The Studebakers trace their origins to the Ruhr Valley of Germany in the town of Solingen. Located southeast of Düsseldorf, on the western reaches of Germany, this locale has been renown, since the middle ages, for it’s iron work and blade making. Throughout the late 1600's the people of that region had been subjected to war, heavy taxation and religious strife and by the early 1700's life for many had turned unbearable. Peder and Clemens Studenbecker, working as blade maker's then, decided to forsake these harsh conditions and immigrate to The New World.
Departing Germany in those days though, was fraught with obstacles, the most daunting of which were the guilds. Skilled workers, such as the Studenbeckers, belonged to trade guilds. These organizations, formed to uphold trade standards and protect members, were loath export their professional secrets. The brothers were told that in order to quit the guild, they had to relocate to another city and work at a different trade for five years. They complied by moving to Hagen, to the northeast of Solingen, and having satisfied their obligations, journeyed down the Rhine with their cousin Heinrich to Rotterdam. Sailing on the Harle for Philadelphia, they arrived in the American colonies September 1, 1736 and eventually moved to Germantown to take up farming.
John Clement Studebaker was born on February 8, 1799 in Adams County, Pennsylvania, sixty-two years after the first Studebakers landed in America. He was married at age 21, in Ephrata, Pennsylvania, to Rebecca Mohler, an 18 year old from Lancaster. Purchasing some land in 1830 near Getty's Town (now Gettysburg), he built a house and work shop where he worked as a blacksmith and wagon maker. Industrious and devoutly religious, he ran his business on the philosophy "always give more than you promise". Times were hard though and his efforts at raising a family were not very successful. Not only was the country in an economic slump, but John C. had a charitable spirit towards those in need. He frequently undercharged people, accepted farm goods for payment or did work on credit for which he didn't collect. Additionally, he was known to co-sign loans for his church brethern, some of which defaulted. Within five years he found himself deeply in debt and was forced to sell his holdings.
Captivated by the possibilities that lay
further west, John Clement built a covered wagon and moved his family to
Ohio where he felt life would be easier. Arriving in Ashland, Ohio in
1836, he purchased a small farm and mill with the intent of taking up
milling. Ill-fortune, it seemed, followed him to Ohio and when
persistent creditors tracked him down, he was forced to sell the mill
and return to blacksmithing and wagon making. Life in Ashland was no
better than before as the nations economy worsened and his familiar mode
of doing business pushed him deeper into debt. Ultimately he was forced
to mortgage his land to pay creditors. Confident he could still find a
place where he might prosper, he headed further west, leaving his eldest
son Henry to run the business in his absence. Venturing into Indiana he
came across a town called Southhold, later to become South Bend.
Located next to the St. Joseph river he felt that it had possibilities
and returned to Ohio to prepare his family for yet another move.
Clement, his second son, went ahead a year before the family4
and late in 1851 John C. Studebaker and family departed Ohio in that
same covered wagon bound for South Bend.
As the Studebakers settled in, Clement was teaching and Henry was blacksmithing for hire. Neither was happy with their arrangement and they endeavoured to go into business. With the passion of youth, $68 and two sets of smithy tools, they established H & C Studebaker on February 16, 1852. The first day of business grossed 25 cents for shoeing a horse. A few weeks later they received their first wagon order from a Mr. Earl. The wagon was constructed and sold for $175. Business was slow though and they did whatever they could to make ends meet. The end of the first year would bring just one more wagon order. At this time the third son, John Mohler, had come of age. He, like his brothers, had learned smithing and wagon making but his immediate desires lay west in the gold fields of California. When a wagon train passed through South Bend early in 1853, he proposed an arrangement wherein he would give them a new wagon in exchange for passage and board. It was agreed and his brothers helped him build the wagon in ten days.
J. M. (as his family called him) arrived in Hangtown,
California on August 31, 1853 with but 50 cents in his pocket. The anxious party of
gold seekers had barely stretched their legs when a request went out
from the crowd of towns folk for a wagon maker. The blacksmith was in
need of help. J. M. acknowledged his experience in that trade but
declined the request saying he was eager to begin prospecting. A
stranger standing nearby
cautioned him that prospecting was risky and that the job just offered
him was a fine opportunity. Impressed by his candour J. M. took the
strangers advise but, the smithy, Joe Hinds, was not building wagons.
He was in immediate need of 25 wheel barrows. J. M. was to receive $10
for each wheelbarrow he completed. Accustomed to oak and hickory he did
his best with the pitch pine at hand and finished the first one in two
days. Upon hearing Joe’s criticism of his first effort, J. M. replied
he ”was a wagon maker, not a wheel barrow maker” and assured him the
next one would be better. He would work for Hinds for the next five years
becoming known affectionately as Wheelbarrow Johny. Hangtown
would grow (becoming Placerville) and J. M. would save his money
eventually accumulating $8000.
