By on November 1, 2006

studenbaker22.jpgThe new CEO of the company walked into the boardroom. The mood was grim. Recruited from another company in another industry just a few months previously, he carried bleak news. The automaker had just reported the largest third quarter loss in recent history. Their most profitable products, which had been flying off dealer lots, were dead in the water. Strikes at suppliers had crippled production of the few products that sold well. Market share was evaporating, and operations in Europe were drowning in red ink. Worst of all, recent downgrading of their bonds had hurt the profitability of their all-important finance unit, which had underwritten the car business for years. It was time for some bold moves.

The board of directors listened to the bad news as the patriarch of the founding family stared down at them from a portrait on the wall. When the CEO finished, the directors mulled over their options. No matter what course they chose, the lives of thousands of employees would be affected. The economic health of the company’s home town depended on them. It was a heavy burden.

The year was 1963. The company was Studebaker. The CEO was Sherwood Egbert, formerly of McCulloch Chainsaws. After due consideration, the directors decided that there was no economic justification for remaining in the car business. They initiated plans to ease the company out of the automobile industry and expand its portfolio of profitable businesses. When the last Studebaker eventually rolled off the assembly line, the company’s stock almost doubled. Studebaker went on to become a very profitable company, eventually merging with other conglomerates.

Four-and-a-half decades later, Ford stands at the same crossroads. The Blue Oval just reported the worst third quarter earnings in over a decade-and-a-half. Market share has dropped dramatically, by over a third. Consumers have deserted the profitable trucks and SUVs that drove Ford to the heights of profitability. In the meantime, buyers are lined up none deep for the Ford 500 and its clone, the Mercury Montego. Overseas losses continue, with the Premium Automotive Group losing an astounding $600m.

Wall Street’s lack of confidence in Ford’s automotive endeavors has resulted in the continued downgrading of Ford’s bonds. This raises the cost of capital to Ford Financial, which is the profit engine of the Ford Motor Company. Without profits from Financial, Ford would not be a financially tenable organization. This last quarter, profits from Ford Financial were off about $400m, mainly due to the higher cost of borrowing.

The solutions to Ford Financial’s profit problems leave Ford with a Hobson’s choice. If Ford sells a controlling share of Financial to an outside company (a la GM and Cerberus), the credit ratings of Financial’s bonds would rise dramatically. But Ford would then reap only half, or less, of the profits. And it’s entirely possible that the finance unit’s new owners might find better uses for those profits than propping up FoMoCo.

If, on the other hand, Ford allows the deficit-ridden automobile operations to continue to drag down the credit ratings of Ford Financial, less and less cash from Financial will be available to prop up Ford. Declining profits will decrease the value of Ford Financial. If and when Ford is forced to sell it off just to meet the payroll, the finance company will be worth a fraction of its current fair market value.

And then there’s Ford’s seriously deteriorating relationship with its suppliers. A large number of companies that Ford relies on for continued production of its automotive products are in bankruptcy: Delphi, Tower, Dana, Dura, Federal Mogul and Collins & Aikman; to name a few. A failure of any of these mission critical manufacturers would cause an immediate shutdown of one or more of Ford’s production plants. Ford’s relentless pressure on prices has weakened its supply base to the point where continued and reliable production is a tenuous supposition.

Recently, Ford had to shut down its Fusion/Milan/MKZ plant, when Collins and Aikman (C&A) refused (for one shift) to supply parts at a loss. C&A, bankrupt, felt they simply had to have more money to cover their costs. Widely but silently applauded in the supplier community, the move could well be the first in a series of similar supplier “strikes." Just when Ford needs more cost savings, their own supplier base, already destitute, will demand, and get, higher prices. Ford has already deplored the “serious harm to the relationship” caused by C&A’s actions, but it’s clear that relationships with Ford don’t pay the bills.

In response to these issues, Ford’s new CEO Alan Mulally is calling for "incremental continuous improvement.” Meanwhile, Ford’s board of directors is heading towards a sad recognition of the truth: the automaker doesn’t have a viable plan for making cars and trucks at a profit, or the time to devise one. At that point, it’s only a matter of time before Ford thinks the unthinkable: following Studebaker into becoming a multi-national financial company.  

Get the latest TTAC e-Newsletter!

74 Comments on “Ford Death Watch 15: Those who do not learn from history...”


  • avatar
    maxo

    Before we get the first thread flamer whining about the number of death watch articles, let me say that Bob’s article here is an entirely plausible destination for Ford. I won’t comment on the probability, but the plausability is definitely there.

  • avatar
    SuperAROD

    People were putting Boeing’s commercial airplane business in the grave just a few years ago, too. Mullaly not only helped turn Boeing around but helped put it back to #1. Now it is the “can do nothing wrong” Airbus folks who are hoping to survive.

    Give the guy a chance. Now that Mr. Ford is out of the way, perhaps a real CEO can do something about Ford’s precarious position.

  • avatar

    Ah, but Mr. Ford is NOT out of the way.

  • avatar
    starlightmica

    I mentioned this on another thread, but the first paragraph is similar to what Fiat just went through a few years ago, before they pulled a non-automotive CEO who’s done a good job so far.

    Of course, it doesn’t hurt that GM gave up $2 billon to get things started…

    Funny, Fortune has their own take on this situation:
    http://money.cnn.com/magazines/fortune/fortune_archive/2006/11/13/8393169/

  • avatar
    tms1999

    The tense relationship with the (already stressed or bankrupt) suppliers is understandable: the pressure is unfair and unwarranted, the current Ford demise is not their fault.

    Ford’s only hope is to build (and sell) more cars until the overwhelming legacy cost per car is under the water line, and so, each car sale turns a profit.

    They used to do it.

    Or maybe I should not be that optimistic. All they need to do is maintain a cushion of cash good enough in the bank and sell just enough car so they don’t bleed money.

    That will keep them alive for a while.

    But unlike the airline industry (whose costs are just airplanes and jet fuel) Ford kinda needs some cash to r&d new models.

  • avatar
    Steve_S

    Plausible yes but I don’t think probable. When faced with true do or die Ford will do. You’ll see Mercury get closed and perhaps Ford’s stake in Mazda sold as well as all of PAG except Volvo. Ford will close more plants and renegotiate with the UAW. This will take years. Eventually they will stabilize much smaller than they are now while moving as much as possible of their plants to Mexico, Canada and elsewhere. I would be very surprised if Ford went the way of Studebaker.

  • avatar
    GodBlessTTAC

    i thought ford europe was doing well?

  • avatar
    cretinx

    Here’s a novel idea – How about Ford builds a car people want, and not a poorly made, ill fitting penalty box with the driving dynamics of horse-drawn wagon?

