Lehman Brothers Collection - Contemporary Business Archives

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Lehman Brothers Collection

Twentieth-Century Business Archives

The Studebaker Corporation - Lehman Brothers Collection

The Studebaker Corporation

List of Deals

The origin of the Studebaker Corporation dates to 1852 when brothers Henry and Clement Studebaker opened the H&C Studebaker blacksmith shop in South Bend, Indiana, with sixty-eight dollars in capital and two forges. Two wagons were built in the first year, one of which gave satisfactory service for thirty-three years. In 1858 a third brother, John Mohler Studebaker, returned from California, where he made wheelbarrows for gold miners, and invested his earnings of $8,000 in the business. At this time, the brothers had been manufacturing wagon orders for the U.S. Army. The company was renamed the Studebaker Manufacturing Company in 1868. During that year it also opened a branch in St. Joseph, Missouri, to handle the trade of pioneers who were crossing the country in large numbers.

In 1868 sales were $360,619, and by 1887 sales eclipsed $2 million and production topped 75,000 vehicles. It eventually became the largest wagon manufacturer in the world. It also earned the distinction of being the only manufacturer to successfully switch from horse-drawn to gasoline-powered vehicles.

Studebaker experimented with a “horseless vehicle” in 1897 and made the transition into the automobile market after the turn of the century, introducing an electric car in 1902 as well as gasoline-powered cars in 1904. These were produced by Garford Company of Ohio and marketed under the name Studebaker-Garford. In subsequent years it introduced several firsts, including the first six-cylinder motor cast and the first auto manufacturer to offer cord tires as standard equipment.

Studebaker sales amounted to $13.9 million with net profits of $1.6 million in 1910. The company merged with Everitt-Metzker-Flanders Company of Detroit in 1911 to form the Studebaker Corporation with $45 million in capital. Studebaker sold automobiles under the EMF and Flanders names until 1913. Thereafter all new cars carried the Studebaker name until 1920, at which time automobile production was moved from Detroit to South Bend, Indiana.

Studebaker earned over $9 million per year in 1915 and 1916. Profits fell to around $3.5 million annually during World War I as the company offered its plants to the government for war production. During the war, Studebaker took over 160 different government contracts and produced more that $30 million in manufactured goods, including mine anchors. After the war, earnings rebounded to $11 million in 1921, $18 million in 1922, and $20 million in 1923. Part of this can be attributed to the enormous investment the company made in plant investment: From 1916 through 1923, Studebaker invested over $37 million in plant and equipment, all from earnings. In 1923 it owned the largest automobile manufacturing plant in the world.

During the 1920s Studebaker built automobiles in the medium price field through a distribution network of 5,000 dealers and 3,500 service stations. The company sold 145,167 cars in 1923, up from 89,356 in 1919.

Studebaker introduced the Erskine, a small car for the European market, in 1927, and it also purchased luxury automaker Pierce-Arrow.

Studebaker had assets over $100 million by the end of 1931 and served as a holding company for several subsidiaries: Pierce-Arrow, Studebaker, Rockne, and S.P.A. Trucks. In May 1932 Studebaker formed another subsidiary, S.P.A.R. Sales Corporation, to handle sales activities of the Studebaker, Pierce-Arrow, and Rockne subsidiaries.

Studebaker acquired the White Motor Company of Cleveland, Ohio, in September 1932 for $26.3 million in cash, notes, and stock. White Motor was founded in 1901 and produced trucks and buses.

On March 18, 1933, the effects of the Great Depression and poor management decisions placed Studebaker in receivership. In early 1935 Studebaker was reorganized under the new Section 77B of the bankruptcy act. Under terms of the plan, approximately $6.4 million in new 6 percent debentures were offered for subscription by the present common and preferred stockholders of the company. The proceeds were used for working capital and the deal was underwritten by Lehman Brothers; Field, Glore & Company; Hayden, Stone & Company; and Goldman, Sachs & Company.

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