While J. M. was in California, business had improved for Henry and Clement but they weren’t reaching their potential. They were now receiving some wagon orders but realized they could only turn out about a dozen wagons a year. Materials had to be purchased as needed, a wagon at a time due to a shortage of working capitol and mounting debt. Then their luck finally turned for the better. In 1857 the Mishawaka Wagon Works, near South Bend, had contracted with the Army for several hundred wagons. Realizing they could not fulfil their obligation, they approached the Studebakers for assistance. Henry and Clem enthusiastically agreed to deliver 100 wagons in 6 months. When their euphoria wore off they realized a daunting task lay ahead. Not only would they have to hire and train some help, there was the matter of lumber. They had none. There were trees for the taking all around South Bend but the wood needed 3 years to cure properly. Their solution was to construct drying kilns thereby reducing curing time to days. The project was masterfully executed and whatever couldn't be built, contrived or fabricated was farmed out. The wagons were delivered in 90 days but the brothers made precious little from the experience. Yet, in completing the Army order they had constructed or acquired everything they needed to build wagons in large numbers. H & C Studebaker was on the verge of something big. If they only had enough capital.
In April 1858, John M. departed Placerville to visit his brothers in South Bend. With his savings in a money belt, he journeyed home by way of San Francisco, Panama and New York. Upon returning he was greeted with enthusiasm but found H & C Studebaker languishing under judgements and moderate production. He also found that Henry wanted to quit the wagon business and take up farming. Anxious to participate in the family enterprise, J. M. used part of his earnings to buy Henry out. Within the year John Mohler met Mary Stull, a farm girl of German descent and after a brief courtship married her on January 3, 1860. That same winter Peter Studebaker, John Clements fourth son, got involved in the business. Peter ran a general store in Goshen and at J. M.’s urging, agreed to use his establishment to sell wagons. In the spring he constructed sheds to display the wagons and soon discovered he could sell them as fast as his brothers could deliver them. Convinced of the future of transportation in America, Clement and his new partner, John Mohler, began to expand. By the end of 1860 the wagon works employed 14 men and business was gradually improving. The Studebaker brothers were filled with optimism but the clouds of war loomed on the horizon.
It has been cynically said that war is good business. This was the case with the Studebakers. When the Civil war broke out, Southern forces were unbeaten, the Union needed to catch up and Clement and J. M. were still struggling to grow their business. The Studebakers, for the most part, were devout Dunkards and did not participate directly in the war but they had no objection to accepting government contracts. Beginning in 1862 the Union placed orders for wagons, gun caissons and other war materials. For the Studebakers this was a windfall that required immediate expansion of their facilities. The wagon works continuously grew to meet demand as they supplied the Union throughout the war. Rebel forces were also familiar with these sturdy, well built vehicles since they were known to have commandeered them on numerous occasions including the retreat from Gettysburg. The Civil War did not put much money in company coffers but, once again, government orders had allowed the brothers to expand their facilities. Adventurous settlers were now moving west in droves and the wagon works in South Bend was poised to accommodate the surge in wagon sales.
By wars end everything had finally come together. After more than a decade of hard work the Studebakers had an abundance of paying customers and a factory to supply them with gleaming new vehicles. From this point on the business grew phenomenally. As 1867 drew to a close the brothers valued their assets at $223,269.06 and in March of 1868 incorporated themselves under Indiana law. The new company was called the Studebaker Brothers Manufacturing Company and by the end of the year boasted 190 well paid employees. The brothers were able to capitalize it with $25,000 each with Clement being named President, J. M. the Treasurer and Peter, now in the firm full time, was Secretary. Aside from their titles, each used his individual talents to guide the company to new horizons. Clement attended to administrative matters while J. M. oversaw construction of wagons and carriages. Peter used his sales skills to create markets outside Indiana, vital to the kind growth they envisioned. For once, the Studebakers were building wagons without orders and selling them. As 1868 ended, total sales exceeded $360,000.
St. Joseph, Missouri was the staging point for wagon trains headed west and every spring would see a mass migration from there. It was natural then, for Peter to establish a sales outlet in this strategic location. About 1870 he and his brother-in-law set up the first Studebaker showroom outside of Indiana. But Peters vision of the future went beyond wagon trains and Missouri. He saw enormous sales potential in the country and knew his brothers could provide the merchandise. A famous anecdote asserts that Peter once said he could sell all the wagons Clem could make, to which Clem replied he could make all the wagons his brother could sell. In a few years Peter would have branch houses in Salt Lake, San Francisco, Kansas City, Portland , Dallas, Minneapolis, Chicago, New York and Denver. In 1870 sales exceeded $500,000.