    My family has owned a Sable, a Focus, and an Explorer, and I have personally owned 3 Mazdas (2 pre-Ford, one post-Ford) – every car with Ford’s touch that we’ve had has been a giant piece of crap (My RX-8, though a Mazda, had typical Ford cost-cutting measures – tons of trim and interior bits were cheap and fell apart – I ditched it for my rock-solid Z4) – the only saving grace was that they were dirt cheap appliances for transportation, like a washing machine cleans clothes.

    Ford can’t make a profit on products people don’t want. BUILD ME A GOOD CAR AND I WILL BUY IT FORD! PLEASE! I’d love to buy your products! Just give me a reason to do so.

  • avatar
    Luther

    Wow.

    Imagine if the economy goes into recession now and the last 2 years was as good as it is going to be for awhile.
    I bet that is Ford’s biggest fear.

    What is the profit margin on the Focus, Mustang, Fusion, Edge ?
    How many of these cars does Ford have to sell to stay solvent in the U.S. ?

  • avatar
    Sajeev Mehta

    Give the guy a chance. Now that Mr. Ford is out of the way, perhaps a real CEO can do something about Ford’s precarious position.

    Going on with Bob’s history lesson: you always play second fiddle to the Mr. Ford in charge of the family business. If you don’t know your place, they show you the door. Just ask Lee Iacocca.

    The Studebaker connection is shocking, but seems to be more and more relevant as the months go by. Great article, Bob.

  • avatar
    g4zilla

    From July 1962, Motor Trend Magazine, article by Chuck Nerpel:

    “Avanti, freely translated from Italian means…forward!, which is just where Studebaker’s president Sherwood Egbert hopes to lead his company with an exciting new 1963 automobile. From ‘doodle-to-drawing-board-to-prototype’ in less than a year is quite an accomplishment for any automobile maker who is designing a production car, but Studebaker was able to push this program and still incorporate into the Avanti several major ‘firsts’ for the industry.”

    Oh man…Ford is so dead.

  • avatar
    racebeer

    Really sad ….. I think Mulally has the talent to do the job and make the right decisions, but there is NO WAY Billy-Bob Ford will let him do what is required. He will wind up neutered just like Mustang Lee. You can’t upstage the boss’s boss’s boss’s nephew……….and survive for long.

    FoMoCo = RIP

  • avatar
    BostonTeaParty

    It would be interesting to see if Jaguar was taken out of the PAG equation, how much money they did actually make/lose. I wouldn’t be surprised to see that the majority of the $600 million loss coming directly from them. Volvo surely made a profit and Aston? Landy wasn’t doing that badly was it, even though its tied into Jaguar?

  • avatar
    BostonTeaParty

    FoMoCo = FuBaR?

  • avatar
    philbailey

    Sadly, the Avanti was a great car of its era but it could not stick a patch on the hull of a sinking ship.
    For that matter, so are the Mazda3 and Mazda6 of today for the “job one” they are intended to perform.

  • avatar
    SuperAROD

    If “Billy Bob Ford” plays the “business as usual” game he will be the Ford that ruined the family business….

    Somehow I would like to think that Mr. Ford is smart enough to realize that the end could be near, and that if he doesn’t want to live in infamy he’d better not play the BAU politics game – he’d better let Mullaly do his freaking job.

  • avatar

    >>My RX-8, though a Mazda, had typical Ford cost-cutting measures – tons of trim and interior bits were cheap and fell apart – I ditched it for my rock-solid Z4

    It hurts to hear that. I drove one for a week and loved it. So responsive, and so spacious compared to other sports cars. I would have bought one if I didn’t consider the engine to be obsolete. (For various reasons, there is no way to get decent fuel mileage out of the Wankel. Anyone interested in the details can email me at [email protected], and I’ll email you the article I wrote about this.)

  • avatar

    Interesting article Mr. Elton.

    I still think Ford has a viable vehicle production business; just maybe not a CAR production business.

    Let’s face it. As bad as Ford’s car reputation is, it has to be admitted that they still have a giant truck-buying base and way too much brand equity to just throw away.

    It can be done, but Ford’s got to move fast to recognize the reality that they may have to focus on defending their truck business (leave the cars to Mazda and Volvo excepting a token Mustang car) and shrink their business accordingly.

  • avatar
    oboylepr

    SuperAROD,

    Wrong on all fronts. BCA was never in as dire a condition as Ford is now and was never even close to disappearing of the commercial aircraft stage. Boeing’s recovery in sales was only partly due to Alan Mulally. What saved Boeing was the superb products it is offering it’s customers. Things will continue on track for Boeing as long as it avoids another fiasco like the Air Force’s tanker procurment scandal. BTW, Airbus are not struggling to survive, I see that claptrap all the time on Airliners.net. As for Ford, it now has Mulally but lacks the products it needs to win back market share and as it has been said before, there are none on the radar never mind the horizon. Mr. Mulally is a talented engineer and salesman but he needs something to sell. Those that think that Ford will be another Boeing story are in for a disapointment. That being said, I hope and pray Ford, GM and DCX do not go under. I work for one of those destitute, punch drunk and anxious parts suppliers so I do not want any of them to die. They need to get real, Boeing’s only serious competitor is Airbus but Ford has competitors coming out it’s ying-yang with more arriving all the time. Just wait until ROC’s industrial engine is at full revs.

    OB

  • avatar
    Luther

    Ford’s second greatest fear: 2007 Toyota Tundra.

    Ugh.

  • avatar
    Kevin

    Ford Financial has surely done more harm than good. Is Ford a bank or a car manufacturer? The crutch of being a lending bank has allowed Ford not to evolve into a lean mean manufacturer, which now threatens to kill it. Smooth move, bean counters.

    BTW, as I posted last month, don’t be fooled by this month’s sales growth versus an atrocious month last year. November will look good also. But the December comparison will be a bitch.

  • avatar
    cykickspy

    Which one will go first Ford or GM?
    My money is on Ford, and as soon as one American icon is gone it will help the other 2 and could hurt the foreign auto builders… as I remember Toyota was afraid of that exact thing happening

  • avatar
    cykickspy

    Luther:

    Ford’s second greatest fear: 2007 Toyota Tundra.

    I dont think Ford has to worry about the truck or suv market… the tundra is no where near Ford or GM truck sales… besides Toyota can build a car yes, but a half decent truck?? In my opinion… not in a million years!!!

  • avatar
    Lyn Vogel

    David Holzman: “It hurts to hear that. I drove one for a week and loved it. So responsive, and so spacious compared to other sports cars. I would have bought one if I didn’t consider the engine to be obsolete. (For various reasons, there is no way to get decent fuel mileage out of the Wankel. Anyone interested in the details can email me at [email protected], and I’ll email you the article I wrote about this.)”

    I’ve driven both an ’04 and an ’06 RX-8 for a combined 1,800 miles. Mileage on the first was 22, the second 24. So apparently there is a “way.”

  • avatar

    The Tundra only has to be a [relatively] small success to hurt Ford. The last thing The Big 2.5 need is a price war in this segment. Methinks that’s exactly what they’re going to get.

