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Posted by: David Kiley on November 6, 2008

I was searching for something via Google and came across this passage from a 1954 edition of Time Magazine.

Given all the “rationale” surrounding a GM-Chrysler merger, it is worth looking at how far management thinking has come since 1954. Perhaps substitute today’s names for the ones in the story.

Time Magazine: “For weeks the auto industry has been alive with rumors of a merger between Studebaker and Packard so that the two independents could compete better against the Big Three. This week directors of the two companies scheduled a meeting in Manhattan to close the deal, tie up a few loose ends, and pick a boss for their hopeful new company.

In effect, Packard will take over Studebaker. Packard President James J. Nance, 53, who has put new life into Packard, will take over as president of the new company. Studebaker’s Board Chairman Paul Hoffman will become board chairman of Studebaker-Packard, and Studebaker’s President Harold S. Vance chairman of the executive committee.

Champion & Limousine. If the merger goes through, it will be the third for the auto industry in a little more than a year (the others: Kaiser-Willys, Nash-Hud-son). But it is a necessary step and a shrewd move for both. The two independents have steadily lost ground in 1954’s red-hot auto race. Packard sales are down 53%, Studebaker’s 55%; both lost money in the first quarter—$6,000,000 for Studebaker and $380,000 for Packard. By joining forces, they can put together a sales organization of some 3,900 dealers across the U.S., and offer customers a complete line of cars from the cheapest Studebaker Champion ($1,700) to the most luxurious Packard Limousine ($7,500).

There are other benefits. Packard has been long on engineering, short on the kind of racy-looking design that helps sell cars. Studebaker, with its long, low cars, has been a style pacesetter. The combined company should also be able to cut production costs.

Book v. Market. The merger will involve a straight stock transfer. Packard shareholders are expected to get one share in the new company for every five they own and Studebaker stockholders to get 12 shares in the combined company for every one of Studebaker stock. The exchange deal was based on the book value of the two stocks. Though Packard’s total assets are only slightly less than Studebaker’s, the per-share book value of its stock is far less because it has 14,491,000 shares compared to only 2,361,000 for Studebaker. Thus one share of Studebaker (valued at $42.81) equals 7½ shares of Packard (valued at $5.70 a share). On the New York Stock Exchange the spread was not as great; Studebaker was selling for $19 and Packard for $4, a ratio of only about five to one. On this basis, some Packard stockholders may complain that they are getting shortchanged, especially since this exchange would leave Studebaker shareholders with 55% of the new company. But they are not likely to hold up the merger, since neither company can do better alone.

To begin with, Packard and Studebaker will have about 3% of the total auto mar ket. The big question is whether the new company will be big enough to compete successfully against the Big Three. Roaring along at full speed, the giants have pulled even farther ahead of the independ ents this year. General Motors now has 48% of the market, Ford 31%, Chrysler 15%—a total of 94%. Around Detroit last week, the talk is of still another merger eventually. This time auto experts believe it will be between Studebaker-Packard and the newly formed American Motors (Nash and Hudson).

Reader Comments


November 8, 2008 3:37 AM

Speaking of a deja vu, in early 2008 the 2nd Battle of Midway was re-fought on a different scale and battlefield, and with different results. Japan had assembled 2 major task forces comprising of Toyota and Honda against the America's 3 comprising of GM, Ford, and Chrysler. The mighty GM task force consisted of Hummer, Cadillac, Chevy, Buick, GMC, Pontiac, Saab, and Saturn. Ford comprised of Ford and Lincoln Mercury while Chrysler is a consolidation of Chrysler, Dodge and Plymouth. Admiral Watanabe would lead the main battle wagons comprising of Lexus, Scion, and Toyota for frontal attack while Honda will attack the flanks with Acura and Hondas. Without the brilliant leadership of Admiral Nimitz and Halsie, Captain Wagoner of the main task force blindly sailed into the main Japanese fleet. In this second battle, the role, characters and mistakes were reversed. Demonstrating indecision and wrong decisions reminiscent of the past Japanese Admiral Nagumo, Wagoner could not decide between launching electric plug-in, or hybrid, or SUV. In the end, his chief of staffs counseled him to load up the deck with SUV because of its huge potential for racking up impressive gains. In the first wave of Admiral Watanabe's attack, Wagoner's task force could not get into the air because of past delays and indecision and most critically, its decks were crammed full of SUV that were akin to slow, heavy lumbering monster yachts against the Japanese's light, nimble, and crafty machines. After the smoke and carnage had cleared, Wagoner had lost the Hummer fleet, topedoed and in flames sinking fast and unsalvageable. Wagoner could only shake his fist as his flagship, the Cadillac, got broadsided by Watanabe’s Lexus, a modern, high-tech “wunder” wagon reminiscent of Germany’s Wehrmacht design. With the rest of his task force in shreds, Wagoner order a flanking maneuver lead by the newly christened Volt. It was a bolt move as well as a big gamble because the wide left-hook won't arrive in time as Japan's secondary task force came from behind Wagoner for the ambush attack. Instead of going all-out on the offense, Wagoner waited, and waited, and waited hoping America's 2nd and 3rd task force, Ford and Chrysler, will weakening Watanabe's frontal assault. Not only did that not materialize, but the 2nd and 3rd task force ran into task force Honda and subsequently were so mangled and debilitated that they had to do a full speed astern maneuver, reverting to old standbys like Mustangs, Challenger, and Chargers which long ago had their days under the sun. Finally in desperation, Wagoner launched every battle wagons he had including employee discounts and zero percent financing, hoping that would change the winds of war. Like all the Brewster Buffalos sent out to defend Midway, Wagoner’s battle wagons were high price hearse, dead-on-arrival, unable to change the course of history. On the other hand Admiral Watanabe had learnt his history well and would do what Nagumo failed to do: follow through with the battle plan. On board the Malibu, Wagoner has retreated south in hope of merging his tattered fleet with that of the crippled Chrysler fleet. Just to be sure he gets America’s attention, Wagoner issued order to send out calls for SOS and Maydays on all hailing frequencies. With fixed bayonet, Samurai Watanabe is preparing for the final bonzai charge. Yamamoto is beaming with pride. General Tojo is doing back-flips in his grave. The Emperor can visualize using Wagoner, Lutz, Wellburn and Fritz as his four Geishas clowns. Never in US history has America lost so much, cost so dearly, and suffered so long at the hands of so few. With its pride under water, America is praying for Captain Wagoner's relieved of command and substitute better leadership equivalent to the caliber of a Nimitz or Halzie or MacArthur.

Tom Paine

November 10, 2008 9:16 AM

And thanks to this merger Studebaker-Packard remains the mighty automotive power we know it as today! Could a combined GM-Chrysler be any less?

Stéphane Dumas

December 21, 2008 10:13 AM

I spotted a interesting rant posted on Hemmings Motor news website about what if Packard had merged with Nash instead of Studebaker? Things could had been different....

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