STUDEBAKER

The Studebaker Corporation traced its business origins earlier than any other U.S. automobile manufacturer. It started in 1852 as a family operated blacksmith shop in South Bend, Indiana, and began manufacturing wagons five years later. During the American Civil War (1861–65) government contracts for wagons brought the firm new prosperity. In March 1868 brothers John, Clement, and Peter Studebaker each invested $25,000 and incorporated as the Studebaker Brothers Manufacturing Company.

In the highly competitive wagon industry, Studebaker became the world's largest manufacturer. With good management, technological innovation, and capital expansion, it pursued a strategy of large scale manufacturing of high quality products known for durability and beauty. Through a well-coordinated distribution system, its national marketing captured the dominant share of the large farm wagon market and a profitable share of the urban wagon and carriage markets. By 1870 it also became the government's largest supplier of wagons.

Studebaker became a modern corporation in 1893 through the efforts of John Studebaker's son-in-law, Frederick Fish, a Wall Street lawyer. The reorganization shifted power from the family to investors represented on a newly created board of directors. With additional capital and new leadership, the firm made a decisive change in its product line. Overcoming resistance from the surviving Studebaker brothers, Fish pushed the company into the new automobile industry. Studebaker started cautiously in 1897 by making bodies for the New York Electric Vehicle Company, and three years later it began manufacturing its own automobiles. Although Studebaker continued making carriages until 1910 and wagons until 1918, it was firmly committed to the automotive industry when the corporation reorganized again in 1911.

Under the leadership of president Albert Russell Erskine from 1915 to 1933, Studebaker attempted to become one of the dominant automobile manufacturers. Concentrating on producing trucks and cars for the competitive medium-priced market, it enjoyed its golden years immediately after World War I (1914–18), and it stood behind only the Ford Motor Company and General Motors in total assets. In 1924, however, it failed to buy out the Maxwell Motor Corporation, losing to Walter P. Chrysler, who then succeeded in building his own big, multi-model firm. Thereafter Studebaker remained one of the so-called "Independents," relatively small automakers, in an industry dominated by the Big Three—General Motors, Ford Motor Company, and Chrysler Motors—all based in Detroit.

By March 1933 Studebaker was unable to pay its creditors because of president Erskine's high dividend policies despite an automobile market that was shrunken by the Great Depression (1929–39). Studebaker might have disappeared then, as many other Independents did during the Depression, however, it survived a court ordered bankruptcy and reorganized again in 1935 under the leadership of two former vice presidents. With president Paul G. Hoffman concentrating on sales and public relations and chairman Harold Vance concentrating on production, Studebaker recovered. From its headquarters still in South Bend, the firm produced cars (including the new low-priced Champion) with innovative engineering and design that distinguished them from Detroit products. By 1940 the firm was the largest of the Independents, with a market share of almost 2.5 percent. The national economy recovered from the Depression and the future looked bright.

World War II (1939–45) then significantly altered the automobile industry. When all civilian automobile production ceased by government order, automakers operated as defense contractors. Studebaker manufactured trucks and other products under government contracts that guaranteed profits without competitive pressures to control production costs.

After the war high consumer demand for new cars allowed all the Independent automakers to increase their market shares and total volume. Hoffman and Vance expressed optimism because Studebaker's distinctively designed cars attracted wide attention and increased sales. Studebaker reached its peak of prosperity in 1950, with record sales that brought it a four-percent market share. However in its rush to take advantage of the strong postwar market, the firm failed to modernize its plants, reduce high production costs, or correct worsening product quality. After the Korean War (1950–53) the loss of defense contracts and fierce competition between General Motors and Ford for industry leadership put all the Independent automakers at greater risk. Hoffman and Vance recognized that Studebaker was too small to survive alone and in 1954 they arranged a merger with the Packard Motor Company of Detroit.

Under the leadership of James J. Nance, formerly Packard's president, the new Studebaker Packard Corporation tried to imitate the Big Three. But Nance's efforts to cut production costs and improve quality led to labor strife in South Bend. Similarly, his efforts to imitate Detroit automakers' products failed to increase the company's declining sales. With losses mounting, Studebaker Packard survived only by merging in 1956 with Curtiss-Wright, the aeronautical firm. During the late 1950s it recovered somewhat by introducing a compact economy car, but the Big Three soon captured that market as well. In 1962 Studebaker made its last effort to find a niche in the automobile industry by launching the Avanti, a distinctive, streamlined sports type car with an all fiberglass body. However, small volume production of that car could not sustain the automaker. In December 1963 the South Bend plant closed, although car production continued on a reduced scale in Hamilton, Ontario, Canada until the fall of 1967. Then, the combination of its small size, inability to keep pace with competition, and managerial errors over a long period finally ended Studebaker's role as an automaker.

Nevertheless, the close of its automotive history did not mean the end of Studebaker. As it scaled down its automobile production during the early 1960s, it pursued a survival strategy of diversification. In November 1967 it arranged a new merger that created the Studebaker-Worthington Corporation. Producing a wide variety of products, some for the automotive industry, it operated for twelve years until it was absorbed by McGraw-Edison.

See also: Automobile Industry