  • avatar
    Lyn Vogel

    racebeer: “Really sad ….. I think Mulally has the talent to do the job and make the right decisions, but there is NO WAY Billy-Bob Ford will let him do what is required. He will wind up neutered just like Mustang Lee. You can’t upstage the boss’s boss’s boss’s nephew……….and survive for long.”

    So Ford brought in Mr. Mulally to take over the exec position held by Mr. Ford…in order to not allow him to do the job?

    And you’re comparing the Ford of today with the company of numerous decades prior?

    And what’s with the “Billy Bob” inanity?

  • avatar
    CliffG

    I really wish whenever I thought of Mullally I didn’t think Scully, and, boy, that really went well for Apple, eh? Also, the BA/Airbus comparison for Ford would look a lot better if the government was sliding huge dollars under the doormat while the only competitor of Ford was GM. Oh.

    The captive finance subsidiary has been deadly for both GM and F for the simple reason that it allowed the finance guys to move to the top of the pyramid and the easy profits masked the fact that the underlying products were not all that good.

    In regards to the parts suppliers and Ford (applies to GM also), the horrifying price squeeze Ford put on those guys keeps reminding me of that story about the frog and the scorpion. I just can’t figure out which one is which…. Or is that the UAW and F?

  • avatar
    Steve_S

    >cretinx:
    A quibble about the RX8:
    I’ve owned Ford and Mercury before, 12 years worth. The RX8 has no Ford in it. I also average around 20mpg which is fine by me. You run it ragged you will get poor mpg same as if you ran a mustang ragged you’d get the same.

    The RX8 requires a little extra attention but then rewards with a unique design and engine. I’ll agree that the Z4 looks like a sweet machine and I wouldn’t mind having one but if you don’t need back seats to begin with then there is no need to get an RX8.

  • avatar
    Captain Tungsten

    Interesting and thought provoking. In fact it was so thought provoking, that it provoked me into trying to find out what the history of Studebaker’s sales and market share was during that time. Some superficial googling didn’t uncover that information, but did uncover that this the third (at least) article that Bob Elton has written about the parallels between Ford and Studebaker.

    https://www.thetruthaboutcars.com/?p=1165

    https://www.thetruthaboutcars.com/?p=1212

    So, I’ll ask the expert. What was Studebaker’s position at the market in their heyday in the early 50’s, and where was it when they finally pulled the plug? And what fraction of their revenue was auto related? It seems to me that the Ford BOD doesn’t have the same options that Studebaker did, since they are nowhere near as successfully diversified. Maybe Jacques Nasser was on to something when he tried that tactic in the 90’s.

  • avatar
    Studedude1961

    Studebaker’s market share during it’s heyday (approximately 1950…it’s highest postwar production year) was 268,099 cars in calendar 1950 and a grand total of 333,000 when Canadian production is added in. 1964 calendar year production was less than 50,000. Studebaker built 4,000 plus Avantis in total. Sherwood Egbert, ailing from stomach cancer, had taken a leave of absence and was replaced by the Studebaker Board by Byers Burlingame before U.S. production was suspended on December 9, 1963. I have no idea what modern Ford production numbers are, but I would imagine Studebaker’s best year might equal a two-month built at Ford today. While it’s fun and perhaps historically interesting to compare Studebaker and Ford, their sizes are so much different that a similar comparison might pit Pop’s Downtown Hardware with the modern Wal-Mart out on the highway.

    But this is where the comparison gets interesting: When rumors surfaced in South Bend that Studebaker was pulling the plug on automotive production, one line worker told a reporter from the South Bend Tribune that both he and the reporter would be “dead and gone” before such an industrial might as Studebaker called it quits. That statement sounds very much like what we sometimes here from Ford defenders here on this forum.

    Ford has built many wonderful cars and trucks and the company has been left for dead at least two times, and with reason. In the immediate postwar years it really was no secret that Ford, with antiquated products, might not make a comeback under young Henry Ford II. In the late 1970s/early 1980s folks left the baroque offerings of Ford in droves in favor of cleaner styled imports. Ford weathered both storms with new and innovative products. The 1949 Ford and 1986 Taurus saved Ford but were already on the drawing board as things got tough. Does Ford have similar products on the drawing board today?

  • avatar
    racebeer

    Lyn V …. maybe my sarcasim didn’t sink in. What I am talking about is exactly some of the same problems RF has spoken of numerous times at the big 2.5 … a DEEP corporate culture that has historically been adverse to outside ideas. There have been a number of presidents come and go at Ford that didn’t have the Ford last name. They were all fired by a Ford because they didn’t toe the company line or didn’t drink the Kool Aid. Now, if they really let Mulally do the job, that’s great. I’m just saying that history doesn’t bode well for his success. As for the Billy-Bob comment, that again speaks to the generations of inbreeding that in my opinion gives Ford a huge handicap relative to change.

    Now to the Tundra — I predict they will maybe get 150,000 sold if they are lucky. I don’t care if it is made in Texas or not, the typical P/U truck buyer just isn’t going to jump ship that quickly. It doesn’t matter that they have a Bass ProShop sponsorship, run in the Craftsman Truck series, or are sponsoring a Country/Western band’s national tour ….. truck buyers are pretty loyal.

  • avatar
    Rastus

    We keep hearing how “terrible” a bankruptcy at GM or Ford will be. How “devastating” it will be to all those poor individuals and local communities, etc.

    But I just have to say you are not thinking from the right frame of mind. A bankruptcy at Ford and GM will actually be GOOD!

    Just think about all those recessions manually (ie, purposefully) induced by the Fed. Yes, they most certainly DO occur. They will manually induce foreclosures, bankruptcies, plant closures, liquidations and even suicides…all to preserve “the dollar”. You don’t understand…”you” are not their interest. The banks are their interests…and what is good for the bank will oftentimes lead one to blow his face off with a shotgun due to financial ruin. And that ok…

    So …my thesis is that we need to look at this whole SNAFU from a “macroeconomic” perspective. Plant closures, defaults, foreclosures, personal financial ruin….it’ll be great for the economy! Not for “their” interests…but for “our” interests.

    Think about it: For all you capitalists, property values will become dirt cheap…you can now afford that nice piece of real estate in downtown Detroit! You can buy heavy equipment from FoMoCo and GM for 10 cents on the dollar once liquidation occurs. And the fact that fewer of their junk products will be clogging the US highways is all Good!!

    And if they live to see another day, well, they will have caught a good case of religion and will actually LISTEN to the customer!! Is that what we want??? YES!! Less air pollution from their gas hogs, less state income tax to contend with so state legislatures will be forced to streamline and become more efficient…

    …it’s all part of the “cleansing”.

    Don’t you want to be clean? I do!!

    And more importantly, if GM and Ford do end up liquidation…and there IS a mad rush of suicides…there will be NO HEALTH CARE ISSUES!!!

    Problem Solved!

