The bread and butter of most modern luxury car companies is their “near-luxury” models, moderately priced but still expensive cars aimed at buyers who are enticed by the badge, but can’t afford the company’s real luxury cars. It’s big business today, but it’s not a new idea. Back in the mid-thirties, beleaguered Packard jumped into the mid-priced fray with its affordable One Twenty — the car that saved Packard and set the stage for its eventual demise.
Let’s talk a little about branding. The terminology is relatively new, but the idea is not: building the image and reputation of a brand name to the point where buyers will seek it out and even pay a premium for it, sometimes in defiance of logic. Successful brands are considered the holy grail of modern business and billions of dollars are invested every year to try to create and maintain that success.
Creating successful brands is challenging and, contrary to the ambitious dreams of many a marketing goon, they rare emerge from a vacuum. Most brands begin with a successful product whose aura is painstakingly extended (“leveraged”) onto other products. The tricky bit is that a given brand will only stretch so far; attach a snobbish name to too much tacky crap and its snob appeal will begin to erode. It’s a risky endeavor, but sometimes it’s necessary if a business is to survive.
That is precisely the dilemma faced by the Packard Motor Car Company in the early 1930s. Packard had been incorporated in 1902, but it was not until Alvan Macauley became president and general manager in 1916 that it had found its métier. By the end of the 1920s, Packard had established itself as the most prestigious car made in America. Duesenberg was more expensive and offered greater performance, but Duesenbergs had a little too much flash, a faintly vulgar air that smelled too strongly of the arriviste. A Packard bespoke class; it said old money.
During the stock market boom of the late twenties, Packard was in an enviable position. The company had no need for hard-sell tactics, either in advertising or on the sales floor, and while total sales were modest, each car sold was toweringly expensive and very profitable.
The Crash brought this genteel cocktail party to an abrupt and painful halt. With ruined stockbrokers jumping out of windows and the shockwaves spreading throughout the economy, the people who still had $2,400 or more to spend on a new Packard were suddenly circumspect. Sales of high-end models like Cadillac’s new V-12 and spectacular V-16 or Packard’s newly revived Twin Six quickly stalled.
The obvious if painful answer was to introduce cheaper models that could sell in larger numbers, supplementing sales of the pricier cars until prosperity returned. Unfortunately, Packard’s first stab in that direction, the 1932 Light Eight, did poorly. Conceived before the Crash, the Light Eight was ill-suited to the new economic reality, managing to be simultaneously too cheap to be profitable and too expensive to sell in the necessary volume. Consequently, Packard ended the 1932 fiscal year with a $7 million net loss, the equivalent of $108 million in 2008.
As this crisis unfolded, Alvan Macauley brought in new blood, hiring Max Gilman from Packard’s New York distributor as Packard’s new vice president of distribution. Gilman, who was promoted to general manager in 1934, was from Brooklyn — gruff, ruthless, tough-talking, and in most respects the diametric opposite of the patrician Macauley. The same was true of two other important new hires: former Buick manufacturing executive George T. Christopher, who soon became Packard’s assistant vice president of production, and new sales manager William Packer, hired from Chevrolet.
Macauley’s selection of men so obviously different from the customary Packard mold appears to have been wholly intentional, because their principal task would be to take Packard in a new and challenging direction. The failure of the Light Eight had underscored Packard’s need for cheaper, higher-volume models, but it had also illustrated that those cars needed to be cheaper to build, an area where Packard’s existing staff had little expertise.
The new model Gilman and Macauley envisioned would be considerably cheaper than the Light Eight, which had started at almost $2,000. The new car was intended to cost less than half that, putting it in the $850–$1,000 class then dominated by Buick, Hudson, Chrysler, and eight-cylinder Oldsmobiles. Gilman calculated that Packard could potentially sell 70,000 cars a year in that segment, which would mean a total volume at least 30% greater than Packard’s best pre-Crash years.
A NEW APPROACH
Packard’s manufacturing and assembly operations had seldom paid much head to Fordist notions of production efficiency or cost controls. Instead, each Packard was built in an almost leisurely fashion with a lot of painstaking hand labor. That approach maintained Packard’s reputation for quality, but contributed to very high unit costs, which were incompatible with the goals for the new car.
