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Re: Romney's selective memory
#11
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Steve203
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The eventual outcome for AMC should have been satisfaction enough for Romney, leading the remnants of two medium-priced makers onto major successes in an emergent segment which theretofore was certain failure for all who tried. Subsequent AMC troubles were after his tenure; he left them with solid finances and an updated product line which if simply built upon could have lead to further successes.

Romney's stewardship of AMC has it's critics. I remember reading an article in Fortune in the late 60s, which noted that Romney paid out their early 60s profits in dividends, instead of investing in efficient plant and equipment, just as Studebaker had paid out war profits in dividends when Harold Vance was begging for facilities improvements. In the 70s they were still shipping bodies from Milwaukee, instead of investing Rambler profits in an integrated body and assembly plant on the outskirts of Kenosha, or building a new powertrain plant to clear enough of the existing plant's footprint to put in a body plant.

Posted on: 2015/8/23 22:00
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Re: Romney's selective memory
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Mahoning63
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Interesting discussion as always.

Here's the Wiki on George. Seems he was a stand-up guy and top auto exec, wish there were more like him then and now.

https://en.wikipedia.org/wiki/George_W._Romney

Posted on: 2015/8/24 8:08
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Re: Romney's selective memory
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Steve203
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Quote:

Mahoning63 wrote:
Interesting discussion as always.

Here's the Wiki on George. Seems he was a stand-up guy and top auto exec, wish there were more like him then and now.


I am not quite old enough to have a clear memory of Romney's time as Governor. I remember his run for President in 68, and the questions about his eligibility because he was born in Mexico. What sank his campaign was his change of position regarding Nam. When it became politically expedient to be against the war, he shifted from being pro-war to being against it. When questioned about his change of position, he blamed others, said the Army officials he had met with in Nam had "brainwashed" him into being pro-war. I remember a comic doing a routine about the 68 candidates using dolls. When he got to the Romney doll, he popped the head off, showed it was empty inside and said "brains completely washable"

That decision Romney made about paying out dividends, instead of investing in more efficient facilities, shows up in company after company, and the easy short term choice of doing nothing and paying out dividends to keep the shareholders happy for another year frequently comes back to bite the company in the out years.

Imagine if Packard had bought up the land from the south end of the plant to Theodore St and built a new stamping and body plant, rather than outsourcing to Briggs. They probably could have gotten a loan on favorable terms from the RFC. Nope. It was easier and cheaper, over the short term, to outsource.

Posted on: 2015/8/24 10:38
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Re: Romney's selective memory
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58L8134
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Hi Steve203 and Paul

"They probably could have gotten a loan on favorable terms from the RFC."

https://en.wikipedia.org/wiki/Reconstruction_Finance_Corporation

Glad you brought up the RFC, many business turned to Reconstruction Finance Corporation for financing in that period, including automakers and railroads. Packard, even as seemly financially healthy as it was, could have benefitted from the boost a low interest RFC loan for their own stamping and body plant would have provided.

When they were still assembling their own bodies prior to the '41 Clipper, who were they sourcing their stamping from? One assumes some were done in-house but larger components that required higher capacity press to create were likely out-sourced.

Briggs may have also pushed Packard for more business as I recall reading that they lost much of their Ford business as that company brought more bodymaking in-house by 1940.

As regards Romney, he made that same expedient choice between short-term dividends versus long-term capital improvements that is so common with managements. While its a balancing act, erring on the side of capital improvement should have yielded a stronger enterprise long-term. Of course, poor product planning and execution could still undo the good affect of even the best infrastructure.

Steve

Posted on: 2015/8/24 11:54
.....epigram time.....
Proud 1953 Clipper Deluxe owner. Thinking about my next Packard, want a Clipper Deluxe Eight, manual shift with overdrive.
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Re: Romney's selective memory
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Steve203
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When they were still assembling their own bodies prior to the '41 Clipper, who were they sourcing their stamping from? One assumes some were done in-house but larger components that required higher capacity press to create were likely out-sourced.

I think it is the 1944 annual report that shows the diagrams of the E Grand complex in it's prewar and wartime configurations. In the prewar configuration, the sheds along the railroad tracks south of Palmer are marked "stamping division", while the multi-story buildings along Concord south of E Grand are marked "body plant". They could have outsourced some stampings at the time. That would be easy to do with Briggs, Murray and Budd all running stamping plants and competing for business. By the 50s, Studebaker had Budd making the vast majority of it's stampings, shipping them nested to South Bend by rail.

<i>Briggs may have also pushed Packard for more business as I recall reading that they lost much of their Ford business as that company brought more bodymaking in-house by 1940.</i>

The body specialists had been losing business through the 30s as automakers brought bodybuilding in house.

