Re: New "What Ifs?"

Posted by Steve203 On 2014/6/13 8:21:40

Packard's profits after WWII were in the non auto lines,

I've seen numbers saying 50% of revenue and 80% of profits were from defense contracts. All defense contracts are "cost plus" so the contractor is guaranteed a profit, no matter how high his costs are.

Kaiser made so much money on defense work, and lost so much on autos, that some stockholders were demanding the company exit autos and be a pure defense contractor.

The J-47 contract that Packard built Utica for called for 3,000 engines for $180M. On June 24 of 52, the contract was increased to 6,000 engines for $393M. Initial production rate was supposed to be 500 engines/month. In March of 52, 4 months before the first engines were completed, the rate was cut to 300/mo. In January, 53, the rate was cut to 250/mo and contract completion stretched from Dec 53 to March 55.

In Feb 53, the Air Force announced a cut in procurement of 20%, which was distributed disproportionatly as Packard and Studebaker contracts were cut 40%, while GE suffered a much smaller cut. That left Packard producing 150 engines/mo until October, when production was cut to a pilot line producing 25/mo, which ended in June 55.

The wheels came off the J-47 program just as Packard was spending over $40M to update it's auto line, including over $20M for equipment and tooling for the V8 and another $4.5M for tooling for the Twin-Ultramatic.

While Packard probably recovered it's investment in Utica ($15M), if it had used space it already owned, or leased space, as Studebaker had, Nance would have had that $15M in the bank to finance his modernisation program.