While manufacturing cost controls were George Christopher’s stock in trade, it was clear that trying to apply GM-style mass production methods to Packard’s existing operations would only create chaos. Instead, Macauley and Gilman convinced the board to authorize the construction of an all-new and very modern assembly plant on the Packard campus. This was costly, but it allowed Christopher to build in the necessary processes from the start and helped to reduce the culture shock for existing employees. The new plant also served to reassure nervous Packard executives and board members that the company was merely supplementing, not abandoning, its traditional approach. In the older facility, which Packard employees carefully described as the “Senior Plant,” big Packards would continue to be built in the time-honored way.
Meanwhile, Bill Packer was recruiting new dealers and introducing the Packard sales organization to new concepts like haggling and financing. Packer also set out to build anticipation for the new model with an unusual ad campaign featuring months of teaser ads that didn’t show the product (a technique Nissan later attempted, with mixed results, for the 1990 Infiniti Q45).
THE PACKARD ONE TWENTY
The new small Packard — dubbed One Twenty, from its 120-inch (3,048mm) wheelbase — was introduced to the public in January 1935, although it didn’t reach full production until April of that year. The One Twenty was a good deal smaller and half a ton lighter than the senior cars, powered by a new 257 cu. in. (4,214 cc) straight-eight engine. With 110 gross horsepower (82 kW), it offered excellent performance for the time.
The One Twenty was more mechanically sophisticated than the senior cars, featuring a new independent front suspension and hydraulic brakes where the big cars still had solid front axles and mechanically operated drums. More importantly, at least from a marketing standpoint, the smaller car’s materials and build quality showed little sign of Christopher’s ruthless cost optimization. The One Twenty was a well-trimmed car with a solidity and attention to detail worthy of the Packard name.
(We should mention here that Packard repeatedly dithered on the exact nomenclature for the One Twenty, which in different series/model years was variously written “One Twenty,” “One-Twenty,” or “120” with no apparent rhyme or reason. In 1938, the name was dropped entirely in favor of the more prosaic “Packard Eight,” but the One Twenty designation returned in 1939. We’ve used “One Twenty” throughout for the sake of our own sanity, but purists will note that the designation would not be precisely correct for all years.)
The One Twenty ended up more expensive than originally planned, starting at $980, but it was still cheap enough to undercut all but the cheapest Buicks and more than $200 cheaper than LaSalle, its nearest direct competitor. The attractive price and the power of the Packard name were a potent combination: Despite its late introduction, Packard sold 24,995 copies in 1935 and 55,042 in 1936, when the One Twenty received a bigger 282 cu. in. (4,622 cc) eight with 120 hp (90 kW). This was still short of Gilman’s original projections, but Packard’s total 1935 sales were still nearly four times the 1934 total and 1936’s tally was almost twice that of 1935.
The One Twenty was an expensive gambit, costing some $6.2 million including the new plant, but it paid off, allowing Packard to post a $7 million profit for 1936. The number of dealership franchises had doubled by that time and the company jumped from 17th to 9th place in total U.S. auto sales.
For a luxury automaker looking to expand its reach, the first big success poses a difficult question: How far should you try to push your luck? In late 1935, Max Gilman’s answer was “further.” The One Twenty was off to a great start, but its sales suggested there was still room for further expansion.
About a year later, in September 1936, Packard unveiled the Packard Six, the first six-cylinder model the company had offered since 1928. The new Six, known internally as the 115, was essentially a cut-down One Twenty with a wheelbase of 115 rather than 120 inches (2,921 rather than 3,048 mm) and a new 237 cu. in. (3,878 cc) L-head inline six with 100 hp (75 kW). With a starting price of $795, the Six now competed with Nash and Oldsmobile as well as the lower ends of the Buick and Chrysler lines.
Predictably, the Six sold even better than did the One Twenty: some 65,400 units on top of 50,100 units of the One Twenty, giving the company its best sales year to date. The recession that followed in 1938 prevented Packard from sustaining that level of production, but sales remained strong enough to justify Gilman’s judgment. Packard invested an additional $5.1 million in further plant expansion, anticipating more growth to come.
The Packard old guard was none too pleased with this trend, but it was rapidly becoming clear that there was no stopping it. Alvan Macauley stepped down as president in favor of Gilman in April 1939, although Macauley remained chairman of the board until March 1948. George Christopher, meanwhile, became vice president of manufacturing.
