(EXPANDED FROM 9/29/2021)
A few years ago Ate Up With Motor had an interesting exchange about how Sherwood Egbert’s departure as president of the Studebaker Corporation hurt its automotive division’s chances of survival. Egbert resigned on Nov. 25, 1963 because of advancing stomach cancer. It’s worth reading Aaron Severson’s perspective in a comment thread as well as in his base article (go here).
This got me wondering: If Egbert had stayed healthy, might Studebaker have managed to maintain a foothold in the automotive business much longer? After doing another round of research, my sense is that Egbert’s continued presence would likely have not mattered much. Although his charismatic championing of autos might have kept the corporation’s board of directors from pulling the plug in December 1963, it is hard to see how much longer they would have held out. The walls were closing in on Egbert.
Bad news was hitting from multiple directions
The good news was that after Egbert became president of Studebaker in February 1961, he quickly ramped up diversification efforts — with dramatic results. In 1962 cars sales represented only 55 percent of Studebaker revenue, down from 74 percent in 1960 (Ostrow, 1963). This helped Studebaker begin to offset steady losses from automotive operations.
The bad news was that some of Egbert’s eclectic acquisitions were problematic. By 1963 the purchase of Trans International Airlines “was looking more and more like a total failure,” argued Thomas Bonsall (2000, p. 371). So too was Franklin Manufacturing, which produced refrigerators and freezers.
This put added pressure on the automotive division to stem its losses. After the 1964 Studebakers were introduced, Time (1963) magazine warned that if this “model year is as bad as the last one, it is hard to see how Studebaker’s auto division can continue indefinitely wheeling along at a $12 million annual loss.”
Studebaker had borrowed $25 million to purchase Franklin, and the banks agreed to extend the payment time frame. “However, the banks refused to lend any more money for the auto division unless the corporation agreed to put up its acquired divisions as collateral. That was something the board was unwilling to do,” noted Patrick Foster (2008, p. 160).
The board’s more hard-line attitude toward automobiles may have partly reflected a changing of the guard. In June 1963 board chair Clarence Francis stepped down and was replaced by Randolph H. Guthrie. John Hull (2008) has argued that “Egbert lost a staunch supporter when Francis retired.”
Also see ‘Could Studebaker have come out of the 1970s as successful as Jeep?’
Meanwhile, none of Egbert’s efforts to bring the automotive division back to profitability showed signs of success. As a case in point, the Gran Turismo Hawk’s sales dropped by 50 percent in 1963 to roughly 4,600 units only one year after being facelifted. Brooks Stevens’ redesign had been clever, but he could only do so much to refresh a car whose body was introduced way back in 1953.
More ominously, the Avanti sold poorly even after production problems were ironed out. Indeed, even the struggling Hawk outproduced the Avanti in 1963.
Most importantly, Studebaker’s only high-volume car, the Lark, steadily lost altitude. In 1963 output dropped to roughly 75,000 units, almost 19 percent below the previous year and 43 percent below the Lark’s peak year of 1959.
So even though the Hawk and Avanti generated almost 8,500 units in 1963, they only added up to 10 percent of Studebaker’s total production of under 84,000 units. This was far below breakeven point, which the Wall Street Journal reported to be roughly 120,000 units (Ostrow, 1963).
The Lark’s 1964 facelift was the last straw
When Guthrie became board chairman, he quickly concluded that the automotive division had no future “unless the reskinned 1964 line took off” (Bonsall, 2000; p. 372). Yet design consultant Brooks Stevens said that he could spend only $7.5 million to update both the Lark and the Hawk (Langworth, 1979, 1993).
Most of the money went into restyling the Lark, which also received nomenclature changes. Prior to the car’s unveiling, Egbert stated that “it will be quite a change, not just a face-lifting.” He further insisted that the new design “will be as competitive as any styling on the market today” (Booth, 1963, p. 14).
Also see ‘1964 Studebaker: Brooks Stevens hammered final nail in the coffin’
Of course, that was bravado — the car didn’t get a full reskinning even though it had the oldest body in the US auto industry. Yet Studebaker’s family cars were positioned against General Motors’ armada of new mid-sized cars, which offered trend-setting styling that included curved side glass.
In late-November, Time (1963) reported that Studebaker’s 1964 models “got off to a poor start: the company has an 86-day inventory on hand, compared with an industry average of 26 days. Last week Studebaker, which has already laid off 1,200 employees because of slow sales, announced a four-day shutdown of assembly lines so that its inventories could be brought down.”
When Egbert went on “indefinite” medical leave in November 1963 it was unclear when — or even whether — he would return (Time, 1963). That undoubtedly created a power void that was filled by bean counters such as Financial Vice President B. A. Burlingame, who became president after Egbert eventually resigned.
