Happiness & Kings

(See front cover)

Favorite book of James Alvan Macauley, president of Packard Motor Car Co. since 1916 and of the Automobile Manufacturers Association since 1928, is Lorna Doone. Last week Alvan Macauley (the "James" disappeared long ago) might have quoted another British author to the effect that "The world is so full of a number of things, I'm sure we should all be as happy as kings." Some items contributing to Mr. Macauley's happiness:

P: For the first nine months of 1935, Packard built 31,987 cars--seven times the number turned out during the same period in 1934.

&3182; During these same nine months Packard made $776,000. In the 1934 twelve-month it lost $7,290,000.

P: Packard's 15,000,000 shares touched a last week's high of 7 1/2. Last year's low was 2 3/4. President Macaulay, holding 339,245 shares, increased his net worth by $1,500,000.

P: Successful was the new Packard One Twenty, named for its 120-inch wheelbase, selling around $1,000. Priced at less than half the standard Packard models, the One Twenty was delivered in February 1935. Since then more than 25,000 One Twenties have been produced, with the Packard baby outselling older models 5-to-1.

P: Packard's 1936 schedule calls for 9,000 standard Packards, 70,000 One Twenties. Best previous production occurred in fiscal 1929 when some 50,000 cars were turned out.

The company which Mr. Macauley, the One Twenty and Recovery have done so much for outgrew its founders when still an infant. It was formed in 1899 in Warren, Ohio, by Brothers James and Warren

D. Packard. In 1903 it moved to Detroit, leaving the Packards behind. By that time two of its principal owners were young Yalemen who had served together in the Spanish War on the U. S. S. Yosemite-- Henry Bourne Joy and Truman Handy Newberry, both born in November 1864. Mr. Joy, whose father formed the "Joy System" of railroads, part of which became the nucleus of the present Chicago, Burlington & Quincy served as Packard's president (1905-16). Mr. Newberry made a pleasant little splash as T.R.'s Secretary of the Navy (1908-09) and a large unpleasant splash a decade later when he defeated Henry Ford for the U. S. Senate, was accused of buying his seat with excessive campaign expenditures, resigned after he had been exonerated. When Mr. Macauley arrived as Packard's General Manager in 1910, the company was largely owned by the Joys, the Newberrys, the Algers, the McMillans and other First Families of Detroit.

Flypaper. Before going to Packard, Alvan Macauley had worked for John Henry Patterson's National Cash Register and for American Arithmometer Co., forerunner of Burroughs Adding Machine. When about to leave National Cash Register, Mr. Macauley was somewhat embarrassed over breaking the news to Mr. Patterson who, though gifted, was also explosive. Fortunately, Mr. Macauley's departure was tempered by an even greater embarrassment for Mr. Patterson. When Mr. Macauley went in to tell his employer of his new job, he found his chief, just back from Europe and wearing a pair of French flannel trousers, sitting on a sheet of flypaper. Mr. Macauley, horror-stricken, gaped at Mr. Patterson. Mr. Patterson, sensing something amiss, felt his rear end, arose with a yell. By the time Mr. Macauley had helped remove the flypaper from Mr. Patterson's pants and apply turpentine to Mr. Patterson's person, the head of National Cash Register was in no mood to become excited about Mr. Macauley's future.

At Arithmometer, Mr. Macauley had his troubles. The man who was then president resented his arrival and shortly resigned, taking with him 52 executives and keymen. Left behind was only one man who knew anything about adding-machine design. Arithmometer was then doing business in St. Louis. Mr. Macauley quarreled with the city government because it refused to let him connect two buildings with a bridge across an alley, moved the whole Arithmometer personnel and plant to Detroit in 1905. Five years later came the call to Packard and in 1916 the presidency of the Packard works.

Until 1930 the Macauley administration was largely a record of continued expansion, continued prosperity, continued earnings. Back in the beginning, Packard decided to embrace high-quality small production, forego low-price mass production. In the years right after the War its cars sold at $6,000 and no pre-Depression Packard could ever be bought for less than $2,000. As the volume producer in the high-priced field, the company during the last five years of the Coolidge Era (1925-29): 1) took in $411,000,000; 2) made $86,000,000; 3) paid out cash dividends of $50,000,000.