  • avatar
    roadracer

    Ford’s relentless pressure on prices has weakened its supply base to the point where continued and reliable production is a tenuous supposition.

    Agreed, but Ford didn’t act alone.

  • avatar
    Steven T.

    Bob Elton:

    I appreciate any writer who attempts to draw upon automotive history to inform Detroit’s present predicament. Your essay is gripping and provocative, but without more information I can’t buy into all of the parallels you draw between Ford and Studebaker. Here are some questions:

    You suggest that Studebaker’s “operations in Europe were drowning in red ink.” What operations were those? I thought that Studebaker didn’t have any automotive operations outside of the western hemisphere, and the non-automotive side of the company earned a solid $12 million profit in 1963 (Time magazine, 12/20/63).

    You state that the “worst” part of Studebaker’s financial situation was rooted in a downgrading of corporate bonds that hurt the profitability of an “all-important finance unit” that had “underwritten the car business for years.” I haven’t seen that argument before; could you provide more details?

    You make reference to supplier strikes that “crippled production” of Studebaker’s “most profitable products.” Are you referring to a late-1962 strike at a supplier of doors for Larks (Time, 12/14/62)? If so, on what basis can you argue that the badly aging Lark “had been flying off the dealer lots”? Wouldn’t it have been more relevant to note that sales tanked in the fall of 1963 despite a last-gasp restyling because people were afraid of buying an “orphan”?

    You imply that the crucial decision to “ease the company out of the automobile industry” was made at that 1963 board meeting. Wouldn’t it be fairer to say that the board had been moving in that direction since the late 1950s? You say Egbert had become CEO a few months prior to the 1963 board meeting, but was he not recruited back in 1961 because his predecessor, Harold Churchill (a “car guy”), hadn’t shown sufficient enthusiasm for diversifying the company (Time, 4/12/61)? And isn’t that much the same reason why Egbert was replaced by bean counter Byers Burlingame prior to the 1963 board meeting when it was decided to cease U.S. auto production (Time, 12/20/63)?

    “Studedude” says that Egbert was sidelined because of illness, but Time reported that he was fired because he “insisted on staying” in the auto business. Burlingame was then promoted to CEO with marching orders to pull the trigger. The board decision would thus appear to have been a fait accompli. Do you disagree with this interpretation, and if so why?

    In a previous post you noted that “a founding family maintained ultimate control of both Ford and Studebaker.” Are you suggesting that this was the case in the 1960s? If so, was the Studebaker family in favor of the board’s diversification strategy, or did it side with car guys Churchill and Egbert?

    I’m really not trying to be pedantic. You are offering an innovative interpretation of Studebaker history. I’d like to see more of the factual roots of your logic.

  • avatar
    philbailey

    How much oil are you RX8 guys pouring into your engines? One quart at everyy gasoline fill up? That seems to be about the average.

  • avatar
    Pahaska

    Now to the Tundra — I predict they will maybe get 150,000 sold if they are lucky. I don’t care if it is made in Texas or not, the typical P/U truck buyer just isn’t going to jump ship that quickly.
    The roads here in central Texas are full of recent Tundras. Unless one does not need a HD/Superduty, the Tundra is very competitive and it is reasonable to believe that the company isn’t going under any time soon..

  • avatar

    You know it’s bad when somebody that doesn’t have a ‘deathwatch’ series on you declares what is essentially a deathwatch:
    http://money.cnn.com/magazines/fortune/fortune_archive/2006/11/13/8393169/index.htm?postversion=2006110108

  • avatar
    Sajeev Mehta

    The 1949 Ford and 1986 Taurus saved Ford but were already on the drawing board as things got tough. Does Ford have similar products on the drawing board today?

    I’m sure they have some good stuff in the pipeline, but I’ll bet today’s market conditions (Globalization, Legacy Costs, etc) are far worse than 1946 or 1983 ever was.

    If this product came out when the Five Hundred did, odds are nobody would nostalgically ramble on about the victorious Taurus, and there wouldn’t be a Ford Death Watch on TTAC.

  • avatar
    Lyn Vogel

    philbailey: “How much oil are you RX8 guys pouring into your engines? One quart at everyy gasoline fill up? That seems to be about the average.”

    Your attempt at humor notwithstanding, while the Renesis is designed to use a small portion of oil in its operation, my experience (again, over 1,800 miles in two cars) was that it used no noticable amount.

    Now back to the thread topic.

  • avatar
    cykickspy

    Rastus:
    just to inform you GM is starting to make its vehicles with the E85 motors which are capable or running on 85% ethanol (a renewable cleaner fuel) and 15% octane therefor they are cleaning up their act… We have to put pressure on the oil companies that make billions of dollars profit to create the infrastructure for this technology

  • avatar
    OverheadCam9000

    Both the GM and Ford DeathWatches are driven by finance, i.e. money out the door to buy supplies, pay the workers, taxes, etc. is BIG. Money coming in the door from sales is small. Savings in the bank is modest and shrinking fast(er).

    Maybe RF should shamelessly copy from the Bulletin of the Atomic Scientists and create a Default Day clock for both GM and Ford. Both are burning cash fast(er), and a day of reckoning with the bankers can be (crudely) calculated.

    As the old saying goes, the (financial) gallows concentrates the mind wonderfully!

  • avatar
    seldomawake

    I’ve driven both an ‘04 and an ‘06 RX-8 for a combined 1,800 miles. Mileage on the first was 22, the second 24. So apparently there is a “way.”

    Lyn, I prefer better milage than that. 24mpg is a little low by my standards for what would be my commute car. Now, as a weekend driver… that’s an excellent number. But the RX-8 isn’t really a weekend driver, IMHO.

    Considering how the RX-8 almost always manages to hijack conversation, folks at TTAC: how about a reivew or sumfink, to allow us to sink our teeth in?

  • avatar
    Joeypilot

    Well, add to that a customer with a 2003 Mustang GT with 30K miles on it develops a nasty clunk from the front of the manual transmission area. Service department manager says “It’s normal.” Well if that is normal I hardly think that they are going to sell many of their Mustangs or anything else. They should go out of business; perhaps that will wake up the other 1.5? Not holding my breath.

  • avatar
    jerseydevil

    When I go to car shows, I like to look at brands thet are no longer here. DeSoto, Edsel, Studebaker. Meybe they stopped importing, like Fiat, Renault, Triumph, Alfa, Lancia, Peugot. Lots of other brands and companies that folded, or morphed into something else.

    It might have been more fun to have alot of different cars to choose from, made by different companies – the roadways may have been more interesting.

    If Ford and GM fold, there will be even less to look at, as the wall-marting of everything continues. I would be a sad day.

    I still wonder why no one bought Studebakers, I think they are stunning, even today.

    These days, there’s lots more of the same, all in the name of cost savings, pity. Getting more and more difficult to get a unique ride. Cooper will sell you a thousand and one ways to make ur car different, a popular thing to do , it seems, but not the same thing.