As the company moved into the 70’s, the youngest Studebaker brother, Jacob, was brought onboard as a salesman and eventually took charge of the carriage factory. Business was good and the factory was growing. By 1872 the main building was a block long and four stories tall. Behind it was a three story behemoth with thirty plus smoke stacks. Rail spurs were congested with locomotives moving new wagons and carriages to ever expanding markets. It appeared Studebaker was unstoppable. Then came three events that nearly brought it all down. The first occurred in June of 1872 when a fire broke out in the main building causing $70,000 worth of damage. The company only carried $20,000 worth of insurance but they were financially solid enough to work through the setback. The second calamity was the so called ‘Panic of 1873’. In reality, it was a depression and it’s origins can only be rooted out through a meticulous analysis of cause and effect. Suffice it to say, on September 18, 1873 the largest banking house in the United States, Jay Cooke & Co, closed it’s doors in New York, Philadelphia and Washington. Wages and prices dropped drastically and as a result, 23,000 businesses failed and 3,000,000 people were unemployed. The Studebakers finished that year with a record $820,000 in sales but then the collapse had come at the end of the year. They knew the road ahead would be rough and they braced themselves for it. They cut production from a vehicle every 10 minutes to one every 20 minutes and tightened the belt wherever they could. In some ways they actually benefited. Raw materials, for example, were selling for a fraction of their previous price. They didn’t pay any dividends in 1874 but they survived. What did ravage them that year was another fire. A big one. This one started at 4:30 in morning on August 24, 1874 and was already out of control when it was discovered. This time damages were on the order of $300,000 and two thirds of the factory lay in ruins. It appeared to everyone it all was over. Not to the Studebakers. They were determined to keep their enterprise going. They went to the banks to finance their reconstruction and when it was complete they boasted the world's largest wagon factory.
The brothers had become industrialists. In 1875 sales topped $1,000,000 for the first time and in ‘76 they attended the nations Centennial where their vehicles won numerous awards. 1877 though, would mark the end of an era. John Clement, now 78, the man who had found a better life for his family and who had taught his sons to "always to give more than you promise", passed away. He left the world an amazing legacy in his sons and he had lived to see it all. The 80’s would see the usual ups and downs but, the Studebakers, it seemed, could handle any disaster fate could send their way. They were not however, prepared for a fiasco. The 1884 presidential election pitted James G. Blaine, the Republican candidate against Grover Cleveland, a Democrat. It was well known that the brothers had all voted Republican in the previous election and a rumour began that made it’s way to national newspapers. The Studebakers were being accused of coercing their employees to vote for Blaine. Of course, the rumour was false but, no one would listen. Telegrams arrived at South Bend from all over the country denouncing Studebaker. So outraged were the southern states that Studebaker wagons were burned in protest while demonstrators danced and chanted around them. The brothers went on record as being split in their preferences for president but that was of little consequence to sensationalist news papers. The election came and went and business went on. As the decade drew to a close, Jacob Studebaker, age 43, died in December of 1887.
The century would draw to a close with both optimism and sorrow. In 1891 an encouraging new addition was made to the firm. A corporate lawyer from New Jersey, Fredrich S.Fish, had married Grace Studebaker, John Mohlers daughter, and in view of his qualifications was made director and general counsel. Fred was well liked by everyone and he was full of ideas on where the company should be going. Second generation Studebakers, sons and sons-in-law, were also joining the firm contributing their youth and enthusiasm to management. Sadly though, only two of the five brothers would see the new century arrive. Henry who been farming since his younger brother had bought him out, died in 1895. Then Peter, who had masterminded the national sales network, died in 1897. The last big bang of the 90’s occurred when the Spanish American War broke out in 1898. The Quartermaster of the Army contacted Studebaker to see if they could deliver 500 wagons within 36 hours. As with all their previous dealings with the Army, the answer was yes and the wagons left the factory in 24 hours. Sales for the last year of the century were over $3,900,000. Clement and John Mohler would see 1900 alone and they sensed sweeping changes in the offing.
