Always Give More than You Promise: The History of the Studebaker Corporation

00:00:10
Speaker 1: This is Our American Stories, and our next story comes to us from our own Monte Montgomery and Patrick Foster, an automotive historian, on the history of the classic car company Studebaker.

00:00:24
Speaker 2: In 1852, the Studebaker Corporation was founded by five blacksmithing brothers in the city of South Bend, Indiana.

00:00:33
Speaker 3: It was a big corporation, you know, it was one of the biggest corporations in America. And for, you know, a long time, it was a small business. But they built horse-drawn wagons, and they grew to become at one time the largest wagon maker in the country, and their products were sold all around the world, and they, you know, became very wealthy men and quite successful. What happened with a lot of producers of horse-drawn vehicle when the horseless carriage came out? They were not quite certain what to do with it. They began producing electric cars in 1902, and when it finally became obvious that gasoline cars were going to be pretty much the standard mode of transportation, they contracted with another company and started offering gas-powered cars: Studebaker-Garford. They kind of dipped their toe into the automobile business until, oh, I think it was about 1915. They started producing their own gasoline cars, you know, from a Studebaker design, and because of their fame, you know, they became successful. They did all right until the Great Depression, and then they went bankrupt for a while. And I get criticized by Studebaker people who say they were not actually bankrupt, but they were bankrupt. But luckily, they, a couple of managers, came along and were able to get the company out of bankruptcy and rebuilt it. It was a new company that came out of the ashes of the old one.

00:02:04
Speaker 2: And the largest change for Studebaker was finally attempting to compete with the larger automakers by producing something a bit more affordable to the average American.

00:02:14
Speaker 3: And they eventually got into the lower price ranges in 1939 with a car called the Champion that was very successful.

00:02:24
Speaker 4: It’s big, it’s new, it’s the big news in the low-price field: the big news Studebaker!

00:02:32
Speaker 1: Look at it.

00:02:33
Speaker 3: The Champion was a really remarkable car. It came out for 1939. Studebaker put a lot of effort into it. You see, part of the problem—the biggest problem that the independent American automakers had—is trying to compete with the Big Three: with Ford, Chevy, and Plymouth. They’ve got volume that gives them low prices and gives them more than low prices, low organization. And that means taking a case of Ford, if you’re building a half a million cars a year, a million cars a year, or two million cars a year, and you have to buy a page of advertising, well, you can spread that cost over two million cars. If your Studebaker, that page of advertising costs you the same amount of money, but you can only spread it over maybe one, two hundred thousand cars. So your cost per vehicle tends to be higher, not because the parts are more, are higher, but your overhead is higher. So the Champion was an attempt to break out of that by coming up with a really high-volume car, and to do that, they had to be smart with their costs, and they work. They built the car to be a little bit smaller than the Big Three cars, just a little bit, but in a design that retained almost the same interior space. The car was lighter, so it would cost less to produce because automotive costs at those times were figured by the ton. It allowed them to come out with a car that was good-looking, roomy, competitive price-wise, very competitive; performance-wise, very competitive, and it had got better fuel economy, so they had an advantage over the others. They could match them with roominess and ride and handling and performance and price. Studebaker did extremely well with it, you know. It helped rebuild them in the post-war era, and by the fifties, they were really competitive with the Big Three. They were the largest volume of the American independent car companies by far.

00:04:39
Speaker 2: But trouble was on the horizon for Studebaker and the other independent car manufacturers.

