THE YEAR OF DECISION
Packard’s 1953 Twenty-Sixth Series got off to a slow start, but once dealers actually received the new cars, early sales were strong. The Twenty-Sixth Series was a facelift, the work of new chief stylist Dick Teague. (John Reinhart had quit early in the design process and gone to Ford, where he led the design of the 1956 Continental Mark II.) Although it still lacked a V-8 engine, Packard coaxed 180 hp (134 kW) out of the senior cars’ 327 cu. in. (5,361 cc) straight eight, which was competitive with most rivals. Power steering, power brakes, and air conditioning were now optional and there were two new image leaders: a Derham formal sedan and the Caribbean convertible. The coachbuilder Henney also introduced a new series of limousines on a 149-inch (3,785mm) wheelbase, signaling Packard’s intention to reenter the prestige market.
Packard recorded a profit of $3.5 million in the first quarter of 1953, a healthy increase on the previous two years. Bolstered by that success, the board approved the development of a much-needed V-8 engine, which eventually cost the company more than $20 million. Nance also talked with Packard’s former engineering chief, Colonel Jesse Vincent, about developing a V-12 engine based on the new V-8, which would have given Packard a marketing edge against Cadillac.
Unfortunately, those promising notes soon turned sour. In January, new U.S. President Dwight Eisenhower appointed former GM president Charlie Wilson as Secretary of Defense. Wilson began shifting defense contracts from other automakers to his former company. Nance estimated that Wilson eventually cost Packard more than $425 million in defense-related revenues. An end to hostilities in Korea also meant deep cuts in existing contracts.
As the Korean War wound down, the federal government rescinded its previous restrictions on both production and consumer credit. Ford Motor Company, seeing an opportunity to reclaim the number-one sales slot from Chevrolet, responded with an aggressive increase in production. Chevrolet responded in kind, sparking a brutal sales war. Dealers, faced with impossible surpluses, cut prices to the bone and offered easy credit terms to buyers who would not otherwise have qualified.
The price war was most acutely felt in the low-priced field, but it also took a nasty bite out of the mid-price segment. Despite the greater prestige of middle-class brands, the potential savings on a new Ford or Chevy were hard to resist. The independents, which tended to have higher list prices and thinner margins than the Big Three, suffered the most; their dealers simply could not afford to match the price cuts of their Ford and Chevrolet rivals. Even Packard was hurt. Its cars were already overpriced and the price war led dealers to concentrate on the cheaper Clipper models, further hurting the senior cars. To make matters worse, by summer, the repossession rate on new car loans was the highest it had been since the Great Depression, prompting banks to tighten restrictions on credit.
Packard managed to build around 90,000 cars for the model year, but its cash reserves sank from $40 million to $18 million, forcing Nance to obtain a $25 million revolving credit line for automotive operations. (The company had already obtained a $20 million credit line for defense work, the only debt Packard had to that point.)
Both Nance and the Packard board felt their best option was to seek a merger with another independent with whom they could share costs and components. Nance talked briefly with Hudson‘s A.E. Barit in October, but the board rejected that possibility, preferring Studebaker. Hudson was moribund — it had been common knowledge that it was up for sale since 1951 and the price war had been the last straw — and Studebaker seemed like a better prospect. There was also the ongoing possibility of a merger with Nash, although discussions with Mason had been inconclusive.
Before the year ended, there was one more unpleasant surprise: the loss of Packard’s body supplier, Briggs Body Company.
Since the 1941 Clipper, Briggs had produced most of Packard’s bodies except the Derham and Henney customs. Packard manufactured its own engines and transmissions at its plant in Utica, Michigan, and performed final assembly at its factory on East Grand Boulevard in Detroit, but the actual body stampings were made at Briggs’ plant on Conner Avenue. (Other Briggs plants built bodies for Chrysler and some smaller manufacturers; before the war, Briggs had also done a lot of work for Ford and Lincoln.)
Outsourcing the stampings to Briggs had been a dubious idea to begin with and it rubbed Jim Nance the wrong way. By the fifties, Briggs was often behind schedule, its quality control was sub-par, and cost overruns were frequent. Shortly after his arrival, Nance had asked finance VP Walter Grant to explore the possibility of bringing production back to East Grand. Grant told him it would be prohibitively expensive unless they could increase production to 200,000 units or more. Manufacturing VP Ray Powers also persuaded Nance that the six-story East Grand plant was outmoded and inefficient compared to newer single-level plants. For the time being, Packard had little choice but to stay with Briggs.
In December 1953, that choice was abruptly taken away. Walter O. Briggs, the company’s founder, had died in January 1952 and high inheritance taxes had left the Briggs family eager to divest. In May 1953, they arranged to sell the company’s 12 U.S. factories to Chrysler for $35 million. Chrysler president Tex Colbert informed Packard that Briggs would continue to supply bodies through the 1954 model year to fulfill existing obligations, but made no promises beyond that. It was devastating news: No other outside supplier still had the capacity to build complete bodies in sufficient quantities and Packard didn’t have the capital to bring production in-house.
Nance had previously negotiated a reciprocal agreement with George Mason to produce some Packard stampings at Nash’s plant in Kenosha, Wisconsin, in exchange for Nash’s purchase of Packard’s new V-8. After the Briggs sale, however, Nance concluded that the cost of shipping complete bodies from Kenosha to Detroit would be prohibitive and decided that Packard’s only realistic solution was to purchase the Conner Avenue plant from Chrysler.
Nance’s negotiations with Tex Colbert were necessarily delicate — Chrysler wasn’t eager to sell and Packard did not actually have the money to buy. Nance managed to string Colbert along until the Mutual Benefit Life Insurance Company agreed to underwrite a $7.5 million loan to finance the purchase. Unfortunately, Colbert raised his price to $8.8 million and Mutual refused to go any higher. Nance finally had to settle for a five-year lease with a total cost of $4.2 million.
Around that time, Walter Grant suggested a radical possibility. Rather than continuing to assemble cars at East Grand, Packard could transfer the assembly line to Conner Avenue, consolidating it with the production facilities. Many of Packard’s manufacturing people were leery of that idea because the Conner Avenue plant was rather small (early plans called for expanding it by 20%, although the idea was quietly dropped for cost reasons). However, Grant estimated that the move would save up to $12 million a year, which was compelling.
The consolidation of assembly and production at Conner Avenue remains the single most criticized decision of Jim Nance’s tenure. Many Packard historians characterize it as unjustifiably foolish: Continuing production at Conner without consolidating would have saved enough money to lower Packard’s break-even point from 64,000 units to 30,000 while the $12.6 million cost of transferring the assembly line raised it to 80,000 units. However, Grant pointed out that if Packard could sell 80,000 cars in 1954, they could pay off the investment in less than 15 months, putting the company in a much better financial position for the all-new Packard and Clipper lines Nance still hoped to build. It was a calculated risk, but it would prove to be a terrible mistake.