1900 ushered in a world unimaginable just a few years earlier. Marconi, Edison, Bell and others were pioneering new developments that affected the lives of nearly everybody. One innovation just beginning to make an impact was the horseless carriage. Regarded as an expensive novelty by most, there were some people who saw in it the beginning of a new era in transportation. The new body of executives at Studebaker were among the automotive optimists. Leading them was J. M.’s son-in-law, Frederich S. Fish, now chairman of the executive committee. The second generation of Studebakers were also, for the most part, automobile supporters. The elder Studebakers however, were less enthusiastic. Clem vehemently opposed venturing into automobiles while J. M. was luke warm on the matter. As the Studebakers debated the issue, Fred Fish was tactfully manoeuvring the company into a position favourable to entering the horseless carriage market. Clem, as it turned out, would not live to see the day that Studebaker made automobiles. Upon returning from London during the winter of 1901, he collapsed while debarking the ship and died a few weeks later at his home. With Clems passing, opposition to automobiles finally eroded.
In the late 1890s, steam, gasolineand electricity were all being considered as sources of propulsion by automobile designers. Studebaker had experimented with horseless carriages as early as 1896, but was proceeding cautiously. That year, an electrical engineer named George Strong was retained to work on a battery powered carriage. Studebaker opted to go with electricity early on, largely because they were already making electric carriage bodies for another company and J. M. regarded steam and gasoline as noisey and dangerous. The testing came to fruition in 1902 when Studebaker introduced it's first production automobile, the Electric Runabout. The first sale occurred five days before the company's 50th anniversary3 and Thomas Edison is thought to have purchased the second one. The Runabout was small and quiet and had a top speed of 13 miles per hour on level ground. Five different models were offered and a total of twenty electric vehicles were sold in 1902. Wagon sales that year topped $4,000,000. J. M. still placed his confidence in wagons.
Even as the electric runabouts were first rolling out of the factory, there was a perception that gasoline power was going to win out in the end. Frederich Fish was particularly anxious to move in this direction. The main obstacle for Studebaker, he realised, was they lacked the machinery required to manufacture engines and other automotive components. Cleverly, he was able to solve the problem with the stroke of a pen. The The Garford Motor Company of Cleveland had made the chassis for Studebaker's electrics and was now expanding into the manufacture of gasoline engines. Fish worked out an arrangement whereby Garford would supply chassis’ and engines while Studebaker would make bodies and assemble the finished product at South Bend.
The cars were to be known as Studebaker-Garfords and the first one was sold as soon as it rolled out of the factory on July 22, 1904. The Studebaker-Garfords were a success and combined sales figures for wagons and automobiles increased dramatically over the next three years until reaching $7,800,000 in 1907. The increase was directly attributable to automobile sales and demand was approaching the breaking point. Garford could not supply components fast enough to keep pace with sales. Immediately after the initial agreement, Garford had constructed a new factory in Elyria, Ohio with the intention of moving their operations there but construction delays and labour problems were affecting output. In 1908, impatient with Garfords activities, Studebaker gained a controlling interest in Garford through a stock purchase and was able to direct operations to suit their needs. Still unable to meet growing demand, Studebaker acquired the Tincher Motor Car Co of South Bend in 1908 but discontinued these large expensive cars after a year. Some thing else was needed and again, Fred Fish stepped in with a novel solution.
In August of 1908 three gentlemen by the names of Barney Everett, William Metzger and Walter Flanders had formed a corporation in Michigan for the purpose of manufacturing automobiles. The Everett-Metzger-Flanders Co was a small conglomerate of seven companies that had been put together by merger and acquiring with the intention of building large numbers of medium priced automobiles. They had not yet begun production and Fish was able to affect an arrangement that was mutually beneficial. EMF at that time had no means of marketing their cars and Studebaker offered to sell them through their vast national sales network contracting for 500 units. They were marketed as medium priced cars in two models, the `20' and `30' (referring to horsepower) at $1,000 and $1,250.
The Garford line was continued as a luxury model selling for $4,000. In the 16 months following the EMF deal 8,132 cars were sold. Twelve months later, at the end of 1910, sales had nearly doubled to15,300. In the interim though, a behind the scenes battle was being waged between Studebaker and EMF. The model `20' had numerous engineering problems, including faulty transmissions and clutches, which EMF was indifferent to remedy. J. M., who still believed "always give more than you promised", was not at all pleased. More importantly, EMF executives were bickering amongst themselves and then turned on Fred Fish accusing him of manipulating stock prices to affect a buyout. Fish was able to appease the trio by purchasing substantial shares of EMF’s stock but just months later tempers flared again. This time Fish turned to the courts but EMF stood their ground. The outcome, ironically, was that Studebaker purchased the remaining EMF stock thereby gaining complete control of the concern and acquiring the automotive manufacturing facilities they had long desired. Now that Studebaker owned EMF, a little reorganizing was in order. The buyout had left Studebaker laden with debt and Fish needed to expand factory facilities. To this end, EMF and their subsidiaries7 were 'merged' with Studebaker Brothers Manufacturing Company to form The Studebaker Corporation on December 31, 1910. Two months later, on February 14, 1911, with the assistance of the banking concerns of Goldman, Sachs and Lehman, The Studebaker Corporation was incorporated under New Jersey law. $43,500,000 worth of stock was authorized and Studebaker entered a new era.