Might Egbert have energized car sales if he had operated at full steam during the fall of 1963? Perhaps to a degree. However, he needed to not merely stabilize sales, but to show a solid improvement. Where could that have come from?
By the fall of 1963 the most that Egbert could have done to tweak sales was to revise the brand’s advertising.
Egbert made two big early mistakes
Egbert had argued that his lack of prior background in the auto industry was an advantage because he didn’t have any “in-house, preconceived notions” (Booth, 1963, p. 12). That may have been true, but it could also be a liability. Studebaker’s troubles were so difficult that he had little margin for beginner’s mistakes.
I would suggest that Egbert’s single biggest error was to invest so heavily in personal coupes. That might have made sense if Studebaker had been larger and more financially stable, but this was not the case. The money spent on the Gran Turismo Hawk and Avanti was desperately needed to update the aging Lark. Indeed, its 1964 restyling was a good two years too late.
Another major error was picking a fight with labor in 1962. Whatever cost savings Egbert might have achieved by enduring a six-week strike were arguably more than outweighed by lost production and bad blood generated between labor and management at a time when corporate solidarity was needed.
Also see ‘Classic film shows human side of Studebaker’s end’
If Egbert had avoided just these two mistakes, the automotive division had a reasonable chance of breaking even in 1962. This might have made the banks more receptive to underwriting a bigger redesign of the Lark for 1964. Success breeds success.
Egbert went on to make a third major mistake: He vainly tried to move the Lark into the mid-sized field, where Studebaker’s family car body was too small and old to be competitive. A better move would have been to stay in the compact field and target Studebaker’s high-end models against larger compacts such as the Dodge Dart and Mercury Comet.
Of course, Egbert took a different road. By the fall of 1963 he had run out of room to maneuver. So in the absence of a miracle, the only viable option left was to radically reduce Studebaker’s breakeven point. This is what happened when all production was moved to Canada. Go here for a discussion about Studebaker’s final passenger cars.
NOTES:
This story was originally posted on Sept. 29, 2021 and expanded on July 28, 2023. Product specifications are from the auto editors of Consumer Guide (1993, 2006) and Gunnell (2002). Production data is from Langworth (1979, 1993) unless otherwise noted.
Share your reactions to this post with a comment below or a note to the editor.
RE:SOURCES
- Auto editors of Consumer Guide; 1993, 2006. Encyclopedia of American Cars. Publications International, Lincolnwood, IL.
- Bonsall, Thomas E.; 2000. More Than They Promised: The Studebaker Story. Stanford University Press, Stanford, CA.
- Booth, Gene; 1963. “Sherwood’s Forest.” Car Life. June issue: pp. 12-15.
- Foster, Patrick; 2008. Studebaker: The Complete History. Motorbooks International, Minneapolis, MN.
- Gunnell, John; 2002. Standard Catalog of American Cars, 1946-1975. Revised Fourth Ed. Krause Publications, Iola, WI.
- Hull, John; 2008. Avanti: The Complete Story. Iconografix, Hudson, WI.
- Langworth, Richard M.; 1979, 1993. Studebaker 1946-1966: The Classic Postwar Years. Motorbooks International, Osceola, WI.
- MacMillan, Terrill; 2021. Commentator in “Lark and Super Lark: The Last Days of Studebaker.” Ate Up With Motor. Posted 6:39 p.m., Sept. 18.
- Ostrow, Ronald J. ; 1963. “Putting the Eggs in Several Baskets.” Car Life. June issue: pp. 14-17.
- Time; 1963. “Autos: Troubles at Studebaker.” Published Nov. 22.
ADS, BROCHURES & IMAGES:
- Milwaukee Art Museum Brooks Stevens Archives
- oldcaradvertising.com: Studebaker Avanti (1963)
- oldcarbrochures.org: Chevrolet Chevelle (1964); Rambler (1962); Studebaker (1962, 1964); Studebaker Hawk (1964)
Abraham Sonnabend as a member of the board of directors wanted the Studebaker Corporation out of the automobile business as early as 1962. There was simply no money and the value of Studebaker’s fixed assets were plummeting. For all of Egbert’s optimism, he was not John North Willys. Maybe Studebaker should have focused on trucks and bought Kaiser-Jeep instead in 1962-1963.
One is tempted to say that the money men “allowed” Studebaker its Avanti folly, afterall, how could they not understand that family cars were the bread & butter of the auto division. They most easily could have said, see we let you try… but now time’s up. Precious resources were wasted, not to mention the $$ spent on diversification. The fate of Studebaker car production was sealed before the last car rolled off the assembly line and it’s even doubtful a merger or acquisition would have been approved.
CJ, that’s an entirely reasonable logic chain. It got me to thinking about the differences between Studebaker’s and American Motors’ boards. One board essentially gave up on the automobile fairly early on while the other doubled down all the way to the bitter end.
