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why did studebaker go belly up?

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  • why did studebaker go belly up?

    What was really the demise of Studebaker Corp? I read/heard somewhere that their source for steel was bought out by a rival company (GM?). I cannot find evidence on the internet. Could you please tell me where to find such a theroy? (or am i just completely wrong?)

  • #2
    quote:Originally posted by halluciphile

    What was really the demise of Studebaker Corp? I read/heard somewhere that their source for steel was bought out by a rival company (GM?). I cannot find evidence on the internet. Could you please tell me where to find such a theroy? (or am i just completely wrong?)
    Studebaker didn't "go belly-up". They simply quit making cars, and liquidated the automotive manufacturing facilities. The corporation continued to thrive, and successors are still in business. In a nutshell, they quit the car business because their unit cost was too high to enable them sell enough product at a competitive price.

    I'm sure other contributors to this forum can fill you in on the details.

    Gord Richmond, within Weasel range of the Alberta Badlands
    Gord Richmond, within Weasel range of the Alberta Badlands


    • #3
      Many things contributed to Studebakers end to making cars, but the one
      thing that WASNT an issue was the quality of the product. If anything,
      one thing about their product, was they refused to cheapen it up.


      1963 Studebaker Avanti, 102,000, custom made brake brackets to mount 1998 Mustang GT 4 wheel disc brakes (soon to get 13" Cobra front brakes, 2003 Mustang Cobra 17" wheels, GM altenator, will be getting : 97 Camaro Z28 tan leather seats, 97 Camaro Z28 T-56 6-speed trans, Ported 'R3' style Avanti heads with stainless full flow valves, 'R3' 276 duration cam w/chrysler solid lifters, shortened push rods, aluminum cam gear, Edelbrock AFB Carb, GM HEI distributor, 8.8mm plug wires, waiting in the garage.
      '63 Avanti R1, '03 Mustang Cobra 13" front disc/98 GT rear brakes, 03 Cobra 17" wheels, GM alt, 97 Z28 leather seats, TKO 5-spd, Ported heads w/SST full flow valves.
      Check out my disc brake adapters to install 1994-2004 Mustang disc brakes on your Studebaker!!
      I have also written many TECH how to articles, do a search for my Forum name to find them


      • #4
        Well said gentlemen. Once a company is run by investors instead of it's original founders, or their family, it tends to be a profit of gone thing. Studebaker motors had'nt been making money for twenty years and the investors were sick of the drain on the rest of the company. Since it was'nt making money it was gone.
        It's just too bad they decided to move production to Canada and waste resources on delaying what they were intending to do all along. The company should have just closed in mid '63.

        Ever use the products from STP? Or as the acronym stands for, Studebaker Tested Products???

        Lotsa Larks!
        K.I.S.S. Keep It Simple Studebaker!
        Ron Smith
        Home of the famous Mr. Ed!
        K.I.S.S. Keep It Simple Studebaker!
        Ron Smith
        Where the heck is Fawn Lodge, CA?


        • #5

          Your best bet is to get one of the books, Studebaker More Than They promised, etc., on the history of the company. It seems that towards the end, many factors buried the company. Poor management, finances. They seemed to be more interested in buying up companies to diversify and let the auto divison die. Even when Sherwood Egbert tried to save the company with the introduction of the Avanti ,it looked as if the board of directors were more interested in buying up other companies and ignoring his attempts to save the auto division..


          • #6
            Check out the related thread about Studebaker's demise on the truck talk page. Kevin in the Stoogebaker

            1963 Champ


            • #7
              STP stands for Scientificly Treated Petrolium (sorry about spelling).
              Another issue about the demise of Studebaker automobile production is on the few instances it did make a profit, the board members insisted on paying dividends to its share holders instead of updating the mechanicals of the cars and modernize the assembly process as did the other manufacturers. At the end Studebaker was still assembling cars using the same methods as they did back in the 30's & 40's.
              Dan Miller


              • #8
                Studebaker was basically a car company thru the early 50s. Then it started to get tough for them to make a profit because they didn't have the capital behind them that the big 3 did. The powers that be set out to diversify the company into things other than automaking.
                Several successive auto men took over the automotive division and tried valiantly to turn it around. There were minor successes from these attempts but "minor" didn't have an impact on the bottom line. Couple this with the fact that they'd let the UAW handcuff them to the highest wages in the industry and recall what's been said here about paying dividends rather than investing in technology and you have a recipie for inefficiency - which is bound to lead to failure (unless you're the ONLY one offering a given product, say, like a space shuttle)

                Miscreant at large.

