Re: One Story Assembly Plant What If?

Posted by Steve203 On 2014/6/7 13:28:55

Finally bought the Ward book and added it's information to what I already knew.

In July of 53:

-Kaiser at Willow Run was obviously cooked. The Air Force canceled it's contracts with Kaiser in late June, auto sales had crashed, the Willys plant in Toledo, acquired in April, rendered Willow Run redundant, and the Willow Run autoworkers were on strike.

-Ray Powers, head of manufacturing, started at Packard on July 1, 53. Powers had come from Ford. In the 50s, Ford was building state of the art auto plants at a rapid rate: Wayne stamping and assembly opened in 52, Wixom and Michigan Truck opened in 57, so he was up to speed in the latest, most efficient, manufacturing technology.

-Rumors of the Briggs sale were on the street in "midsummer 53" according to Ward.

Nance had everything to make a move on Willow Run, opportunity to acquire a plant for far less that the cost to build new, the knowledge to organize a new plant, and the recognition that he would soon be in urgent need of a body plant. He lacked one thing: money.

Kaiser would probably have considered an offer to lease the plant, as Hydramatic had initially leased it. Scaling from what Packard paid for Conner, with Willow Run being more than 4 times as large, the lease would have been $3-4M/yr

Packard CFO Grant estimated the savings from having both stamping and assembly under one roof would save Packard $12M/yr, based on producing 80,000 cars/yr. Or $1.3M based on 30,000/yr.

Taking over Conner from Briggs and continuing assembly at EGB would save $8M/yr for an 80,000 production rate.

So the cost of leasing Willow Run would make running costs of consolidation there a wash vs buying Conner and continuing assembly at EGB, and trail the $12M/yr savings of consolidation at Conner, at 80,000 cars/yr. At the production rate of 54, Packard would have been worse off than if they stayed at EGB, due to the lease cost.

But Packard didn't have the money to buy Conner either. Nance could only obtain a loan commitment for $7.5M, a million short of what Chrysler wanted, so they ended up leasing for slightly under $800K/yr, consolidating at Conner to maximize savings, and we know how that worked out.

To make the numbers work, Packard would need to buy Willow Run to eliminate the fixed cost of the lease payments. To raise the money, Utica would have to go, and leave powertrain production at EGB.

A quirk of the J-47 contracts was that the contractors had to provide their own facilities, though the government provided the equipment. Studebaker also had a J-47 contract, but played it wisely, leasing a plant in Chicago and using the South Bend Chippewa Ave plant it already owned, so when their contract was canceled a the end of 53, they were not out a large amount of capital. Packard had built Utica, and bought a plant on Mt Elliott to make forgings, for, accounts vary, $15-$17M. Nance was uneasy about defense contracts, recognizing the procurement decisions were political, but Hugh Ferry had made the commitments before Nance came on the scene.

How much would Willow Run have cost? Hydramatic bought the plant for $26M, "free and clear" meaning after Kaiser had, at it's expense, removed all it's equipment. Some of that equipment was moved to Toledo, eventually to make it's way to Argentina when the IKA deal was closed a year later, the rest went to scrap. Chrysler paid $35M for Briggs, as a going concern, with 8 equipped plants. Chrysler no doubt also assumed Briggs' liabilities. I would expect Packard could have bought Willow Run, with all the equipment: presses, body shop, paint shop, assembly lines, in place, for $30M

Curtiss-Wright might have been induced to buy Utica in 53. Hurley had turned CW around and was making a tidy profit in 53. According to Ward, by 56 C-W needed more factory space and was on the prowl for more defense contracts. While Packard's J-47 contract had been cut to 250 engines/month in early 53, it was not officially cut to the pilot line until the end of September. It might be interesting to speculate if the contract would have been cut at all if the contractor was anyone other than an automaker not named GM. So what would C-W have paid for Utica, Mt Elliott and assumption of the J-47 contract? $20M? In 56, C-W paid $25M for Utica and Chippewa Ave and another $10M for the defense contracts they had in hand, but the price paid was heavily influenced by additional defense contracts promised for their help in bailing out S-P.

To fill the shortfall between what C-W, or anyone else, would pay for Utica, Nance would have to take the $7.5M loan that was offered for Conner. Still short. McFarland would have a cow, but, if Packard stopped development of the Ultramatic and outsourced, it would have saved $4.5M in tooling costs for the Twin-Ultramatic.

Then move into Willow Run in phases: first moving the trim and assembly operations from EGB as soon as Kaiser vacated, late 53/early54. Then move the jigs for the senior bodies to W-R, aggressively recruit experienced former Kaiser body and paint people to assemble stampings shipped from Conner. When the senior bodies are being produced with acceptable quality at an acceptable rate, do the same with the Clipper bodies. Then move the dies to W-R and reactivate the stamping plant when the dies are replaced or modified for the 55 models. This is similar to the plan Nance had in mind to phase body production back into EGB.

Then take over Studebaker. Immediately close all South Bend operations. Consolidate production at W-R. Consolidate Studebaker parts distribution with Packard's. Consolidate dealer networks. Drop the Clipper name. Replace the top trim Clipper with the Executive. Replace the lower Clipper trims with Studebaker Commander and President: built on the Clipper platform with differentiated grill, taillights and dash, the low compression engine as provided to Nash and conventional spring suspension. Drop the Champion entirely. Approach George Romney about distributing the Rambler through Studebaker dealers to fill the low priced void created by abandonment of the Champion.