Re: One Story Assembly Plant What If?

Posted by Steve203 On 2014/6/9 21:34:25

If the 110 wasn't able to pay for new investment where was the company to go anyway?


Lack of reinvestment is a recurring theme with failed auto companies.

Studebaker's bankruptcy in 33 is partly laid on Albert Erskine's decision to keep paying stock dividends, even when the company had to borrow to cover the payout.

Studebaker was also paying out dividends after the war, while the newest of the buildings in the main South Bend complex dated from the 20s, and some dated to their pre 1900 horse and buggy days.

Packard also was paying dividends while it kept repurposing and adding on to obsolete buildings.

I remember an article in Fortune in the late 60s, when AMC had a brush with insolvency, that blamed Romney's paying out dividends instead of investing in modern plant and equipment to reduce the company's uncompetitive cost structure.

In comparison, when Ford's production process and capacity needs rendered the 6 year old Piquette plant obsolete, he didn't try to adopt it or add on to it. He packed up, moved to Highland Park, and built and entire new, state of the art plant.

When Ford's production process and capacity needs rendered the then 18 year old Highland Park plant obsolete, he moved to Dearborn and built another new, state of the art plant, the Rouge.