The new corporation was organized basically as before. J. M. was President and Chairman of the Board and Fred Fish was First Vice President. Joining them from Underwood, the typewriter manufacturer, was Albert Russell Erskine, the new Treasurer. With military efficiency Fish and his associates set about repairing damage and building a corporation. The EMF ‘20’ that had caused so many problems was pulled off the market to correct design problems. In fact all production was halted in order to permit redesign. Electric vehicles were dropped completely and Garford was sold to Willys-Overland. J. M. then sanctioned a manoeuvre that turned into a public relations coup. Mechanics were sent out to every EMF ‘20’ owner and the bad transmissions and other parts replaced. Accompanied by a great deal of advertising, the good will generated by this service undoubtedly exceeded the $1,000,000 cost. When the 1911 models resumed sale, there were more surprises. They now carried no other name than Studebaker. More importantly, prices were cut and generous warrantees were included. And it was all announced in a national ad campaign. The public was delighted and the competition nervous. When 1911 drew to a close 22,555 cars had been sold grossing over $28,480,000. Things had never been better but significant change was on the horizon.
The power base at Studebaker was beginning to shift. Key positions were being filled from outside the family even though sons and sons-in-law continued to occupy some executive posts. A. R. Erskine, who had joined the firm in 1911, distinguished himself through his organizational skills, and rose to First Vice President by 1913. Harold S. Vance came to South Bend from EMF, Detroit (at Erskines urging) to serve as Assistant Treasurer, thus beginning his ascent. In 1915, the inevitable came to pass as J. M. stepped aside assuming the title of ‘Honorary President’. Eager to enjoy his golden years, John Mohler allowed the next generation take the helm. In July of 1915, Erskine stepped up as President and Fish became Chairman of the Board.
In 1914, Europe was at war and urgent orders for war materials began to pour into South Bend. Although the United States would not enter the the ‘Great War’ until 1917, Studebaker became involved when the fateful shot still echoed in Sarajevo. Late in 1914, the British Government placed an order for 3,000 horse drawn wagons (the horse still being an integral component of land warfare). Later they added an order for 20,000 sets of six horse artillery harnesses and 60,000 artillery saddles to be delivered in 20 weeks. Studebaker shipped the completed order in 16 weeks. Orders continued coming in from England as well as France and Russia. As the war stalemated in the trenches, the types of equipment sought changed. Equipage for horse mounted troops and horse drawn artillery was replaced by requests for water wagons, ambulances, artillery carriages, bayonet scabbards, staff cars and, late in the war, caterpillars. In 1917, when America finally weighed in, Erskine sent a telegram to the White House placing Studebaker at the Presidents disposal, the first auto maker to do so. As in previous wars, Studebaker selflessly supported it’s government, and as before made little in the process. Erskine wisely looked ahead and was making postwar preparations even as Doughboys were departing for France. He not only had designers working on new cars, but had architects planning new factory facilities. As the the nation embarked on the ‘World War’, another era of Studebaker came to a quiet and dignified close. On March 16, 1917 John Mohler Studebaker passed away at his home. He and his brothers had built an industrial giant from nothing and after his passing, capable and dedicated people would take the business to even greater heights.
The United States came through ‘The Great War’ with a sense of accomplishment. We had asserted ourselves on foreign shores and now it was time to resume the ‘pursuit of happiness’. By 1919, horse drawn vehicle production was curtailed except for farm wagons and in 1920 Studebaker sold the wagon works to The Kentucky Wagon Mfg Co of Louisville. In so doing, Studebaker became the only wagon maker to successfully transition to automobiles. Up until 1920, all of Studebaker’s automobiles were being built at the former EMF factories in Detroit. Erskine’s pre-war plan to expand the South Bend factory had to be put on hold til war’s end with facilities only partiality complete. In march of 1919, construction resumed and by April of 1920 Plant 2 began the production of automobiles in South Bend. Plant 2 was an industrial show piece where most everything required to assemble cars was fabricated on site. The Detroit plant continued to produce the majority of Studebakers cars but, plans were made to eventually move a larger share of automobile assembly to South Bend. For the next decade, Studebaker built it's reputation around a line of six cylinder vehicles that vitalized it's growth. The `Big Six' was the deluxe series. It had a 60 hp engine and was offered as a tourer, sedan or coupe. The `Special Six' series was similar but was priced lower with a 50 hp engine. The `Light Sixes' were slightly smaller and economically priced with a 40 hp engine. Growth with Erskine at the helm was exceptional and the popularity of the sixes was evident as 51,000 automobiles were sold in 1920, 65,000 in 1921 and 150,000 in 1923. Commenting on the Sixes, Erskine said "these are the cars that made Studebaker famous".