    My fear is that there will finally be two car companies, sharing platforms. Boring. what will we car people do then?

    We need to encourage people to buy ford and GM products for no other reason than it wil be a diminished world for us to play in. Of course, it would be nice if they made a car someone wanted.

    Please put a trunk in the sky/solstice and make the top easier. They are absolutely beautifull designs.

    Please make a slab sided Lincoln Continental. I saw a mock up a few years ago at the Greenwich, CT concours. Gorgeous.

    It used to be that you needed to go overseas to get top flight design, we could do it here, if they get off their asses and actually hire designers. Have you seen the new Alfas? They are breathtaking.

    Just a few suggestions. I really don’t wanna be bored.

  • avatar
    Glenn A.

    While Studebaker did sell cars in Europe and I believe, even had CKD assembly operations in places such as Australia, and possibly even somewhere in Western Europe, the U.S. automotive market was a much more insulated place in 1963 compared to today, and Studebaker was much more of an American company with a Canadian operation (Hamilton, Ontario) and a few concessionaires which assembled cars from knock-down kits elsewhere, instead of international operations.

    The airline purchase made by Sherwood Egbert was a complete fiasco – he borrowed money to do it and then the airline completely flopped, which many Studebaker historians point to as “the last straw” for the bankers to support any more loans for Studebaker unless they gave up the money-losing operations (i.e. – AUTOMOBILES AND TRUCKS).

    No Studebaker family members were in higher management at the corporation after early last century. Studebaker did go into bankruptcy in 1933 and survived. White Motors (which survives to this day) attempted to merge with Studebaker just before this, but Indiana law precluded a buy-out of an Indiana registered company by a “foreign” corporation (White being registered as a corporation in OHIO, those dang terrorist Ohioans were at it even then! – joke – I’m joking!!!) Yeah, corporate law was very antiquated “back in the day”.

    It is not commonly known, but Studebaker had distribution rights to Mercedes-Benz (and also DKW Auto Union – precurser to Audi) cars in the United States from 1958 to 1965. It is even less commonly known that a Studebaker executive was in Bremen Germany to look at Borgward’s auto and truck operations (including Lloyd, Goliath and Borgward) with the idea of buying into the company to MAKE Studebaker a multi-national company, literally the day that the word came down of Borgward Group’s demise. This was in 1961.

    To answer someone’s question about the percentage of automotive biz vs. non-auto when Stude’s board shut down South Bend Main? It was about 50/50. I don’t know what Ford’s ratio is right now, but GM has sold off everything except the gold in their executive’s teeth, and have gone in the opposite direction – they’re going to be bust soon, sadly.

    Back to Dorf Motors – I mean Ford Motors – yeah, they are – to use the vernacular – SCREWED. I cannot see the company surviving AND continuing in the automotive business.

    There is even a parallel to AMERICAN MOTORS which had much more success in the 1980’s working with land and rentals (they rented some of their Southfield AMC Headquarters building out profitably, on purpose! I might add) – perhaps Ford Land can devolve from the main company and survive?

  • avatar
    Lumbergh21

    A rotary engine uses less than a quart of oil every 1,000 miles. The auto manufacturers out there using the standard internal combustion engines will tell you that any oil usage up to 1 quart every 1,000 miles is considered “normal” in their cars. The difference, oil is intentionally injected into a rotary engine; whereas, oil consumption in standard engines is caused by unintentional leakage. If you are using over 1 quart of oil every 1,000 miles, you need to have the oil injection system checked. While I do not have an RX8, I did own an RX7 in the past. The oil injection pump was adjustable on that car, as I’m sure it is on the current rotary engine offering.

    I would also like to see an article on the RX8. I took a couple of test drives back in 2004 when I was looking for a new car. The RX8 was mighty tempting, but I went with a lower cost, less sporty, more practical choice, a Mazda6s. The inch or two of head room that the sunroof cost in the RX8 was an inch or two that I could not spare at my height and preferred driving position.

  • avatar
    bfg9k

    # cykickspy:
    November 1st, 2006 at 7:35 pm

    Luther:

    Ford’s second greatest fear: 2007 Toyota Tundra.

    I dont think Ford has to worry about the truck or suv market… the tundra is no where near Ford or GM truck sales… besides Toyota can build a car yes, but a half decent truck?? In my opinion… not in a million years!!!

    “I don’t think we needs to worry about the car market, the Corolla/Civic is nowhere near our sales. Toyota/Honda build a half-decent car? In my opinion…not in a million years!!!”
    – a Big Three executive, circa 1978

  • avatar
    jaje

    Ford just announced they are cutting white collar benefits, raising premiums and delaying their paychecks one week in December. The latter is the biggest concern as this becomes a very desparate measure when you delay an employees salary right before the holidays.

    here’s the link

  • avatar
    Glenn A.

    Wow, when a company as big as Ford decides they have to delay pay checks for a week, that is NOT encouraging news.

    It cannot be long before the paychecks completely stop for these people, sadly.

  • avatar
    blautens

    Great article – excellent read.

  • avatar
    radimus

    From the article referenced earlier:

    Finance and engineering teams have repeatedly clashed over a finance requirement that each new-car program cost less to engineer than the one it replaces.

    “The finance staff has the company by the balls,” complains one product manager. A plan to totally modernize the high-profit Lincoln Town Car was shelved because, among other things, engineers couldn’t come up with a cost-efficient way to redesign the doors.

    If the above is true then I think we see one of the biggest roots of the whole problem right there. To expect the next model in the line to cost less to design than its predessor is rediculous. It’s no wonder Ford car models go so long without any meaningful updates, only to be killed off after going completely stale with the vaccuum left in the line-up to be filled with a different nameplate. If that doesn’t change and soon, Ford is truly toast. If Ford is truly delaying paychecks, then that policy should have been changed six months ago.

  • avatar
    Terry

    Lumbergh21:
    November 2nd, 2006 at 12:09 pm
    A rotary engine uses less than a quart of oil every 1,000 miles. The auto manufacturers out there using the standard internal combustion engines will tell you that any oil usage up to 1 quart every 1,000 miles is considered “normal” in their cars. The difference, oil is intentionally injected into a rotary engine; whereas, oil consumption in standard engines is caused by unintentional leakage. If you are using over 1 quart of oil every 1,000 miles, you need to have the oil injection system checked. While I do not have an RX8, I did own an RX7 in the past. The oil injection pump was adjustable on that car, as I’m sure it is on the current rotary engine offering.

    Then you would be WRONG.
    The RX-8 oil metering pump is electronically operated by the Engine Control Unit. There is a current reprogram that lessens the amount of oil injection, not to reduce oil consumption, but rather to help prevent cold start spark plug fouling issues.
    All RX-7s 1989–’95 used the electronic oil metering pumps. Prior to that, the rotaru used an adjustable rod operated by the primary throttle shaft.
    Terry 25 yr Mazda Master Tech/Shop Foreman/Rotary Engine Specialist. And I STILL have one of my RX-7s as a daily driver.

