Studebaker: The Life and Death of an American Corporation (review)

Abstract

Reviewed by: Studebaker: The Life and Death of an American Corporation * Mark S. Foster (bio) Studebaker: The Life and Death of an American Corporation. By Donald T. Critchlow. Bloomington: Indiana University Press, 1996. Pp. x+273; illustrations, tables, notes, bibliography, index. $39.95. When the last American-made Studebaker automobile rolled off the assembly line in South Bend, Indiana, in December 1963, one of the last remaining independent automotive producers was on the brink of extinction. It marked the effective end of the company’s history, which had begun 111 years before. Locals lamented the demise of a venerable corporation that had been a source of civic pride and thousands of jobs. But even as business analysts wrote Studebaker’s epitaph, most Americans unsentimentally concluded that it was just another corporate failure. Donald Critchlow states his intention at the outset: “If I can tell as interesting a story of the managerial elite as the one told by historians of the ‘plain folks,’ I will have achieved a major objective” (p. 12). He consciously rejects Alfred Chandler’s model of rational, structural corporate hierarchies. The Studebaker brothers managed their firm informally in the nineteenth century, and when they entered automobile production that industry featured “strikingly heterogeneous” managerial models (p. 73). Nor did Studebaker’s history fit an alternative model to Chandler’s offered by Charles Sabel and Michael Piore, in which small firms emphasize “flexible specialization” of products, which allows them to adjust rapidly to changing market conditions and thereby compete effectively with larger companies (pp. 3–4). Studebaker’s managers made many commitments based on gut-level instincts and influences unrelated to logic. Although Studebaker eventually failed, Critchlow documents many of the corporation’s successes. Many Americans have forgotten the company’s illustrious history of producing wagons from the 1850s through World War I. In addition, very few independent automobile companies lasted as long as Studebaker, which produced competitive models for sixty years. Studebaker competed effectively despite its defiance of industry conventions. Management refused to center operations in Detroit, preferring to maintain corporate headquarters in South Bend, and for much of its history Studebaker enjoyed enlightened labor relations. Critchlow acknowledges Studebaker’s mistakes. The company entered the automobile business quite late, and managers failed to commit to gasoline-powered engines until rivals had a big head start. Despite Studebaker’s many opportunities to modernize production facilities, its management repeatedly chose handsome dividends instead. There were numerous mergers with other independents; a few served the company’s needs, but the majority were poor fits. Production engineers turned out some superb automobiles, some of which sold well, but there were too many duds. Although the company generally experienced harmonious relations with [End Page 786] labor, they came at a high price. Production standards were far lower than average for the industry, and labor costs far higher; this was a poisonous mix for a company struggling to survive. Once the Studebaker family essentially lost control of the firm to banks after 1910, a parade of executives ran the company. Some, such as Albert R. Erskine, James J. Nance, and Sherwood Egbert, tried to introduce more “rational” managerial systems at Studebaker. Others, including Paul G. Hoffman, had a more informal, personal managerial style. All wrestled with the issue of maintaining (in fact or at least appearance) “loyalty” to South Bend and Studebaker “traditions” while simultaneously paying attention to the bottom line. Ultimately, collectively, they failed. The book has a few weaknesses and apparent inconsistencies. Critchlow does not always provide clear explanations with numbers. On page 55 he states that in 1908, Studebaker “earned over a million dollars on a little over five hundred cars sold. . . .” That would be $2,000 in “earnings” per unit. Did the “earnings” figure include the wagon operations? During World War II, the corporation reportedly did $1.2 billion in war production work. Yet net profits totaled nearly $600 million in 1942 and 1943 combined. Presumably, Studebaker continued to produce a large amount of civilian goods. A more thorough explanation of wartime production and profits would have been useful. These are minor caveats, as the book succeeds in most important respects. A highly regarded and widely published senior historian, Donald...