120. Depression hit high-priced cars harder than any other group in the industry. Packard sales dropped from $107,000,000 in fiscal 1929 to $14000,000 in 1934; cars sold dropped from 44,634 to 6,552. In 1932 Packard tried to keep its salesmen and dealers from starving to death by marketing a light, 8-cylinder car priced at $1,750. The model failed, was withdrawn after only a few thousand had been sold. Meanwhile, as the quality market continued to shrink, Mr. Macauley in 1934 decided upon another invasion of the relatively low-priced field. This time he marked his car clear down into the thousand-dollar level, produced the 1935 One Twenty. Month ago Packard announced the 1936 One Twenty, differing from the 1935 model chiefly in having a 120-h. p. engine instead of 110 h. p. The new engine created a new slogan ("A horsepower for every inch'') and resulted in the sales-point, odd for Packard, that the new One Twenty can "run away from a Ford."

At 63, President Macauley with his high forehead, his thin white hair, his rimless eyeglasses and his square-jawed face could, if he would, get a job in Hollywood playing parts as a typical U. S. tycoon. He detests people who jingle coins and he shrinks from the sight of gold teeth. His voice is seldom raised, his temper never lost. Like many other motor executives, Mr. Macauley is a good mechanic, maintains a woodworking shop in the basement of his Grosse Pointe Shores home. For his friends, he carves cigaret cases; for his grandchildren, toy furniture and dolls. An incorrigible baseball addict, he was expert on Hank Greenberg's batting average, on "Schoolboy" Rowe's record of games won-&-lost.

Mr. Macauley's attitude toward his employes is marked by a strong sense of paternalism. He personally awards to each five-year employe a pin; to each ten-year employe, a watch; to each 25-year employe, another pin. Last year, out of 2,691 Packard workers, 56% were five-year men; 20% were ten-year men; 8% were 25-year men. No one is fired for old age; a Packard workman recently died at 84. Oldsters are shifted to less active departments.

In 1929 Mr. Macauley banked $125,000 as salary, $131,000 as bonus. In 1933, he made $30,000 salary, no bonus. Since prolification has proved profitable for his company, his salary is now back to $40,000.

Simple Sweep. In addition to happiness as head of Packard, Alvan Macauley was also happy last week in his capacity as head of the Automobile Manufacturers Association. For the motor industry, which even in 1933 operated in the black, was this year accelerating toward boom-day tops. Simple and sweeping are key-figures on the automobile's 1929 peak, 1932 valley, 1934 recovery, 1935 probability: Cars and trucks produced

1929 5,622,000 1932 1,431,000 1934 2,870,000 1935 3,900,000 (estimated)

Wholesale value

1929 $3,576,645,000 1932 793,045,000 1934 1,537,290,000 1935 2,000,000,000 (estimated)

Profit figures for the industry are always obscured by nonreporting Ford Motor Car. Last year cars other than Ford earned their makers some $81,000,000. This year the industry, without Ford expects to make approximately twice that amount.

Trends. Motor prosperity, however, does not mean prosperity for the whole automobile industry. General Motor, Ford and Chrysler still account for slightly more than 90% Of total sales, thus leaving the independents squeezed into a narrow corner. In 1934, seven independent makers lost about $23,000,000; even in 1935 they may lose $6,000,000.