  • avatar
    jthorner

    “Finance and engineering teams have repeatedly clashed over a finance requirement that each new-car program cost less to engineer than the one it replaces.”

    Amazing incompetence. Do you think that is how Lexus develops it’s next generation vehicles? I highly doubt it. Many traditional US companies are committing slow motion suicide at the hands of MBA graduates!

    John

  • avatar
    EJ

    Let’s look at pickup truck sales last month:

    Ford (F-series + Ranger): 62,418
    GM (Silverado + Sierra + Colorado + Canyon): 85,628
    Toyota (Tacoma + Tundra): 24,167

    Ford is lagging GM badly and Toyota is not all that far behind, even without their new Tundra.
    I think the coming year is going to be tough for Ford trucks.
    Toyota already has good pickup truck sales and could be adding another 10,000 per month or so.

  • avatar

    “Instead of paying employees before the holidays on Dec. 22, as is the tradition, (Ford) employees will receive their salary on Dec. 29, Evans said.
    “This change alone will save the company $70 million of cash flow this year without reducing compensation to employees,” Fields told employees in the e-mail, which was released to Reuters.”

    Two comments about the above information:
    1) Anyone who ridicules/worries about GM for their cost-cutting maneuvers which save hundreds of millions or even billions of dollars needs to lavish quadruple the ridicule/worries on Ford in this desperate, sad penny pinching move.

    2) I actually think Ford is being too generous here. It’s obviously an irrational, soft-hearted holiday season move. Come February ’07 watch for thousands of paychecks to be cancelled altogether. i.e. massive, massive layoffs.

  • avatar
    Terry Parkhurst

    “Studedude” and others are correct. Sherwood Egbert came to head Studebaker in 1961 and left the company, about two months before it left South Bend, Indiana. I remember all that, since for reasons I have never been able to pin down, I was taken as a kid with the Avanti; even to the point of trying to get my father to buy one. (He responded, “Four thousand dollars is just too much for a car!” – a favorite story of mine these days.) I was really sold when Andy Granatelli took several versions of the Avanti to Bonneville and set various speed records there.
    In 1981, when I was writing about cars for the Seattle Business Journal – now the Puget Sound Business Journal – I did a piece comparing the last days of Studebaker to the struggle then on-going for (the former) Chrysler Corporation. (It ran in both that paper and, a short time later, in the San Francisco Business Journal.) That’s when I read the story, in some archival magazines of the early ’60s, about Sherwood Egbert’s stomach cancer; likely it was just a story to cover up the fact that he’d lost favor with the Board of Directors. For the record, he did succumb to stomach cancer in 1969.
    As Robert (Farago) has noted, Bill Ford is still in on the decision making process. But how much longer, one has to wonder.
    Ford itself has been in dire straights before, most notably in the early 1980s, when it seemed that Ford might go out of existence – at least in North America – before Chrysler. It got to the point then, where they had hardly any cars or trucks – this was before they had much in the way of SUVs – anyone wanted. Sound familar?
    The thing is, if Ford, as was Studebaker, gets tarred big time with the notion that, in the very near future, they won’t be around, the prophecy may become self-fufilling. Today, even more so than in 1963, consumers are afraid of being left with a car or truck they can’t get parts of service for.
    The desperation of Ford dealers came home to me this week, when I visited a friend who is the service advisor for an independent Volvo repair facility.
    “You sold me on the Explorer, Terry!” he enthused. Indeed, I had come there with a 2006 Ford Explorer, earlier this year, and played salesman; going out with him, while he drove it a few miles. He and his wife ended up buying one, listed at about $36,000, at the price of just $29,000, after explaining that he was in the auto industry and really grinding the poor guy down.
    As has been said here by editor Farago, Ford dealers really want to get rid of those 2006 models, as the 2007 ones roll off the transport trucks. Will it help Ford survive? I’ll let others make bets on that one.

  • avatar
    cykickspy

    EJ:
    November 2nd, 2006 at 8:15 pm
    Let’s look at pickup truck sales last month:

    Ford (F-series + Ranger): 62,418
    GM (Silverado + Sierra + Colorado + Canyon): 85,628
    Toyota (Tacoma + Tundra): 24,167

    Ford is lagging GM badly and Toyota is not all that far behind, even without their new Tundra.
    I think the coming year is going to be tough for Ford trucks.
    Toyota already has good pickup truck sales and could be adding another 10,000 per month or so.

    I totally disagree… I think that truck buyers are extremely loyal to their company. and even if they leave ford they wont migrate to a foreign asian company like toyota… and dont tell me that toyota is american because that vehicle was made in Texas … pure and simple…all the profits go back to Japan!
    If a former ford truck owner opts to not buy a ford again… they will more than likely by a GM or Dodge truck!

  • avatar
    Terry

    ” and dont tell me that toyota is american because that vehicle was made in Texas … pure and simple…all the profits go back to Japan!”

    Typical redneck BS logic.
    If ALL the profits go back to Japan, how do they pay the employees at the plant, pay the distribution and parts supplier costs, pay transportation costs, pay dealer incentives, promotions, and dealer personnel?
    It wasnt all that long ago when the battle cry heard throught the land was..”Well, if they want to sell them here, they ought to BUILD them here.” They are doing JUST THAT, so why all the bitching NOW?
    These captive imports are using AMERICAN parts suppliers, building plants in AMERICA, employing AMERICANS, etc, while the domestics are closing plants, moving production to other countries, and laying off AMERICAN workers.
    As it now stands, the import nameplate IS the domestic industry, the traditional American car is becoming more foreign both in content and in the mix of cars out on the roads.
    And the best you can do is bleat..” all the profits go back to Japan…”

  • avatar
    windswords

    Terry
    If ALL the profits go back to Japan, how do they pay the employees at the plant, pay the distribution and parts supplier costs, pay transportation costs, pay dealer incentives, promotions, and dealer personnel?

    Easy. The PROFITS go to Japan, not the EXPENSES, which is what you listed above. Yes some profit is kept here for expansion and design centers etc., but if you think 100% of the profit stays here I got a bridge to sell to ya.

  • avatar
    Terry

    Makes sense, I stand corrected. But I have to ask…isnt it better that some profit stays here than the domestics losing $$ on the cars they produce here?
    And maybe they should, but I have yet to run into a Mazda/Subaru owner that gives a rat’s a$$ where the profits go. They just want the car they want.
    It always comes down to product.

  • avatar
    Glenn A.

    windswords: your are dead wrong about profits “all going back to Japan” anyway.

    Here’s why.

    Do you supposed that ONLY Japanese retirement plans, banks and individuals own Toyota stock?

    No. No more than ONLY American retirement plans, banks and individuals own GM or Ford stock.

