Ultramatic by Borg-Warner?

Posted by Steve203 On 2014/12/31 10:06:48

Started reading the Langworth book about Studebaker a couple days ago. Found an interesting tidbit, a quote from a memo Nance sent to VP Engineering William Graves at the beginning of 55:

"I am being pushed very hard by the Borg-Warner people, to take us out of the transmission business by purchasing our manufacturing equipment and so forth. This is the last thing I want to do. We have about $15 million invested in Ultramatic, and should therefore make it pay off. So far, Packard has made no money being in the transmission business, but it was hoped that this would be one of the benefits of the merger."

The book goes on to say that Borg-Warner transmissions could be bought for less than it cost to make Ultramatics.

While the quote above shows Nance to be concerned with sunk costs, which my college Finance prof said never to do, I can see why Nance would decline B-W's offer. That offer sounds very much like the deal that had Packard outsource bodybuilding, and dispose of it's bodybuilding equipment, and Nance had just finished dealing with the consequences of that move.