                1957 Transtar 1/2ton
                1960 Larkvertible V8
                1958 Provincial wagon
                1953 Commander coupe
                1957 President 2-dr
                1955 President State
                1951 Champion Biz cpe
                1963 Daytona project FS
                No deceptive flags to prove I'm patriotic - no biblical BS to impress - just ME and Studebakers - as it should be.


                • #9
                  There were many, many reasons, and there are several very good books on the subject. Here are a few rather subjective thoughts:
                  1. The economies of scale were changing. While a car company could make a profit building 100K cars in 1950, it needed to sell twice that many in 1962. Competition was tougher, and costs could only be amortized by spreading them over more units. I remember reading an article that claimed that GM spent more money retooling their door handles than Stude spent to restyle their whole product line in 1961. Probably apocryphal, but it's a good story that makes the point.
                  2. Corporate boards are elected to represent the stockholders, not the employees or customers. They will only stand for continuing to remain in a money-losing business for just so long (current GM board excepted). In retrospect, the diversification into other product lines was actually a very good idea. Most of the purchases were good investments, and were relatively inexpensive, even compared to the relatively modest cash flow of S-P at the time. The company did not go bankrupt and the stockholders ended up with shares in a company that was making money.
                  3. In order to borrow enough money to stay in business in the late 1950s, several bankers were added to the board. They were money people, not car people. They saw car-making as no different than making toothpicks -- if you're not making money, get out of the business.
                  4. Major investments were required in both the cars and the manufacturing plant, and that cash was not available. The 59-60 Larks made money, but not enough -- and they really weren't all that different under the skin from the earlier models. Look at the other early 60s cars -- most had ball joint front suspensions, 400+ cu in V8s, etc -- the list is long. Studebaker couldn't even find the money to design a step-on parking brake until their dealer's assn browbeat them into it. Their truck line hadn't really been upadated since the 49 models came out in summer 1948. Much of their physical plant was obsolescent by 1960. Although it could have been modernized, the money wasn't there.
                  5. Stude's labor costs were among the highest in the industry, and their productivity was among the lowest. The company had signed some sweetheart agreements with UAW Local 5 when business was booming after WWII, and was never able to break the cycle. They knew that a lengthy strike would kill them, so they did everything they could to make sure that the line stayed open at least 8 hours a day. At the end they were making cars on spec and forcing their dealers to take them at a discount. Infrastructure costs money even if it's not being used.
                  6. Management was weak, maybe even incompetent in some cases. Sherwood Egbert might have been the guy who could have pulled the fat out of the fire, but he drew the short straw health-wise.
                  7. President Kennedy was assasinated in November 1963 and triggered a very short, but severe, recession. Car sales plummeted across the whole industry. Stude had poured all its hopes into the 64 models, which DID look quite fresh and un-Lark-like. But nobody was selling cars in December 1963, and the board couldn't tell how long the slump would last. The Hamilton plant supposedly could turn a profit making 30K cars a year, while the break-even point for the South Bend plant was around 200K cars a year, so it seemed to make sense to downsize to a smaller, more modern facility. However, it appears that there may have been another motive -- some of the oldest dealers had a clause in their contracts that would have forced the company to pay penalties if they ever stopped making cars. The solution was to build relatively uncompetitive cars and starve those dealers into switching to another car line, or going out of business. "The common-sense car" -- boy, that really makes you want to trade in your Pontiac 421 for a Stude, doesn't it?
                  8. Rumors of Stude's demise had been circulating ever since the low-selling 55 - 58 models, and drove away a lot of potential customers. The same thing hap
                  Skip Lackie


                  • #10
                    I can't say with authority that this is what put them out of business, but they were building cars that probably didn't attract the largest possible cross-section of the buying public. They were fine cars that held a niche market, but couldn't draw upon snob-appeal, even though they got involved with marketing Mercedes as a companion line. I see that when it comes to buying a new vehicle, people around here usually don't want "something different", they want to conform, and have what everyone else has. Then as now, the BIGGER your car or truck, and the more popular, the better. That kinda leaves out Studebaker, doesn't it? BTW,if you want to rob a bank in this town, use an enormous Dodge Ram pickup as the getaway car. That way, the police won't know just who to stop. [:0]