The way that Packard transferred it's bodybuilding equipment to Briggs with apparently no documentation, and some accounts I have read saying Packard received a very attractive price from Briggs, for a couple years, then the prices soared, makes me think Gilman bartered the equipment for a discount. Avoiding a big CapEx program, and getting a discount on bodybuilding, will look good in the annual report, and make the stockholders happy, for a couple years. By the time that idea blew up on the company, Max was long gone.

Reading the Wiki entry on the 41 Clipper: the widest car in the industry, the largest stampings in the industry, I can imagine that it not only required new presses but new paint booths and ovens, and the columns in the multistory plant probably had a way of getting in the way.

<i>Of course, poor product planning and execution could still undo the good affect of even the best infrastructure.</i>

Evidence Kaiser at Willow Run, an operation that was initiated and maintained by a string of RFC loans. Tons of unobstructed space to run assembly lines. Bought for about a quarter of what it cost to build. Would have been a great move, if Kaiser knew how to build cars efficiently, and could have sold about 300,000/yr.

Speaking of Willow Run, a local aircraft museum bought the dual bay hanger at the east end of the plant for a new museum building. This is a pic I took during their open house in June, showing one of the two hanger bays. While Willow Run only made B-24s, it was designed to be large enough to accommodate B-29s, which were under development when Willow Run was built. Compare this to what Packard had to deal with: low ceilings and concrete columns everywhere.

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Posted on: 2015/8/24 13:28
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Re: Romney's selective memory
#16
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Owen_Dyneto
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When they were still assembling their own bodies prior to the '41 Clipper, who were they sourcing their stamping from?

If you look at door innards from 1935 juniors thru 1941 seniors you'll see that they were stamped by Budd. They are the only stampings I've actually seen a source name on, no doubt they used others for other parts in addition to what was done in-house.

Posted on: 2015/8/24 13:42
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Re: Romney's selective memory
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58L8134
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Hi Steve203, Paul and Dave

Thanks, Dave for the information that Budd was providing stampings up through 1941 for some series.

"The way that Packard transferred it's bodybuilding equipment to Briggs with apparently no documentation, and some accounts I have read saying Packard received a very attractive price from Briggs, for a couple years, then the prices soared, makes me think Gilman bartered the equipment for a discount. Avoiding a big CapEx program, and getting a discount on bodybuilding, will look good in the annual report, and make the stockholders happy, for a couple years. By the time that idea blew up on the company, Max was long gone."

Steve203, you've really put your finger on it! Another piece falls into place, the confluence of events, actions and principals involved setting up a situation seemly initially advantageous only to turn later to disaster.

Framing these events, Alvan Macauley and Walter Briggs were not only long-time business associates but also family friends as were many principals in that insular circle that was the Detroit automaking community then. Gentleman's agreements were still arrived at over business lunch and on the golf course. While Gilman had been elevated to President in 1939, Macauley would still be very much involved in major deals.

By early 1940, two external forces were exerting heavy pressure on those decision-makers. One, of course, was the rapidly rising demand for war materiel which promised lucrative government contracts. The other was management had become alarmed by the popularity and success of the new GM C-Body series which were competitive across the board versus various Packards. This were the first major production sedan salvo in the configuration contest between the long-time favorite touring sedan and the newly insurgent sport three-box sedan which would ultimately win out. Packard had only the former, all of which looked suddenly quite dated by comparison.

Briggs maintained a design/styling department to generate ideas that could be selected by their customers for development into the next body series. With its tiny in-house styling group not up to the task, in conjunction with Briggs, the development process leading eventually to the Clipper had been initiated. As for Briggs, they had motivation to capture Packard's body business as the following exerpts from the Special Interest Autos, No. 19, Nov-Dec 1973, page 28 demonstrates:

"Ford remained an important Briggs customer into 1939, and Briggs built Ford replacement parts even after that. But, when Chrysler contracted in 1930 to let Briggs build all Plymouth bodies, Chrysler Corp. became Briggs most important customer. Throughout the 1930s, '40s and until 1953, Briggs did supply trim and stamping to Hudson, Packard, Graham, and others. After 1940, Briggs built all of Packard's production bodies.

By 1936, Briggs was building approximately 66% of Ford's purchased passenger-car bodies. Murray supplied another 22%, Budd 11% and Midland Steel 1%."

"Briggs percentage of supplied Ford bodies dropped from 66% in 1936 to 27.4% in 1939. Meanwhile Murray came up from 22.5% in 1936 to 48.1% in 1939, and Budd's precentage more than doubled - 11.2% to 23.7%. These were all gradual shifts, but they show how Ford was phasing out its involvement with Briggs or vice-versa. Precisely what happened isn't known. Ralph Roberts feels that by 1939, Briggs had build up enough Chrysler business so it could afford to dump Ford and Ford's pennypinching profit squeezes. Then, too, many Ford execs had wanted for years for the company to build its own bodies which, after all, represented 1/3 of the value of a new car"

Next paragraphs describe the details of the mix of stamping from various sources which were used to construct Mercury bodies:

"This mixed bag approach became more and more common into the 1940's. Around 1938, Briggs began supplying some body panels to Packard - not all, just some. By 1941, though, Packard had turned over all its body business to Briggs, and Briggs continued with Packard until the Chrysler takeover.