For example, in 1967-68 AMC sold off major non-automotive assets to stay in the car business . . . and then used some of the proceeds to buy Jeep. Studebaker did the opposite in the early-60s. A big reason why may have been that South Bend was lacking in a top executive who had the clout of a Roy D. Chapin Jr.
I suppose Harold Churchill might have gained that clout if he had shown more skill in rebuilding Studebaker’s automotive operations. We’ve talked a bit about some of his questionable decisions here, such as making the Lark too small, relying too heavily on dealers that also had Big Three franchises, not keeping the Lark up to date, and investing in an aborted four-cylinder Lark. The board was right to seek new leadership.
I suspect that Egbert had at least a little more room to try rebuilding autos than you seem to think. However, he completely blew it. I’m a car guy, yet if I were on the Studebaker board in late-1963, I’d have a hard time justifying the continuation of the automotive division (at least without a merger).
I also thought about why AMC stayed around longer. Focusing on their core business of building cars was obviously crucial for them, as you point out. In the end, however, both companies invested in the wrong cars at the wrong time and there was no grace period or enough capital reserves for recovery.
You note, too, that Studebaker was up against GM’s quartet of fresh for ’64 intermediates and the Lark was simply not competitive. Ramblers at least had the advantage of being in the 2nd year of an all new design cycle and a few very good sales years behind it. Without replacing the 1953 architecture, I don’t see how Studebaker could have survived any longer than it did.
Bringing AMC into the conversation got me thinking, based on all your input about the Matador coupe and Pacer being costly failures, of how different things might have played out if A) The Matador coupe had been “broughmatized” from the start, and B) Pacer development $ was turned into a new, smaller, more fuel-efficient Gremlin replacement. And further, imagine such a car being a re-skinned version of the Chrysler Omni-Horizon twins! If only! Who knows, Chrysler/AMC/Jeep/Mitsubishi/Renault might have emerged as the Stellantis of it’s day.
Finally, thanks for continuing to create great posts that are entertaining as well as provoking of fascinating discussions here in the comments.
I do appreciate your thoughts — they are uniformly thoughtful . . . and much more entertaining than mine.
In my groggy hours before going to sleep, two thoughts crossed my mind:
First, what if Packard and Studebaker had merged in 1939 or 1940 before World War Two. Maybe, consolidated management would have sorted itself out during the war and both makes could have been put on a path to survival, with Packard as a luxury make and Studebaker competitive with Oldsmobile. Second, after 1956, Studebaker should have left the automobile business with Packard in tow, and merged with International Harvester to build TRUCKS ! I think an I-H Studebaker line of trucks might have survived !
Speaking of intelligent, thoughtful, and design literate auto executives with stomach cancer, how might the Ford Motor Company have progressed in the post WW2 years if Edsel Bryant Ford had not succumbed to an awful disease in 1943?
Good point, DRN. Edsel sounded like he was a fine executive and a kind person.
It’s always difficult to armchair quarterback how Studebaker might have survived. Imagine, if Egbert had insisted on an all new modular platform to effectively relaunch Studebaker (think Chrysler’s K car platform) and not rolled the dice on the Avanti. Instead, the old platform rolled on and Studebaker did the best they could with what they had to work with. Brooks Stevens 1964 redesigned Studebaker Lark models were the right design, but at least 2-3 years too late to have made a difference in Studebaker’s ultimate demise.
Mr. Starinsky is correct. If Egbert had briefly studied Studebaker (and Packard), and maybe had a conversation about A.M.C.’s Romney about focus in 1961, Egbert should have quickly realized that a re-imagined Lark was the key to any kind of survival. (Romney and A.M.C. obviously learned a relatively cheap lesson concerning the more distinctive 1961 Ambassador.) The Hawk could have continued as the “personal luxury coupe” with very little impact to the bottom line as it used fully amortized tooling; but a new 1963 Lark on a 114-inch wheelbase with a 120-inch wheelbase for station wagons and a deluxe four-door sedan (Land Cruiser wheelbase), curved-window glass and “step-down” interior might have made a sales impact BEFORE the 1964 G.M. intermediates hit and while the Chrysler B-bodies were still plagued with weird styling details. Studebakers had nice interior appointments. Could Studebaker have become the American Mercedes if there had been a re-imagined Lark ? Maybe, but only if the quality could have matched up.
ISTM that the board was waiting for Egbert’s absence to pull the plug on the car business. Egbert was right to diversify. His job was to save Studebaker INC., not preserve the car line. He was president for 33 months. It would take a year at least to build alliances and relationships. Probably his attitude toward the Avanti and GT Hawk would have been somethig like “What the hell, it can’t get any worse”. When the 1960 Lark sales figures came out, anyone knew that it would only get worse. Quite honestly, I’m surprised they got money from lenders to do the Avanti.