    Now, I ask you this. SINCE you or I or any of us reading this can go ahead and BUY Toyota stock right now, no matter where you live in the civilized world – would it be smarter to put 50% of your retirement nest-egg into TOYOTA right now, or would you rather put it into FORD or GM right now?

    Answer carefully. It will make the difference between you having to live in poverty in Mexico when you retire, or living in comfort in your own home….

  • avatar
    Ar-Pharazon

    In spite of the opening of plants in the US, and the local ownership of their stock, the simple fact is that the non-domestic manufacturers and the supply/distribution chain they support contribute much less to the US economy than the domestics and their supply/distribution chain . . . whether they’re losing money or not. If you don’t believe it’s better to have a bigger contribution to your ‘local’ (i.e., national) economy, then fine . . . doesn’t make sense to me, though. Obviously if you work for a domestic or in their chain, you benefit from them, and if you work for a non-domestic or in their chain, you benefit from that. But if you work for neither, then you benefit more from the domestic because of the additional money they pump into the economy.

  • avatar
    Glenn A.

    The bottom line for Toyota and Subaru and Honda right now, compared to GM, Ford and DCX, is that Toyota, Subaru and Honda MAKE money (thus, money moves in a “positive” manner towards those who own stock – as dividends paid, including stock-holders such as retirement funds, banks and individuals in the United States AND elsewhere), whereas – in comparison – GM, Ford and DCX are currently LOSING money.

    I’d rather concentrate on the idea that I’m man enough, and my nation is “man enough” to allow that one of our students (i.e. “Japan Inc.”) has become smarter and more successful than the teacher (in reality, “Corporate America”).

    Because, well, it is quite patently and obviously TRUE.

    Too, I would rather see a company succeed which makes high quality cars, provides jobs for people in my country in increasing numbers with future plans to continue and increase this (2 more car production plants in the works), a company which makes money for itself, a company which has the patience and self-confidence to spend R&D monies on technologies for the future (for 30 years!) AND bring them to market (i.e. hybrids) – that is, Toyota, Subaru and Honda –

    instead of a company which makes crap cars, is so short-sighted that it cannot fathom doing anything other than the immediately profitable (i.e. on-frame SUVs), lets all the rest of the biz go to hell in a handbasket (i.e. cars), a company which foolishly caves in to the UAW despite the fact that times have changed and such idiocy is ruining the company, a comapany which is and has been sending jobs overseas for this reason and for others (such as paying Mexicans 60 cents an hour, or Chinese even less) – i.e. GM and FORD.

    For you nit-pickers, yeah, Subie hasn’t got hybrids on the market yet. But they quietly just announced a new battery type which is 10 times the strength of the li-ion battery and lasts longer than ni-cad. Any bets the next generation Prius uses these new Fuji Heavy Industries batteries, as well as upcoming Subaru hybrids with Toyota tech Hybrid Synergy Drive systems (AND all wheel drive)?

    Yeah! A 100 mpg Prius with 1/2 the price differential of the current car compared to “conventional” cars, AND maybe a 70 mpg Forester HSD hybrid…. I may have to flip a coin in 2010.

  • avatar
    Lumbergh21

    “Then you would be WRONG.
    The RX-8 oil metering pump is electronically operated by the Engine Control Unit. There is a current reprogram that lessens the amount of oil injection, not to reduce oil consumption, but rather to help prevent cold start spark plug fouling issues.
    All RX-7s 1989–’95 used the electronic oil metering pumps. Prior to that, the rotaru used an adjustable rod operated by the primary throttle shaft.
    Terry 25 yr Mazda Master Tech/Shop Foreman/Rotary Engine Specialist. And I STILL have one of my RX-7s as a daily driver.”

    My apologies for the error; I stand corrected. But, it also sounds like any problems they had with excessive oil injection have been ironed out. I still think TTAC ought to try and do a review of the RX8. By the way, I had a 1987 RX7 until the seals gave up the ghost. I sold it to another guy, who I knew through work, for what the wrecking yard offered me. He rebuilt the engine and gave the car to his girlfriend. Six months later it was smashed by an idiot in a Ford pickup in the parking lot at work.

  • avatar
    craigefa

    the simple fact is that the non-domestic manufacturers and the supply/distribution chain they support contribute much less to the US economy than the domestics and their supply/distribution chain

    Won’t this change as the domestics lose market share? As Toyota, Honda, Nissan grow, won’t they build more plants here and buy more parts? I don’t believe this is a zero-sum game. A Japanese win doesn’t mean the US loses.

    As far as the profits, I don’t care that they go back to Japan. If we’re doing our job right in this country, we’ll figure out a way to get it back from them (or from another country) with a new product or service. Our struggle to hold on to the auto industry and manufacturing, to me, shows a lack of belief in ourselves. Let’s just move on and do something else.

  • avatar
    airglow

    http://www.andromeda.com/people/ddyer/apple/counter.html

    Remember the Apple Death Watch??

    About as accurate as “We will be greeted as liberators” by Dr. Evil Dick Cheney.

    Enthusiast are really bad at predicting the future of this and many other industries.

    So will Farago, Elton and the TTAC gang prove to be better seers than Cheney and the Apple Death Watch guys? I doubt it, but only time will tell.

    To continue the Ford and GM death watch series TTAC must predict a death date (or date range) for each. C’mon, you guys seem to have plenty of excess testosterone, you can actually give us cynical skeptics a drop dead date for Ford and GM, can’t you?

  • avatar
    EJ

    Nationwide GM and Ford are clearly contributing more to the economy than Toyota does.
    However, here in the state of California, where I live, Toyota happens to be the ONLY operator of a car factory: the NUMMI plant that makes more than 300,000 Toyota Tacoma and Corolla per year (they also make a few Pontiac Vibe), with UAW workers and all.
    I’m actually stunned that Toyota makes vehicles here in the urban area of San Francisco, neighboring dot-com office parks and with an astronomical cost of doing business (I guess, I don’t know that for sure).
    Hell, they even have to scramble to get air pollution permits for the plant (Californians generally don’t like nasty factories).
    Toyota is clearly very supportive of the California economy. Thanks for that Toyota, on behalf of California!
    By the way, Toyota+Lexus have a stunning 27% market share in California. Ford has less than 10%.

  • avatar
    Lyn Vogel

    Lumbergh21: “I still think TTAC ought to try and do a review of the RX8.”

    Er, there is one already. Please check the archives.

  • avatar
    relton

    For some reason, I wasn’t able to log in to the site earlier.

    Anyhow, here’s some Studebaker lore for you:

    1. In 1950, Studebaker was the 4th largest automobile manufacturer in the world. World. A tip of the hat to whomever can tell me, accurately, who was number 3.

    2. Studebaker lost over 50% of their market share in less than 2 years (53-54).

    3. After years of losing more and more money,, and falling sales, they came out with the Lark in 1959. Financed by Merceds-Benz. It sold spectaculary well. In 1960, sales were even better. Studebaker was set to post a handsome, even extravagant, profit, by Studebaker standards. Then strikes at a couple of supplier plants, door hardware, door stampings, electrical equipment, shut the place down for about a month. Lots of lost sales, lots of lost profits.