00:04:45
Speaker 3: 1954 was the most competitive year in car sales, probably in the history of the auto industry. Henry Ford II had recently taken over his grandfather’s firm, and he was itching to take on Chevrolet, and he announced that, believe it was 1953, that he was going to outsell Chevrolet in ’54 or kill the company trying. And what he did in late 1953 into 1954 is he ordered up more production from his factories and ordered that those cars be shipped to dealers, whether the dealers had ordered them or not. So, if you were a Ford dealer in South Bend, Indiana, and you ordered 20 new Fords for the month, you might get 40 of them along with the bill, and you could either pay the bill or give up your franchise. You know, there was no message with Henry Ford II. So, you know, most dealers said, “Okay, well, we’re going to pay for the cars, and we’re going to sell the heck out of them.” And they started cutting prices like crazy, advertising like crazy, and the result was Ford sales skyrocketed. Well, Chevrolet wasn’t going to take that sitting down, so they did the same thing. Even Plymouth got in on it. So, you’ve got the Big Three, the three biggest automakers in the world, fighting it out tooth and nail for every sale. And, I mean, they did dirty things that are actually illegal. They did this practice called bootlegging, where they would take brand-new cars and run them through an auction as used cars just to get rid of them, just to get a little bit money back and be able to stay in the game. Against that, Studebaker, Nash, Hudson, Packard, they just couldn’t compete, and sales just dropped like a stone. So the little automakers, the independent American automakers, started bleeding money. Nash ended up purchasing Hudson Motor Company, and they formed American Motors. And Studebaker and Packard merged with each other. They did it so quickly they didn’t do due diligence. When you’re doing a merger, you have to do what’s called due diligence, where A looks at the books at B to see what sort of profits and losses they’re making and what their overhead is, and B looks at the book of A for the same reason. This way you’re going into this marriage with both eyes open. Well, Studebaker and Packard were so desperate to merge with each other, and also, I think both of them were afraid of what the other one would think of their, you know, their ledgers that they didn’t do due diligence. They just said, “You tell us how much, you know, what your overhead is and how much your profit losses for the last year, and we’ll do the same for you, and we’re not going to check each other’s books.” And both sides lied like rugs. So the upshot was, about three months after they merged together, they discovered they were losing money by the bucketload. They were bleeding. I mean, it was—it was unbelievable how much money they were losing. And the head of Studebaker-Packard, James Nance, sent one of his financial people over to South Bend and said, “You know, find out, you know, what the problem is down there.” And he found out that Studebaker had understated their break-even point by something on the order of 80 or 100 thousand cars, and there was just no way they were going to turn a profit. For a while, once they merged, there was no one merging them. It’s really hard onto a merger. So they were stuck together, and it was a rocky road for the next five years. What should have happened, and the whole plan behind it, which was a good plan, was: they were merged together, they would sell each other’s products, and instantly they did. The engineering team would get together and design one car body that could be used by both brands. This is what Nash and Hudson did. It’s what Chevrolet had been doing for years. It’s what Ford had been doing for years. You know, a Pontiac is basically as Chevrolet would more trim, so the Studebaker and Packard. The plan was they would eventually share the same body, and that would cut their overhead tremendously. They would be able to spread their costs over so many more vehicles, and they would be profitable. And it would have worked too, but they just didn’t have enough capital to last long enough.

00:09:13
Speaker 1: And you’re listening to Patrick Foster, automotive historian, telling the story of the Studebaker Corporation and in his own way, telling the story of American history and American business, commerce, and entrepreneurial activity. When we come back, more of the Studebaker Corporation story here on Our American Stories. And we returned to Our American Stories and the Studebaker story. When we last left off, Studebaker was once again on the ropes, but they were about to have a major stroke of luck.

00:10:22
Speaker 3: They should have gone out of business in 1958. It’s a miracle that they didn’t. But they managed to pull the fat from the fire. They brought out the Lark in 1959, and that saved them, you know, for as long as they lasted. Actually, it saved the corporation.

00:10:37
Speaker 4: Hi there, I’m Rex May, and this is the ’61 Lark. Well, sure it’s beautiful, but more important, the Lark’s got something new: a new kind of performance, a new kind of excitement, unmatched in any U.S. compact made today.

00:10:51
Speaker 2: And the Lark was truly a miracle of a car for Studebaker, built using existing parts from the Studebaker Starlight, a car which consumers didn’t like.

00:11:02
Speaker 3: They had that 1953 car that they had been peddling through 1958, and basically because the company had no money and could not afford a new body, they took that 1953 sedan body and they saw it off both ends. They shortened a wheelbase and came up with very simple styling that stood out—that was a Lark. Really, there was nothing new about the body other than the front-end cap and the were styling. It was designed on a shoestring, and they used a lot of parts that they had been using for years. And this is the interesting thing: they sold the lot for more than they had been selling the 1958 big car, and they were able to get away with it because it was a new concept. This was not some stripped-down big car that you would be ashamed to be seen in; this was a compact car. And compact cars were just come becoming the rage, and in 1959, the dam broke on the compact car market, and Studebaker was, you know, part of it was luck, but part of it was good product planning. And in 1959, they turned in the best year in their history profit-wise. The car sold like nickel hamburgers. It was amazing, and it was a good car. It was roomy for a compact, and they nailed as far as ride and handling. Gas mileage was very good. It was underpowered, but with a Lark, he could get a V8 engine, and Studebaker had a really excellent V8, and a lot of people wanted a small car, but they wanted power. So sales of V8-powered compacts hit Studebaker, at least, were very good, so they did. All in all, they did very well with that car. In 1960, Studebaker car sales fell because the Big Three got into the compact market. 1961, there was a recession in the American auto industry that hit Studebaker hard.

00:13:00
Speaker 2: But despite the company’s struggling, Studebaker was about to release their magnum opus, the Avanti.