DILUTION AND DECLINE
The success of the “junior” Packards soon made the senior cars seem superfluous. Neither Gilman nor Christopher had much affection for them; the big Super Eight and Twelve were still magnificent cars, but they were expensive to build, sold in ever-declining numbers, and didn’t contribute much to the bottom line. The Twelve was dropped after 1939 and future senior Packards would be bigger, fancier versions of the junior cars rather than the other way around. By 1940, the senior Packards would even follow the junior cars’ nomenclature, becoming Super Eight One Sixty and Custom Eight One Eighty.
In the short term, that made obvious sense, but it demonstrated a dangerous misunderstanding of the reasons for the junior cars’ success. The One Twenty and Six were fine cars, but the primary reason they had sold so well was that they gave thousands of middle-class buyers a chance to brag that they drove a Packard, a privilege previously limited to an elite few. As Packards became more commonplace and thus more ubiquitous, that cachet began to fade, something the decline of the senior cars certainly didn’t help.
To some extent, that was simply the way the American luxury market was going. Cadillac’s V-12 was gone by then and the V-16 would disapppear in 1940. Lincoln went the same way, dropping the big Model K line in favor of the Zephyr. American luxury car buyers were now more interested in style leaders like the Cadillac Sixty Special or the new Lincoln Continental, a trend Packard followed with the 1941 Clipper.
Packard’s miscalculation was not that it had gone down-market — if it hadn’t, it’s very unlikely that it would have survived the decade — but that in his search for greater volume, Gilman had positioned both the One Twenty and the Six/One Ten in a class below even the Zephyr and the cheapest Cadillac Series 60 and 61. Moreover, the junior Packards were perhaps too good, leaving little reason for buyers to step up to the pricier models that competed with Cadillac and Lincoln.
In short, rather than expanding the Packard brand, Macauley, Gilman, Christopher, and Packer had only succeeded in redefining it. That in itself was no small feat, but it had pushed Packard into a very crowded market segment — good as the junior cars’ sales were by Packard standards, they were no threat at all to Buick or Oldsmobile — while undermining the prestige that had been the junior cars’ biggest marketing edge.
George Christopher, who became president after Gilman was forced out in early 1942, either did not grasp that dilemma or considered it irrelevant. After the war, he boldly declared that he would increase production to 200,000 units a year (almost double Packard’s best previous year), but it never happened. Wartime military contracts left Packard debt-free and initial postwar sales were robust, but once the sales rush was over, Packard began to slip.
Christopher was forced to retire in 1949. His eventual replacement, James Nance, recognized the problem Packard’s declining prestige represented and took steps to rectify the situation, but it was too little too late. Merging with Studebaker in October 1954 only brought more losses. After two final, ignominious years as a badge-engineered Studebaker, the venerable brand was retired in 1958.
The gloomy course of Packard’s postwar trajectory is no reflection on the actual merits of the early One Twenty. It was a desirable, high-quality product that brought no dishonor to its badge. In retrospect, however, Packard might have done better to position it against the Zephyr rather than Buick or LaSalle. The One Twenty (or a slightly bigger version of same) would probably still have sold well at that price point and would have allowed Packard to maintain its center of gravity within the luxury car field.
It’s a moot point now, of course, because Packard has been gone for decades, but the company’s trajectory is one the managers of BMW, Mercedes-Benz, and Audi would do well to study. In Europe, the “premium” German brands now dominate what used to be the midsize sedan segment and have more recently begun an aggressive push into smaller and cheaper C-segment. To date, the strength of those brands has yet to suffer significantly from that expansion, but as cars from formerly high-end brands displace mainstream marques like Ford and Opel, the Germans may eventually find that they’ve become the new mainstream rather than the upscale alternative.
Considering the Germans’ sales volumes and profit numbers in recent years, that may seem like the opposite of a problem, but if the roundel and three-pointed star no longer connote any particular snob appeal, those manufacturers, like Packard, may find themselves newly vulnerable from both above and below. Presently, they maintain their prestige through continued investment in the bigger, fancier, more expensive models, but with ever-escalating regulatory demands for better fuel economy and lower CO2, the senior cars may not be sustainable indefinitely — and there’s always the risk that some ambitious CEO will, like Max Gilman, eventually decide that the big cars are more expensive than they’re worth. At that point, history may repeat itself.