    4. Egbert was broguht in with the explicit brief to get out of the car business. He got so infatuated with making cars that he brought out 2 new ones, the Hawk GT and the Avanti. No wonder the directors fired him!

    5. Studebaker had assembly plants in at least 30 countries. Studebaker trucks are still being manufactured in India for military use. You see them in the news occasionally.

    6. At the time that they closed the South Bend plant, Studebaker’s sales volume was about 75% automotive. But 100% of the priofits came from the other 11 divisions. Studebaker owned banks, finance companies, an airline (which rthey bought from Kerkorian), office furniture, commercial refigeration units, chemicals, like STP, automotive brands like Paxton, Fram. If it hadn’t been for the profits from these divisions, the company would have folded years ealier.

    7. The day Studebaker quit making cars for good, in Canada, their stock doubled.

    Bonus factoid: in answer to #1, Ford Motor company was # 3 in 1950. They didn’t pass Chrysler until 1952.

    Bob Elton

  • avatar
    Ar-Pharazon

    Please remember that the performance of stock price is not the end-all and be-all of the economy. Neither are profits per-se. Whether their in the red or black, the domestics pay a lot more money out to employees, out to dealerships and technicians (via warranty costs), and also buy a whole lot of stuff.

    Also, it’s not a linear relationship with respect to volume sold. For all the complaints about UAW wages, the fact is that every UAW makes and thus spends more money than an equivalent Toyota or Honda worker. You may find that repulsive on principle, but for the people in nearby communities who sell houses, or RVs, or electronic appliances, or run restaurants, or cut hair, or provide any other goods or service that are bought by UAW workers these higher wages are a good thing. It’s the old ‘trickle down’ theory. Considering how much our overall economy is driven by consumer spending, having this large pool of well paid big spenders is apparently helping to keep a big part of the engine running. The non-domestics do not pay as much to their direct employees, and they also employ a much larger number of temp or part-time people who don’t get the benefits or make near the same money. And also you should probably accept that at least some of the wage they pay is to keep somewhat competitive with the unions, some cost of keeping the union out, let’s say.

    A lot of folks here I think displace their bad feelings about a particular vehicle onto companies or industries as a whole. I have a document called the ‘2006 Industry Report Card’ that rates the various auto companies on different categories, published be a company run by John McElroy . . . no friend to the domestic makers, believe me. Ford is number one in R&D spending . . . $8bn and rising versus $7bn for Toyota and $6.7bn for GM. So your comment about rather having a company that bothers to spend on research makes no sense to me. I don’t understand why a company that pays it’s employees well, invests in researching the future, and has spent the last decade or so trying to make and sell more of what the people wanted gets slagged so much. Don’t tell me that people weren’t buying trucks and SUVs in droves . . . because they were. Every manufacturer was pumping out as many as they could, and working as hard as they could to add them if they didn’t have ’em.

  • avatar
    Steven T.

    Bob, Bob, Bob:

    In your comment you state that the Lark was “financed by” Mercedes-Benz. Don’t you mean Curtiss-Wright, which took Studebaker-Packard under its wing in 1956 and gave it a badly needed cash infusion? To partially offset the discontinuation of the “true” Packards, Studebaker took over the American distribution of Mercedes-Benz, but that was the extent of the partnership between the two.

    You state that the Lark sold “even better” in 1960. All of the histories I’ve read show that Studebaker sales peaked in 1959 and began their downward slide in 1960 as the Big Three introduced competing compacts. By 1961 sales had dropped more than 50 percent below 1959 levels. The collapse of Lark sales is typically ascribed to an aging design and a rapidly shrinking dealer network (partly due to Big Three pressure on its dealers to stop dualing with Studebaker).

    You state that “Studebaker was set to post a handsome, even extravagant, profit” before strikes hit. Are you referring to 1962? If so, sales did partially rebound from 1961, but I think that reasonable people can debate whether the absence of the strikes would have resulted in any profits, let alone “extravagant” ones. What, per chance, do you consider Studebaker’s passenger car break-even point to have been?

    You state that Studebaker “had assembly plants in at least 30 countries.” Perhaps, but my understanding is that even Kaiser-Willys depended much more heavily on automotive operations outside off the U.S. than did Studebaker during the early 1960s.

    You state that in December 1963 “Studebaker’s sales volume was about 75% automotive.” The figure used by Time magazine was 50% (12/20/63).

    You state in your essay that the “worst” factor contributing to Studebaker’s financial crisis was the flagging profitability of its “all-important finance unit.” I’ve yet to find evidence that this was anywhere near as important to Studebaker as it currently is to Ford. Could you provide more information than the vague reference in your comment to Studebaker owning banks and finance companies?

  • avatar
    Studedude1961

    “Studedude” says that Egbert was sidelined because of illness, but Time reported that he was fired because he “insisted on staying” in the auto business. Burlingame was then promoted to CEO with marching orders to pull the trigger. The board decision would thus appear to have been a fait accompli. Do you disagree with this interpretation, and if so why?

    This is what happened to Studebaker President Sherwood Egbert according to Richard M. Langworth’s excellent “Studebaker 1946-1966 – The Classic Postwar Years” Page 131 dealing with late 1963: “In the fall came another ominous development: Sherwood Egbert was desperately ill. He had cancer–but beyond that had worked himself to a frazzle. By November he had taken indefinite leave. (Studebaker Chairman) Guthrie hoped Egbert would soon be back–but he never returned. Shortly Guthrie announced that Byers Burlingame was the new president.” Th

    This is where I got the information about Egbert.

  • avatar
    Glenn

    If Ford is $8 billion in R&D and Toyota $7 billion, then I think Ford must be using ‘cipherin’ about like Jethro Bodine, Enron, GM or Delphi.

    Results are what count, right? Yeah, no way is DORF (“Ford spelled sideways is DORF”) spending $8 billion on R&D.

    Just think – in a few years we may all be posting on similar stories about the demise of GM, Ford and DCX. Sad, isn’t it?

Read all comments

Back to TopLeave a Reply

You must be logged in to post a comment.

Recent Comments

  • RHD: When you have solar panels, charging is basically free.
  • RHD: The oil companies are making record, multi-billion dollar quarterly profits. This situation is brought about by...
  • EBFlex: “No. Your “issue with EVs” involves a single use case which is not relevant to everyone and not the...
  • EBFlex: “Congrats, enjoy the truck and ignore the sourpuss.” Huh? If anything I am showing how much I...
  • raynla: Wait…I thought Mary led Joe?

New Car Research

Get a Free Dealer Quote

Who We Are

  • Adam Tonge
  • Bozi Tatarevic
  • Corey Lewis
  • Jo Borras
  • Mark Baruth
  • Ronnie Schreiber