In 1926 the Detroit plant was finally relocated to South Bend. The man in charge was Harold Vance, who had been General Sales Manager since '23. With the move, he was promoted to Vice President for Production and Engineering and elected to the Board. That year another important addition was made to the executive staff. Out in Los Angles, a gentleman named Paul Hoffman had built the largest and most successful dealership in the country and was invited to South Bend to become Vice President in Charge of Sales. With ample profits coming in, Studebaker sought to expand it's established line of models. Seeing the success of Ford’s Model-T and responding to consumer research and requests from dealers (even in Europe), Erskine felt Studebaker should enter the low price market and accordingly had engineers develop the ‘Erskine’. This handsome, little car, introduced in 1927, had a 40 horse power engine delivering 60 m.p.h. and 30 miles to the gallon but it was never the success it was hoped to be. A short engine life and a significantly higher price tag than it’s competitors added up to poor sales and the Erskine was discontinued within three years. Albert Erskines venture in the opposite direction would prove to be more fruitful.
1928 was a banner year for Studebaker. The poor showing in the small car market the previous year, would be offset by a development just coming to fruition. Concurrent with the little ‘Erskine’, Studebaker had been working on it’s first entry into the 8 cylinder market. Chief Engineer Barney Roos, who had just joined the company, was given the task of building a big 8 cylinder car and he gave Studebaker a genuine classic, the President 8. These large, well appointed cars utilized Studebakers first high compression engines and they were noted for their roominess, style and speed. As the model continued into the early 30s, it’s lines and amenities became even more refined. What's more, with a price tag around $2000, they were within reach of those looking at mid-priced cars. Noted for performance as well as style, Presidents established over 100 records for speed and endurance, some of which stood more than three decades later. That same year, another companies misfortune turned to Studebakers advantage. The prestigious luxury car maker, Pierce Arrow was desperately short of capital and approached Erskine with a proposal to merge. Realizing the prominence this would bring, he readily agreed and the deal was closed4. Studebaker and the rest of the country approached 1929 stable and prosperous.
As the 20’s drew to an end America enjoyed unparalleled affluence. 1929 began on a financial upswing reaching a peak in late summer when the stock market topped out at an all time high. Then, early in October, stock prices began to drop. By October 22, banks and corporations nervously called in outstanding loans. Stockholders reacted in panic and frantically sold their holdings. Within two days, on ‘Black Thursday’, the New York Times carried the headlines “PRICES OF STOCKS CRASH IN HEAVY LIQUIDATION, TOTAL DROP OF BILLIONS”. In an instant, the nations wealth seemingly vanished. Studebaker had weathered many recessions and depressions in its history and Erskine was confident the company would survive another. Even as conditions worsened he continued to express his belief that the market would eventually right itself and business would return to normal. Early on he was encouraged in this sentiment by positive reports from dealers.
To keep the corporation strong while conditions improved, he authorized payment of substantial dividends on Studebaker stock. When things failed to improve, he continued to be optimistic and pay high dividends. To further aid in recovery he decided to re-enter the low priced car market, still convinced, even after the failure of the ‘Erskine’, that small cars would make Studebaker. He acquired a design from Willys-Overland and designated it the ‘Rockne’ setting up a separate division for its manufacture and sales. The ‘Rockne’s’ sales performance however, was even more dismal than the ‘Erskine’ and was discontinued the first year. By 1932 Studebakers sales had dwindled and its liabilities had well overrun its assets. Frantic to recover from an ever worsening predicament, Erskine sought a merger with the White Motor Company, a truck manufacturer. $14,000,000 in notes were issued to finance purchase of 95% of Whites stock only to have the the merger blocked by some of White’s stockholders. Deeply in debt and unable to make commitments, the Studebaker Corporation was placed in receivership on March 21, 1933. On July 1st, Albert Erskine, despondent and broken, took his own life.