                    • #11
                      It certainly wasn't the quality of their cars that did them in. Look how many Studes are still plying the roads today. They just couldn't compete with the big three. At that time, Ford and Chevy were having a sales/price war, plus, as Mr. Biggs so eloquently said, their contract with the auto workers paid the highest wages in the industry.
                      At the end, the only division of the corporation NOT making a profit was the auto building. Everything else was profitable.
                      From what I understand, the move to Canada wasn't necessarily a bad move. I think their break-even point was lower there than in South Bend.
                      I think that it's great that there are so many people who still love Studes and strive to keep them running all over the place. The SDC has between 12000 and 13000 members. Not too many clubs have that many members. Man, that's loyalty.
                      I would venture to say that, if Studebaker were still in business today, I'd buy one.
                      '59 Lark VI Regal Hardtop
                      Recording Secretary, Long Island Studebaker Club


                      • #12
                        I think Skip summarized it very well. The only thing I would add is I think management made mistakes in the 1920's by not trying to expand like GM. I think they could have lasted longer if they had been larger, if Erskine had not given their cash to the shareholders at the start of the depression and if they had ploughed wartime profits into the plan.

                        That being said it looks like the rest of the industry will go the way of Studebaker, Packard, Hudson and Nash.

                        Also be aware that every company that has owned Jeep has been absorbed. Will Mercedes be next?[)]

                        53 Commander Hardtop
                        64 Champ 1/2 ton
                        WA state
                        Don Wilson, Centralia, WA

                        40 Champion 4 door*
                        50 Champion 2 door*
                        53 Commander K Auto*
                        53 Commander K overdrive*
                        55 President Speedster
                        62 GT 4Speed*
                        63 Avanti R1*
                        64 Champ 1/2 ton

                        * Formerly owned


                        • #13
                          I wonder if there wasn't a semi-couscious memory in the public that Studebaker was originally a wagon and buggy maker. In the 1950s and 60s, that kind of association wouldn't add to your prestige, that's for sure.
                          " the exception in individuals, but the rule in groups" - Nietzsche.


                          • #14
                            Other reasons Studebaker went belly-up:

                            1. Antiquated plant facilities. As of the early 1960s the newest buildings in the Studebaker South Bend complex were 40+ years old. Some plant buildings still had dirt floors. The multi-story nature of the plant layout also made it difficult to boost production, profitably, past the 100K mark. One wonders why Studebaker did not cancel its truck line in 1958 and move auto production to the much more modern Chippewa Ave. truck plant when they introduced the Lark.

                            2. No replacement "all new" design for the Lark, as scheduled for 1961. It's debatable whether the new Lark designs, and a design for an even smaller Lark, would have been successful. The Board instead opted to facelift.

                            3. Glut of 1963 models left on dealer lots when the "all-new" facelifted 1964s made their debut in the fall of 1963. The dealer glut made it possible for what few customers Studebaker had to pick up a new 1963 Stude at a deep discount. This hurt 1964 sales.

                            4. Pressure at the Board level to make Studebaker Corporation profitable. The ugly sister profit-wise was the automotive division. Once South Bend was closed, Studebaker automatically turned profitable. Studebaker stock figures for December 1963 bear this out.

                            5. It was mentioned above that Studebaker should have just stopped making cars when the corporation closed South Bend. Studebaker had to remain in the car business, at least for awhile, in order to avoid lawsuits by existing dealers. By March 1966 the threat of lawsuits had pretty much passed and the car division was quietly closed. I remember reading somewhere that Studebaker-Worthington had its first Billion Dollar sales year in 1970.

                            6. Finally, the consumer viewed Studebaker as an "also-ran" years before the company went out of business. Like new car buyers today, most viewed Studebaker with a suspicious eye after the mid-1950s. I believe alot of people are looking at GM and Ford the same way today. Nobody wants to be "stuck" with an orphan!

                            Most of what put Studebaker out of business was out of Studebaker's control. Like all areas of business, things were consolidating and the larger a company was, the better chance it had to survive. When pitted against GM, Ford, Chrysler, AMC (then a powerhouse) and the up-and-coming foreign makes, poor Studebaker with its dirt floor factory, high overhead, aged product line and spoiled workforce, just didn't have a chance.

                            --1963 Cruiser


                            • #15
                              I'd like to add one observation as to the reason for Studebaker's demise in the 1960's as was told to me by my father (a diehard Oldsmobile man) who was a part of the car buying generation in the late 1950's and 1960's; Studebakers in this part of the country (northern New England) had the front fenders rust through in the first two years. This gave the general impression (undeservidly so) of poor quality. Unfortunatley Studebaker didn't address the problem until it was too late.

                              1960 Lark Convertible
                              1962 Lark Regal Convertible
                              Dan Peterson
                              Montpelier, VT
                              1960 Lark V-8 Convertible
                              1960 Lark V-8 Convertible (parts car)