The upshot is that while any brand is as much about perception as substance, perception and substance are nonetheless inextricably linked. Of course, perception inevitably lags reality, but that can be both good and bad. A strong reputation can sustain a brand through some rough periods or serious missteps, but, as Packard discovered, once you lose that momentum, getting it back can be very difficult indeed.
NOTES ON SOURCES
Our sources for this article included the Auto Editors of Consumer Guide, Encyclopedia of American Cars: Over 65 Years of Automotive History, (Lincolnwood, IL: Publications, International, 1996); Dave Holls and Michael Lamm, A Century of Automotive Style: 100 Years of American Car Design (Stockton, CA: Lamm-Morada Publishing Co. Inc., 1997); Beverly Rae Kimes, ed., Standard Catalog of American Cars 1805-1942, Second Edition (Iola, WI: Krause Publications, Inc., 1989); James Arthur Ward, The Fall of the Packard Motor Car Company(Stanford, CA: Stanford University Press, 1995); Arch Brown, “1937 Packard 6: A Packard for $795,” Special Interest Autos #67 (January-February 1982); John F. Katz, “One Twenty: Packard’s Maligned Savior,” Special Interest Autos #140 (March-April 1994); Michael Lamm, “1932 Packard Light 8,” Special Interest Autos #22 (May-June 1974); and Michael G. H. Scott, “Style and Substance: 1935 Packard Eight,” Special Interest Autos #166 (July-August 1998), all of which are are reprinted in The Hemmings Motor News Book of Packards: driveReports from Special Interest Autos magazine, ed. Terry Ehrich (Bennington, VT: Hemmings Motor News 2001); Richard K. Phillips, “Into a New and Untried Middle Ground: The One Twenty, 1935-1936,” and L. Morgan Yost, “The End of an Era: The Seventeenth Series — September 1938-August 1939, The Eighteenth Series — August 1939-September 1940, The Nineteenth Series — September 1940-August 1941, The Twentieth Series — August 1941-February 1942, Packard: A History of the Motor Car and the Company (Automobile Quarterly Magnificent Marque Books), Third Edition, ed. Beverly Rae Kimes (Princeton, NJ: Automobile Quarterly Publications (CBS Inc.), 1978); Jim Richardson, “A Taste of Opulence: The affordable beauty of Packard’s Model 120 sedan,” Special Interest Autos #196 (August 2003), pp. 24-29; and Burt Weaver, “DriveReport: 1941 Packard 6,” Special Interest Autos #11 (June-July 1972), pp. 44-49.
Our inflation estimates were based on the United States Bureau of Labor Statistics Inflation Calculator, data.bls. gov/ cgi-bin/cpicalc.pl. Please note that the inflation figures cited in the text are approximate and are provided solely for general reference — this is an automotive history, not a treatise on the historical value of money, and nothing in this article should be taken as financial advice of any kind!
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8 CommentsAdd a Comment
Another great article! I miss Packard :(
It is a great lesson learned about brand dilution. Your article can be enjoyed since it can draw many parallels (Sony, Armani etc.)
What hurts the snob appeal even more is when these near luxury cars hit the used car market.
They lose a lot of value compared to a fully loaded Accord or Camry and look pathetic in a used car lot.
It might be just my impression, but it seemed that “old money” used to buy quality goods and keep it forever.
Social climbers needing the wow factor will dump whatever they have for the next big thing, flooding the market and hurting the brand in the long run.
I don’t know that I agree on the depreciation factor. The resale values of the more popular near-luxury cars tend to be pretty strong, because there are plenty of middle-class and even working-class buyers who would like to say they drive a BMW or a Mercedes who can’t swing the payments on a new one — hence the proliferation of CPO deals.
I haven’t studied the comparative depreciation of high-end Accords/Camrys vs. near-luxury models, but it varies a lot from country to country. In the UK, for instance, the depreciation of non-premium saloons tends to be pretty catastrophic, because so many people have cars through their employers that at any given time, there’s a glut of three-year-old off-lease models to drive down prices.
Unlike the entry-level models, the depreciation on high-end luxury and exotic cars tends to be quite staggering. I think the problem is that people who can afford $80,000+ for a car are seldom inclined to buy used, unless it’s something with historical or collector value. A two-year-old $150,000 car could potentially lose fully half its initial value without reaching a marketable threshold. Furthermore, as owners of cars like the BMW 8-Series will tell you, just because you can afford to buy the car doesn’t necessarily make it affordable!