Ford, Plymouth and Chevrolet are doing a little less than their 1934 share of the total business, with a corresponding gain for manufacturers in the next higher price bracket--Chrysler's Dodge and General Motors' Pontiac and Oldsmobile. Biggest single achievement of the first nine months of 1935 appeared to be Ford's return to the position of No. 1 automobile producer. Last year Ford and Chevrolet finished in practically a dead heat. This year Ford went into October with a 178,000-car lead and was outselling Plymouth better than 2-to-1. Big Three totals stood at:

1934 1935 ( 9 months) Chevrolet 534,906 484,297 Ford 530,528 662,204 Plymouth 302,557 298,138

Thus far this year, Ford is selling nearly one car out of every three; Chevrolet not quite one car out of every four; Plymouth about one out of every seven.*

Show. The New York Automobile Show opens this week, two months ahead of its traditional date. President Roosevelt asked the industry to advance its full-dress parade from winter to autumn in the in hope of evening up production, leveling out employment, extending the selling season. Automobile executives did not feel able to refuse the Administration's request after concessions made to them in the disputed Section 7A of the late NRA. With the early show and a pre-Christmas motor boom, fourth quarter sales may reach 900,000. Forecasts of 1936 production range from a modest 4,000,000 to a generous 4,500,000. The industry increased production 45% in 1934 over 1933, and will make nearly a 40% increase in 1935 over 1934.

Independents. Outside General Motors, Ford and Chrysler there are only ten U.S. automakers with any appreciable volume. In addition to Packard, they are Studebaker, Fierce-Arrow, Hudson, Nash, Hupp Auburn, Graham-Paige, Reo, Willys-Over-land.

Studebaker went into receivership in March 1933, emerged in March 1935--in itself a remarkable accomplishment since U. S. motorists usually give a receivership car a bad name, proceed to hang it. Studebaker's $4,876,000 loss in 1933 was cut to $1,462,000 in 1934. From March 9, 1935 (end of receivership) to June 30, losses were held to $88,000.

Head of Studebaker is Paul Hoffman, onetime Studebaker salesman, later Studebaker dealer in Los Angeles, then (1924) Studebaker vice president in charge of sales, finally (1933) Studebaker co-receiver. As Studebaker sales manager, he adopted the "Friendliest Factory" slogan, invited all disgruntled dealers to bring their kicks to him. When the company came out of receivership, President Hoffman made an announcement "to our competitors," said, "A great majority have given us a square deal and a chance to get on our feet again. ... So thanks-- and look out." Last week Studebaker competitors were looking at Studebaker's nine-month sales (30,191) which were running slightly under the 1934 rate.

Fierce-Arrow is that rarity among corporations, a grass widow. It was married to Studebaker in 1928 but during Depression both parties might well have pleaded nonsupport. Divorce came in August 1933 when Studebaker receivers sold Fierce-Arrow to a group of Buffalo businessmen for $1,000,000. Nine-month sales in 1935 were 583, far behind the 1,399 sales for the same 1934 period.

Hudson closed 1934 with working capital a thin $1,700,000, a year's deficit of $3,239,000. By Sept. 1, 1935, working capital was up to $10,600,000, thanks, in part, to a $6,000,000 loan from the New York and Chicago Federal Reserve Banks. Hudson, largest of the independents, sold 300,000 cars in 1929, dropped to 38,000 in 1933. Sales for the first nine months of this year came to 56,676 cars, mostly Terraplanes, and Hudson may make a small 1935 profit.

Hudson's Chairman Roy Dikeman Chapin, onetime (1932-33) Secretary of Commerce, has been Topman in his company since 1910. He got into motors by way of photography. Hired by Ransom Eli Olds in 1901, he made all the pictures for the first Olds catalog. As Secretary of Commerce under Herbert Hoover, his premature predictions of Depression's end surprised automobile associates who had long admired him as an able man of business. But Politician Chapin was merely upholding the traditions of his office by breathing optimisms of which Automan Chapin would never have been guilty.

Nash had $42,000,000 cash and government securities on hand at the end of 1929. It still had $27,000,000 at the end of 1934. It has paid common dividends in every year since 1918 and, though Depression dividends have exceeded earnings by $20,000,000, the company remains eminently solvent. Its low-priced LaFayette, brought out early in 1934, has accounted for about half the 1935 sales, which totaled 26,215 cars for the first nine months. Nash lost $1,625,000 in 1934 but 1935 sales show a 40% improvement and the company may end 1935 in the black.