Oldtimers admit that Chrysler Corp. proved a much steadier and less temperamental customer than Ford. Briggs and Chrysler traditionally enjoyed a closer, calmer relationship. "Ford used to nickel and dime us to death," says a former Briggs employee. "Chrysler and Packard were much more like gentlemen."

The motivations of all parties involved comes together. Walter Briggs, considering how he will fill out the lost Ford capacity, realizes Packard can be a partial solution. Briggs gladly not only takes on more of their stamping work, away from competitor Budd, but also discusses with Alvan Macauley and Max Gilman the prospect of taking over all Packard's body production. Across the table, Macauley and Gilman readily agree, knowing the current Junior body plant will then be freed up for war materiel production. Gilman instantly sees a further feather for his cap to demonstrate his business acumen: Packard's new Clipper can be brought to market without a major capital expenditure project to outfit the body plant with the huge new stamping presses required for such a car. And bodies supplied at a per unit price so reasonable one would be foolish to pass it up. Alvan Macauley trust his friend Walter Briggs to take the Packard stamping equipment without documentation, considering their prior business dealings as proof enough of his trustworthiness. All the pieces of the jig-saw puzzle fit neatly together, seemingly to benefit all parties.

In the intervening years, Gilman's dalliance expels him from Packard, production-focused George Christopher takes his place. Geo-political hostilities end and now the Packard/Briggs bond is unbreakable. But things have changed, further from the SIA article, page 29:

"After the war, Briggs anticipated a huge demand for new cars and accordingly tooled its automotive division for production of 73% greater than 1941. But steel storages, strikes, and general delays kept Briggs from reaching full production until late 1947."........."And by 1947, Briggs' production in the U.S. was up 60% above 1941, thanks mostly to Plymouth business."

"Time, though, was running out for Briggs, or at least times were changing so that the era of big independent autobody builders had passed. Even with Chrysler Corp., Packard, and some Hudson business after the war, plus smaller contracts from several independent automakers, the future was beginning to look dim. As various independents scrambled to merge and others folded, where could Briggs turn for new contracts? Another important factor: By 1949, the cost to Briggs of producing an automobile body had risen 86% over 1941. The rise came from many sources: labor, expansion, inflation, and reduced volume."

So, there you have it, the likely scenario that lead to what looked initially like an advantageous situation for all involved that then turned into an immense trap which was never fully resolved. By the time Nance investigated re-instituting their own bodymaking operation, it had become cost prohibitive for their finances. One of the many factors that little by little lead to Packard's demise.

Steve

Posted on: 2015/8/28 14:01
.....epigram time.....
Proud 1953 Clipper Deluxe owner. Thinking about my next Packard, want a Clipper Deluxe Eight, manual shift with overdrive.
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Re: Romney's selective memory
#18
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Steve203
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So, there you have it, the likely scenario that lead to what looked initially like an advantageous situation for all involved that then turned into an immense trap which was never fully resolved. By the time Nance investigated re-instituting their own bodymaking operation, it had become cost prohibitive for their finances. One of the many factors that little by little lead to Packard's demise.


And by the end of 53, all the parties to that "gentlemen's agreement" were gone. Briggs and Macauley dead. Gilman and Christopher fired. The Briggs heirs already violated it by selling out to Chrysler.

I found a 1949 Hudson annual report on line. Projecting it's numbers ahead to 53 with the earnings posted for those years, less the dividends Hudson paid out, I get a book value of a little under $62M vs Packard's book of just under $83M

Using the cash price offered to Hudson holders that did not want AMC shares, I get a market cap of a bit over $16M, vs a market cap of over $50M for Packard.

In today's world of leveraged buyouts, activist shareholders and greenmail, Packard could have gobbled up Hudson, including their body plant, easily, and at far less cost than building a greenfield body plant. The 7,000 dealers, legacy service parts business and an established midmarket brand to fill the niche Nance was trying to slot the Clipper into, all would have been bonuses.

I have added Neal's last book about Packard to my winter reading list, along with a book about Nash that I found on Pat Foster's publishing web site.

Posted on: 2015/8/28 16:12
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Re: Romney's selective memory
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R Anderson
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Interesting speculations.
As a point of information, viz: several previous posts, it's princiPALS, not princiPLES....sorry, old teachers can't help ourselves.

Posted on: 2015/8/28 20:54
56 Clipper Deluxe survivor
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Re: Romney's selective memory
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JT120
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Steve, seeing your mention of Willow Run I was wondering if you read "The Last Onslaught on Detroit"? Very good book.

Posted on: 2015/8/28 21:31
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