Harold Vance and Paul Hoffman, of Studebaker, and Ashton Bean of White Motor Company were appointed by the courts to be trustees in receivership. Their approach to recovery would prove to be much different than that of their predecessor. The first order of business was to inform the public that the company was still alive. Their released statement said, in part that “Studebaker carries on . . . The great South Bend plants of Studebaker, closed since the announcement of the bank moratorium, reopen Tuesday, March 21”. And open they did. During April, more than 3,800 cars were built and the company showed a profit of $20,000. While this was certainly positive it would not salvage the business. Debt was in the millions and running an auto firm took millions more.
The most immediate need was retooling for the next years models. In order to increase money on hand, Pierce Arrow was sold for $1,000,000 cash. Vance and Hoffman then sought to further boost capital by going to the banks. The banking firm of Lehman Brothers, long associated with Studebaker, and seeing that the company and its new management had the ability to carry on, facilitated re-incorporating under Delaware law. The trustees then concerned themselves with labour. Both men were adamant that their work force be content and well paid and to this end, in mid 1933, allowed the United Auto Workers to unionise their plants. The Studebaker Chapter of the UAW would come to be known as Local 5. With the liquidation of the White Motor Company stock, Vance and Hoffman finally succeeded in building their working cash to almost $6,000,000. On March 9, 1935, Studebaker Corporation became the only automobile manufacturer to ever be released from receivership.
Being freed from the courts was one thing; restoring Studebaker to its former state was quite another. To affect a complete recovery, Vance and Hoffman realized that production numbers would have to be vastly increased. They also realized that achieving those numbers meant venturing into an area where Studebaker had failed twice before, the low-priced market. So in 1935 Studebaker embarked on a gamble. It aimed to produce a new, inexpensive car to be known as the ‘Champion’ and a large portion of ready capital was devoted to its development. Requiring four years and $4,000,000 to complete, Studebaker took care to ensure that the ‘Champion’ was not only inexpensive, but attractive and well engineered. Raymond Loewy7 designed the ‘Champions’ graceful interior and exterior while W. S. James (Roos’ successor) attended to the engineering. It was significantly lighter than other cars giving it improved gas mileage and even included such features as climate control. When the ‘Champion was introduced to the public, in 1939, it was an instant success. Sales over the previous year nearly doubled with 72,000 units being built. By the end of the year, Studebaker was, once again, the largest independent auto maker in the country.
By the end of 1939 prosperity in America had begun to improve as the country steadily emerged from the depression. Employment was was up and optimism was returning to daily life. At Studebaker, the resounding success of the Champion had given the company new life. Throughout the rest of the world though, the situation was grave. Hitler's armies were rolling over Europe while the Japanese consumed Asia and the Pacific. Foreign orders for war supplies were again coming into South Bend. In 1939 Studebaker sold large numbers of K30 3 ton trucks to France, Belgium and Holland who adapted them to military use until the fall of the continent in 1940 .
China too needed trucks but purchased chassis and fitted their own cabs and bodies and used them on the Burma Road. Even with tensions mounting as they were, most Americans opposed the idea of becoming involved in a foreign war. Congress too, resisted any suggestion of involvement but prudently increased defence funding. With production costs rising and certain that civilian car production would be reduced, Vance actively sought military contracts. When the U. S. Government approached several auto makers seeking proposals for military trucks, Studebaker created a truck based on their M series and early in 1941 was given a contract to begin production. In December 1941, as the next years models were just coming off assembly lines, peace for America finally ran out.
When America entered the conflict, the nations industrial base quickly shifted to making the implements of war. Studebaker's contribution to the war effort would be in the production of three principle items, trucks, aircraft engines and a little tracked vehicle called the Weasel. Shortly before the war, Studebaker had already started limited production of its US6 truck for the Army. When passenger car production was halted on January 31, 1942, truck assembly was stepped up reaching 4,000 per month by March. Powered by a six cylinder Hercules engine, the US6 trucks were produced in four and six wheel drive versions. 200,000 of these rugged vehicles were built between 1941 and 1945 for the US and SovietArmies.
Prior to Americas entry into the war, Studebaker had contracted with the government to manufacture large numbers of the Wright Cyclone R-1820 radial engine. Due to the perceived urgency in the last months before the war, the government financed construction of three new factories to be located in South Bend, Fort Wayne and Chicago. By June 1942, the South Bend plant was completed and fully operational. Built under license, the 1,200 horse power engines were used in the famed Boeing B-17 Flying Fortress. Studebakers output of these critical engines would top 63,000 by wars end.
