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Packard - profits & losses, fun and games with numbers

Posted: Tue Apr 19, 2016 6:57 am
by Dave Czirr
A while back noted Packard historian Jim Balfour who has annual reports to the stockholders for almost all years for Ohio Automobile Company, Packard Motor Car Company, and Studebaker-Packard Corporation provided me with some published data from those reports on Packard's financial results and I decided to dabble a bit with the numbers. From 1907 onwards Packard had only 6 loosing years (1921, 1931, 1932, 1934, 1938 and 1946); Studebaker-Packard reported losses for 1954, 1955 and 1956 but those are consolidated results and do not provide individual data for the Packard and Studebaker divisions individually. Though certainly the Depression has a large impact on 1931, 1932 and 1934, a portion of those losses can be attributed to development of two entirely new lines for cars for 1932 (Light Eight and Twin Six) and the development of the new "120" during 1934.

The profit/loss per vehicle was calculated by me from the original data; Packard's best profit years both in terms of dollars and dollars per vehicle sold were all before the Depression, either before the luxury market began to drastically downsize, or they abandoned it as their exclusive niche, or both - however you chose to look at it. The sole exception to this was 1948 which benefited both from the postwar "seller's market" and the fact that the development costs for the new 1948 cars were all borne in 1947 and earlier. Even more revealing about the profitability of 1926, 1928 and 1929 is the sales volume that generated it; 1929's profit of $30.1m was generated from total sales of $135m. By comparison 1949's profit of $7.7m was generated from sales of $214m and more than twice as many vehicles sold.

Another way to look at the data is in terms of net profit to the corporation per car sold. When looking at this data keep in mind the number of cars sold is for the fiscal (calendar) year, not the model year. Also note that for 1954, 1955 and 1956 the total losses are for the S-P corporation as a whole so any data just for Packards sold is really meaningless though I have read somewhere that in 1955 Packard along made a miniscule profit. What really pops out to me in the profit per car data is that in the heyday of Packard's participation in only the true luxury market they averaged about $400 profit per car; compare this to 1937, a boom year in terms of total vehicles built and sold but heavily laden with "junior" cars and they only made $28 per car. I hope you enjoy dabbling and massaging the numbers as much as I have, look forward to your thoughts.

Re: Packard - profits & losses, fun and games with numbers

Posted: Tue Apr 19, 2016 10:04 am
by JWLawrence
Interesting evaluation of the data. I note that Packard highest selling year was 1937, but it was not its best profit year.

Re: Packard - profits & losses, fun and games with numbers

Posted: Fri Apr 22, 2016 4:20 am
by 5682-4775
Hi Dave

Thanks for taking the time to summarize and analyze this data, it certainly clarifies many curiosities about how profitable various product efforts were. Those years of high production numbers should have been consistently more profitable but one sees the real affect of going head to head with established medium-priced carmakers better able to navigate that competitive segment. Also sheds light on their lack of development funds for new models.

Steve

Re: Packard - profits & losses, fun and games with numbers

Posted: Tue Apr 26, 2016 3:17 pm
by Mahoning63
Fabulous Dave! The work you put into this is greatly appreciated.

The red years 1921 and 1934 stand out as big investments in advanced vehicles and facilities, well worth the losses. The red year 1954 saw a big investment in powertrains, probably should have been made in 1950 instead. Defense work helped profits throughout the 40s. Wish there existed a P/L break-out by car line from the Thirties on.

Paul

Re: Packard - profits & losses, fun and games with numbers

Posted: Wed May 25, 2016 9:00 am
by lancia
Hi Dave,

some time ago for my own amusement and using only the limited profit/loss/earnings and production data included in the Beverley Rae Kimes book, I did a bit of statistical modelling to try to discover what phenomena were associated with Packard's changing profitability per car produced over the years. Two phenomena besides the numbers of cars sold seemed to be important. The first was the passage of time which I interpreted as cheap cars becoming more acceptable so that buyers would pay less of a cash premium for a Packard vs a Ford or Chevrolet in 1950 compared to 1920 (after adjusting for inflation). The other big factor was whether customers bought enough of the "top of the line" models, top of the line meaning Senior Packards between 1935 and 1941, eights in the era of the 126-526 sixes, Model 30s instead of Model 18s and 48 horse cars in the era of the 38 horse dominant sixes.

I'll now enter your additional profit data in my statistical model and see if those conclusions stand the test. If they do, they may point to a fundamental conflict between maintaing really exceptional quality that was easily evident to the buyer on the one hand and on the other expanding production as the other means to maintaining profits, since top of the line cars were engineered basically using the same techniques as the cheaper models until the 120 was launched.

So was 1920-21, the years Packard moved to replace the Twin six with the Single Eight, the last time Packard were able to make such a large cost saving in manufacturing by re-thinking their engineering processes that stock-holders were genuinely rewarded by their engineers rather than by the gyrations on Wall Street?

Re: Packard - profits & losses, fun and games with numbers

Posted: Thu May 26, 2016 2:57 am
by lancia
Found just one mistake in your table - the usual I suppose - a decimal point moved sideways. The loss per car in 1938 should read $31.8 not $318

Re: Packard - profits & losses, fun and games with numbers

Posted: Thu May 26, 2016 5:11 am
by Dave Czirr
Thanks for noting that! I've made the correction to the original document.

If I were to go back and get more data from the annual reports, I suppose the common stock dividends paid per year would add to the understanding and would go some ways to answering your question above. Thanks for your interest in the topic.