almost overnight.
    One of the highlights of last years national meet for me was Friday night downtown activities- - I was so impressed by the turnout and support from the local community. I thought the South Bend Tribune coverage of the meet was outstanding. It was so good to see the local community embrace its past history.

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    Quote Originally Posted by Jessie J. View Post
    Studebaker Corporation's foray into diversification was profitable and protected stockholders. Was it at the expense of the workers and their pension funding?
    Is there an accounting of whether, or how much this diversification drive depleted the core Automotive Division's assets? Or added to an overall Co. debt load that negatively affected the Automotive Division's ability to obtain necessary funds for ongoing infrastructure improvement and Product Development?

    It appears to me that much of the Automotive Divisions decline was the result of a series of deliberate Corporate Boardroom decisions that effectively strangled Studebaker's Automotive Division into market obsolescence and non-competitiveness. Diversification boosted stock value and investors returns, at the expense of the workers jobs and fully funding the pension obligations.

    Can't help but wonder how Studebaker would have fared if all of that $$$$$$ and credit-line that went into engaging in years of diversification, had instead had been reinvested into the updating and improving their core product. All new bodies, updated engines and transmissions etc.
    This would have certainly had an effect on the desirability and marketability of Studebaker automobiles, as well as positioning the Company in a much stronger position regarding forming new manufacturing alliances. Could have been a much more desirable companion to MB or VW, or any of a half dozen other auto manufactures.
    The course of the path not taken will never be known.
    .
    Whether we like it or not, the #1 responsibility of a board of directors is to protect the stockholders -- that is what they are elected by the stockholders to do. The almost-equal second one is to provide products or services to make money for the stockholders and keep the firm in business. Third on the list (if there even is a #3) is to provide employment and fair working conditions for the staff. Meeting contractual obligations with the employees is part of that -- but exceeding those obligations to the detriment of the stockholders is not.

    Everybody here loves Studebakers, but as documented many times on this forum, the company's management made a number of blunders during the early and mid-1950s that greatly reduced sales and profitability. The company had gone back to the banks several times for loans with a promise that profitability would return soon. The diversification of the early 1960s and the hiring of Sherwood Egbert placated the bankers for a time, but the automotive division continued to be a drain on the company's bottom line. It should be recognized that the purchases of Onan, Gravely, etc were pretty much small change to a company with the annual financial through-put of a firm of Studebaker's size -- and the chances of a return of these investments was much greater than comparable investments in the automotive division would have been.

    By December 1963, they had lost money in ten out of the last 12 years, and sales were in decline again. The restyled 1964 models were selling slowly, there were 3,000 unsold 1963s still on the lot, and the company owed the banks $16.5 million. The banks flatly refused to loan the company any more money -- there was no credit line that could be used for anything. About half of the board was composed of bankers. Rumors had been flying since the dreadful sales of the mid-50s that the company would quit the automobile business. That alone caused a lot of potential customers to shop elsewhere for a new car.

    Studebaker's management can be blamed for making many mistakes -- but from the perspective of the company's stockholders, the decision to close the SB plant in 1963 could not be avoided any longer. This subject has been covered in great detail here: Critchlow, Donald T., Studebaker, The Life and Death of an American Corporation, Indiana University Press, 1996

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    Quote Originally Posted by Jessie J. View Post
    ... Can't help but wonder how Studebaker would have fared if all of that $$$$$$ and credit-line that went into engaging in years of diversification, had instead had been reinvested into the updating and improving their core product. All new bodies, updated engines and transmissions etc. This would have certainly had an effect on the desirability and marketability of Studebaker automobiles, as well as positioning the Company in a much stronger position regarding forming new manufacturing alliances...
    I think when one looks at AMC, Plymouth and even Oldsmobile/Pontiac the likely hood of the smaller independent (or sub corporate models) surviving would have been small. When AMC was bought and eccential disbanded they tried to keep the newly formed "Eagle" brand going and it too failed. Today the marketplace is filled with (seemingly too many) "good" cars. Hence the demise of Oldsmobile and Pontiac. The only avenue in would be for cheaper cars and I think the Chinese likely have the inside track on that.
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    The pension at the end was under funded as was the Packard pension when Detroit was closed.

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    Silver Hawk Member Guido's Avatar
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    Studebaker had two strikes against it in the highly competitive automobile marketplace; an aging and inefficient infrastructure and a highly compensated workforce. The resulting economics caused them to be uncompetitive against competitors that were more efficient and operated with greater economies of scale.
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    Skip,

    Exactly right and a good summation of the problem.

    Frank Philippi

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    Of course Skip is right. Just one of my many biases. I, my father, and uncles all desperately wanted to see the underdog Studebaker survive and overcome its myriad liabilities and challenges.
    We ordered our last new Commander in 1966, and there is little doubt that my family would have purchased a '67,'68,'69, '70, '71, ....Well, you get the picture. But it was not to be, so instead of a lifetime of the thrills of buying and proudly driving new Studebaker's, it has been a lifetime of disappointing alternatives, and keeping and fixing antique Studebaker's, and dreaming of what could, in some other dimension of time and an alternate reality, have been.
    That, and I'll admit that I'm mighty partial to, and nostalgic for that stability and upward mobility that Union protected employment provided to our families and communities. Celebrating my 50th year as a U.A.W member.

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    As Wittsend points out, the days of the not-Big 3 auto manufacturers were over anyway, though am not sure the people at AMC, Kaiser Jeep, Wolseley, Bristol, etc knew it at the time.

    Am personally neutral on labor unions, but as Gary points out, in the 1950s Studebaker rolled over too many times when negotiating with UAW local 5, which resulted in them having the highest labor rates in the industry. And then when the company was on the verge of going broke in the early 60s, the union chose to strike.

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    Even as a Union member I have always thought they were nuts to vote for a strike at that time, and for so little.
    But things being what they were, I highly doubt Studebaker auto production would have survived beyond '66 even without the strike. A lot of things could have been done differently, but product direction and marketing decisions made in the late '40s had already greased the skids. The heavy focus on providing cheap transportation and years of production of far too many low priced, low desirability, low to no profit vehicles were to prove the death of them.
    In the midst of a period of expanding prosperity and booming domestic auto sales, Studebaker had -managed- to fall so far in the esteem of the general public that many people were embarrassed to even be seen in one. Might as well hang a sign out stating that you couldn't afford a better vehicle, or that you were simply an idiot.
    I guess I was mostly the latter because I continued to love (the better optioned) Studebaker's right up to today. The cheap krap not so much. But it was good to have such a ready supply of these undesired $50 or $100 'parts cars' for decades after.
    But yes. I wish they had did it different.

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    One has to wonder how efficient the assembly line workers were if (as the article stated) workers in their 80's were still working at Studebaker during that time. I just retired last fall before reaching 69 from a job a lot less physical than working in an automobile assembly plant. Given the health advances we've enjoyed and benefitted from since the early 60's, today's elders most likely are healthier than the same age workers back in the early 60's.
    [SIGPIC]

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    The strikes hurt, maybe if the 64' were pushed up as 63's the line would have sold better giving them a few more year to right the ship, but in time Studebaker would never have survived the Asian car companies coming to the US.

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    The outcome was inevitable, virtually all the other independent manufacturers had already failed. However we choose to romanticize our Studebakers, the buying public had deserted the company, for the more modern products of the Big Three. Prolonging the agony, would only have led to a company deeper in debt, and work force that would be that much older, who would have more trouble surviving, because it's age. The company did a better job of taking care of it's pensioners, then many of the companys four decades later, who just chose to dissolve their contractual obligations with their workers.

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