Not being filthy rich, I don’t know how much I can usefully say about the car buying habits of that class, but my impression is that for various financial reasons, it’s become increasingly uncommon for wealthy buyers to actually buy new cars at all — I think a fair number are (very expensive) closed-end leases. In that case, low depreciation is attractive, because it translates into lower lease rates. Of course, if you’re buying something purely as a toy, you might make an exception, but the rich do care about such things. (Ask any waitress how well rich customers tend to tip…)
In any case, though, while wealthy might subscribe to the “buy quality and hold onto it” philosophy for durable goods like furniture, consumer goods tend to be another matter. It might be a different story in places like England, where the gentry may have property and status but not a lot in the way of liquid assets, but you don’t usually see multimillionaires driving (or being driven in) older cars unless they’re trying to make some sort of statement. If you drive a ’68 Miura, it implies that you’re a collector or an enthusiast; if you drive a 10-year-old family sedan, people might think you’re poor unless you issue press statements to the contrary.
This might be considered sacrilege, but a 120 coupe had great success as a hot rod at the Windsor RSL Speedway in Australia in the early 1960’s. I spoke to the son of the driver, who told me that the 120 was a road car, and his Dad ripped off the fenders/mudguards and went racing!
In my opinion, this is the most clear cut, precise article into the evolution of the “Junior Packards” I have ever read. I have owned several 120 Packards and they are a joy to drive; bear in mind I’m talking about late 30’s and early 40’s technology. But the styling all but dated by 1941, is today a statement on how to build an elegant vehicle. Its too bad “THEY” didn’t see that in 1946 and built the cheaper cars;also, Packard should have learned from Pierce-Arrow and NOT screw around with Studebaker! In the end, the latter also went out of business. June/2016
An excellent article and analysis. Alvan Macauley was my great great grandfather. I was born in Ann Arbor and spent early childhood days at the Macauley mansion, 715 Lake Shore Dr.in Grosse Pointe. Knowing litle of his career until I was older, I’ve always had an appreciation for style, elegance and engineering that the Packard brand represented. I own a 1939 120 Club Coupe ‘Junior’ and it more than meets my standards of appreciation. ‘Pa’ as I knew him was indeed an automotive pioneer and and admired executive both of Packard and of the Automobile Manufacturing Assn, on the board for 33 years, 18 years as its president, critically through WWII. Having most of his business and private papers, I can say with confidence that for him ‘reputation’ was the core mantra of his leadership: “The man who builds and the man who buys are both beneficiaries of good reputation To the one it is a continuous spur and an incentive..to the other the strongest of all guarantees that what he buys is worthy. Reputation is never completely earned…it is always being earned. It is a reward…but in a much more profound sense it is continuing responsibility. That which is mediocre may deteriorate and no great harm done. That which has been accorded a good reputation is forever forbidden to drop below its own best… That said, Pa had a keen, even ruthless sense of business and salesmanship while at the same time described (By Fortune) as ‘the only gentleman in the automobile business.’ He was no longer at the helm when the brand he built merged with Studebaker, a decision he deeply regretted the necessity for. Still in the depth of the Depression as a concession to ‘changing times’ he ordered a cut down version of a Twelve custom made for ‘Nana’. But that was as far as he would go.
A minor point, but Max Gilman was not president of Packard-New York — Lee Eastman was. Gilman started out in New York in 1918 as a salesman, and became sales manager for its truck division. Next up was a promotion to truck wholesale manager, and then to vice president of sales for trucks. After truck production ended in 1923, Gilman became manager of the accessory department. He was know as “That hard-boiled guy in New York” when Macauley brought him to Detroit as vice president of distribution in 1932.
In its 4th Quarter 2022 issue, the Packard Club’s “Packard Cormorant Magazine” published part one (1872-1929) of a complete biography of Alvan Macauley – part two (1930-1952) will be published in the 2nd Quarter 2023 issue. Much of the material and photographs were provided by Jonathan Macauley Nielson.
Stuart R. Blond – Editor of The Packard Cormorant
Thanks for the correction! I’ve amended that sentence to just read “… hiring Max Gilman from Packard’s New York distributor as Packard’s new vice president of distribution.”