00:13:08
Speaker 3: You know, it’s not unusual in the history of automotive companies to bring out a glamour car when you’re struggling. The idea behind it is that this is going to be a halo car. It’s going to spread a halo over all your products. It’s going to be a draw. People are going to—and this was the case of the Avanti. People are going to want to come into the Studebaker showroom to see this fantastically styled new car, and they’ll end up buying a Lark. So that was the plan behind it, and they also thought that they could build enough of them and price it high enough to where they could, you know, they could do the Avanti profitably. They did it with a fiberglass body for two reasons: one, because the Corvette had a fiberglass body; and two, because Studebaker didn’t have enough money to pay for the hard tooling to stamp it out, and steal tooling for fiberglass bodies is cheap. And I think it was one of the best-looking cars that’s ever been made in America. I remember coming out of high school. I was a senior, and I was skipping class in the morning to go downtown for breakfast. I’ll they’d met that here. And this gold Avanti pulled up to a traffic light at the intersection where I was waiting to cross, and I had never seen one before, and my jaw hit the ground. I had never seen anything so dramatic. I mean, in a sea of Ford Fairlanes and Dodge Darts, here is this a Fanti? And I didn’t know what it was. You know, I was with a couple of guys, and I said, “What is that?” And a guy said, “Oh, that’s a Studebaker Avanti,” and I was dumbfound. I said, “That’s a Studebaker?” Because I had, you know, a friend of mine had a Studebaker Lark, and the Avanti didn’t look anything like any, any Studebaker I had ever seen. It was dramatic, and it was supposed to be, and it was a beautiful car. They were well-finished. They were very, very fast, and the shame is that they had so many production problems with them that they never really got it sorted out. I think it took from about two years to finally get it sorted out. And by then, you know, Studebaker was in such bad shape that nobody wanted to buy anything with a Studebaker name on it.

00:15:19
Speaker 2: And one of the biggest problems for Studebaker was its own union.

00:15:24
Speaker 3: The problem was the union. They fought tooth and nail for every concession. They struck at the most inopportune times. If you’re an automobile union and you really want to cripple a company, you say, “Okay, we’re going to wait till announcement time for the new models, and then we’re going to go on strike, and then dealers are going to have nothing to sell, and by the time we win our concessions and go back to work, you know, the market’s going to be gone.” And they did that. They did that in 1962, and it just devastated the company. They were having a party down there in South Bend. They had college that were on the payroll who were not actually working. There was one guy who is typing his college species in the bathroom. There were stuff that a good management doesn’t allow to happen. After the strike in 1962, the company never really recovered. For some reason, I don’t know if the buying public just gave up on them, but car sales just all of a sudden went off the cliff, and the company was still building cars. Good management tells you you don’t build a car without an order. That’s been, you know, like a watchword in the industry from day one. But they wanted to keep the assembly lines going, so they were building cars that they had no orders for. And then at the end of the month, or at the end of two months, they’d have this huge stock pilot of cars all over the place, all around South Bend, in fields with weeds growing up to the doors, all getting sun-baked, and they would have to call their dealers up and say, “Yeah, we got a special deal on, you know, take 10 cars, and we’re going to knock so much more.” The off of that, the company was losing money. That was it. They ran out of money. They had to close down, and they announced it just before Christmas 1963.

00:17:10
Speaker 2: Well, the company would continue to build cars in Hamilton, Ontario, until March of 1967. The closure of the plant in South Bend had a devastating impact on the community.

00:17:22
Speaker 3: There was actually a book written on the effect of the closure of South Bend, and there was, you know, there was increased suicides, alcoholism, depression, family breakups because, you know, thousands of people lost their jobs and the biggest employer in South Bend was gone, so it was very tough for the human element—you know, the public. But the town itself got together businessmen, and they worked hard to help people find jobs, to lure new industries in, to do everything they could to help the workers that were displaced by this loss. And I think South Bend is probably a better place now than it was, you know, back when Studebaker was there. It’s been a few years since I’ve been there, but I think overall they’ve done better. One thing I do really appreciate is that the city itself has embraced its automotive heritage. They have an outstanding museum, the Studebaker National Museum, and, you know, they have gatherings of Studebaker enthusiasts every year, and it’s really, you know, they don’t try to bury the past. They celebrate it, and that’s the way it should be. This is American industrial history, and, you know, good or bad, we should recognize it.

00:18:46
Speaker 1: And that’s what we do here at Our American Stories every day. We don’t try and bury the past. We celebrate it. And that’s the good, the bad, and everything in between. You’ve been listening to Patrick Foster, automotive historian. Great job as always to Monte Montgomery, the Studebaker’s story. Here on Our American Stories.