In 1891 Charles Williams Nash was a carriage trimmer in Flint Road Cart Co. Two decades later he was president of General Motors, with Walter P. Chrysler working under him. In 1916 he left General Motors, spent $5,000,000 for the old Rambler automobile plant at Kenosha, Wis. By 1926 he had built 500,000 Nashes and his company had earned $80,000,000 on its original investment. Last year, at 70, Chairman Nash, reputedly worth $100,000,000, celebrated his golden wedding anniversary.

Hupp has this month rid itself of Promoter Archie Moulton Andrews, director and holder of various stock options and commissions dependent upon sales increases (TIME, April 15). Said Federal Judge Arthur J. Tuttle of Detroit in voiding these contracts: "Andrews' conduct was so bad that it seriously seems necessary to attribute all his conduct to an unbalanced mind and a dishonest mind. I cannot account for his conduct on the basis of one of those attributes alone. Acts of Andrews . . . had to do almost entirely with getting money out of the corporation. . . ."

Hupp lost $4,398,000 in 1934 and $880,000 in the first four months of 1935. Then President Vern R. Drum, who used to work for Chrysler, took office, reduced costs, cut losses, added dealers. But Hupp is still in the red and, though nine-month sales were 35% ahead of 1934. they add up to only 6,018 cars.

Auburn is bringing out a Diesel-engine car. Errett Lobban Cord's company has not had a good year since 1931 when its smart, swift models caught public fancy and 31,000 cars were sold. The company lost $3,600,000 in 1934 and $862,000 in the first six months of 1935. Nine-month 1935 sales of 4,324 cars were only about 10% ahead of the corresponding 1934 period.

Graham-Paige was depressed even when other automobile companies were prosperous, showed large deficits in 1929 and 1930. Operations were radically scaled down to Depression levels and the company made $67,000 in 1933, then lost $475,000 in 1934. Nine-month sales of 12,450 cars this year were about a 20% increase over 1934. Strength of the company lies in the personal reputation and financial integrity of Brothers Joseph Bolden and Robert Cabel Graham.

Reo is under the new-old management of Chairman Ransom Eli Olds, who founded the Reo company in 1904 but who had been in virtual retirement for ten years when, in 1934, an intracompany row brought him back to active leadership. During the first half of 1935, Reo made $42,156 but even this tiny profit was welcome after five consecutive years of deficits. Of late Reo has become primarily a truck maker, in 1934 turning out only 3,854 passenger cars as against 5.035 trucks. Government purchases of trucks have supplied a very substantial portion of Reo's business but passenger-car sales thus far in 1935 have barely passed last year's total. Willys-Overland, in receivership since February 1933, sold its Canadian plant, and a subsidiary in Elmira, N.Y. has been seized by the sheriff for nonpayment of taxes.

Big Three. Meanwhile, the Big Three have grown bigger & better. Chrysler, which last summer moved Walter P. Chrysler to the chairmanship and elevated Kaufman Thuma Keller to the presidency, made $18,000,000 in the first six months of 1935. nearly twice its earnings for the full year of 1934. Nine-month sales for the Chrysler group totaled 488,625 cars, about a 40% increase over the 1934 period and about 23% of all U. S. sales. The stock has been a big favorite in the current bull market. On April 1. 1935 it sold at, 34, closed last week at 88.

General Motors last week reported nine-month earnings of $114,482,000 against $92,445,000 for the 1934 period. Nine-month sales for the G. M. group totaled 763,406 cars. Brightest members of the General Motors family are Oldsmobile and Pontiac, both selling at about twice their 1934 rate. Neither Buick nor Cadillac has shown much sales increase thus far in 1935 but, in addition to a lower-priced Buick, General Motors is also bringing out a 1936 Cadillac at $1,645--a $700 decrease from the lowest price in the 1935 line.

Ford profits, as usual, remain a mystery. This week Ford Motor Co. is bringing out a cut-rate Lincoln.

*These and other nine-month sales figures include only 32 states for September.

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