The Weasel was originally conceived as a snow vehicle and when Studebaker received the contract in May of 1942 they immediately went to work. Utilizing a Champion 6 cylinder engine and other automotive components, the first version carried the Army designation M28. The initial reactions to the Weasel were luke-warm as it had questionable handling characteristics in snow and frequently threw it’s tracks. When it was discovered however, the little vehicle could go almost anywhere, Army officials were encouraged. Studebaker set about redesigning it moving the engine from back to front and improving other design flaws. The new version, designated the M29 worked beautifully on all terrains. Used in Europe and the Pacific, the military relied heavily on the Weasel and continued their use after the war. The last version, the M29C, was amphibious and found extensive use in the Pacific. By VJ day, over 15,000 Weasels had been built.
As the war neared an end, industry began to prepare for peace. Studebakers post-war transition however, began long before hostilities ended. Realizing the first auto maker to offer a completely new model would reap substantial benefits, Studebaker set a goal to be first. As early as 1943 a few individuals in the company were assigned to design and planning for the 're-conversion' to passenger cars. Tooling for the new model, it was realized, would take time and could not be accomplished while the war was still going on. It was decided therefore, to initially produce the 1942 models with superficial changes once preparations for a new model could begin.
As the war neared an end it became clear that 1947 would be the target year for a new model. In December of 1945 production of civilian vehicles resumed with the '46 Skyway Champion, in reality the reworked '42. Studebaker produced a little over 10,000 '46s before shutting the lines down three months later to begin preparations for the '47 production run. By April of 1946 the all new '47s were announced with the slogan “First by far with a post-war car”. Studebaker took body styling into a new domain with the ‘47s. Pronounced fenders were replaced by a streamlined body and the passenger compartment of some models featured wrap around rear windows. The new shape inspired the famous comment that one couldn’t tell if it was coming or going. As expected, they were a hit with the public and demand was phenomenal. Total sales for 1947 neared $268,000,000 for a profit of $9,100,000. Studebaker had come a long way since receivership, fourteen years earlier.
The immediate post-war years for Studebaker would be unrivalled in the companies history. With profits rising and demand at an all time high, production capacity needed to be increased. In the post-war years raw materials, especially steel, were still hard to obtain and as a consequence, Studebaker purchased the Empire Steel Corporation of Mansfield, Ohio in 1947. That same year a new factory was acquired in Hamilton, Ontario and in 1948 one of the aviation plants used to make bomber engines during the war was converted to vehicle manufacture. 1948 would also bring a major management change when Paul Hoffman departed the company on a five year leave of absence to head the European Recovery Administration, part of the Marshall Plan.
In Hoffman's absence, Vance assumed the duties of both President and Chairman of the Board. By 1950 America was at war in Korea and so was Studebaker. This time it would not be the all effort of the decade before and for most Americans, life went on as usual. That was also the year of the bullet-nose design, arguably the most recognizable Studebaker ever made. The bullet-nose created quite a stir when it was introduced, prompting both praise and humour. In the end, the public seemed to love it because Studebaker production reached a peak that year with 268,229 cars, the most the company would ever build in a single year.
1951 was charged with anticipation. The next year would be Studebakers centennial and preparations were well underway but the big news for now was a new engine. In its 99th year Studebaker introduced their first overhead valve V-8. Initially offered in the ‘51 Commander, the new engine displaced 232 cubic inches and developed 120 horse power. The public loved the high performance engine and Commander sales were understandably brisk. Total production that year however, tapered. In fact sales figures for 1951, presented a paradox. For the first time its history Studebaker grossed over $500,000,000 but profits were down to $12,500,000, half of the previous years net. This was due in part to wartime price controls but more importantly a substantial amount of the years sales revenue was derived from government contracts. Only in hind sight can we see the beginning of a trend that would lead to eventual downfall. For now though , everything seemed fine and the coming year would bring a milestone and celebration.
With the arrival of 1952 Studebaker celebrated its first 100 years of business. Raymond Loewy and Robert Bourke planned to introduce an all new design for the centennial year but delays necessitated going with a more conventional design. Nonetheless the celebration went on and Studebaker was honoured throughout the country, even being invited to provide the pace car for the Indianapolis 500. Celebration aside, the ominous trend of the year before would continue in 1952. On the surface everything appeared fine. Total sales for the company reached a record $586,000,000 that year. But beneath the apparent prosperity automobile sales continued to slump and profits amounted to a mere $14,300,000. Government contracts still accounted for high sales figures. Over the last century government contracts had always allowed the company grow and indeed, many of these contracts came at crucial times for Studebaker. In the past though, Studebaker had always terminated government dealings and returned exclusively to vehicle production as soon as they could. Studebaker would go on, over the next few years, to build some of the most attractive cars ever conceived. It would also continue on a course that would lead to its eventual demise.