Brave New Motors

One of the new things which the world will see at the end of World War II is a new face on the U.S. automobile industry. This fact was double-checked last week when a Federal judge ended the year-old trusteeship of mercurial Hupp Motor Car Corp. Hupp has paid all delinquent and current taxes, has cutaits RFC loan 30% to $550,000, will pay all creditors $1 on the $1. Even common shareholders will not be wiped out. They can swap 100 old shares for 50 new.

Hupp's renaissance is symbolic of the reversal of a trend. In 1928 the independents of the industry sold 39% of all new U.S. passenger cars and the four biggest ones--Hudson, Nash, Packard, Studebaker--earned $68,800,000. Then came the Depression plus terrific competition from General Motors, Chrysler and Ford. Result: dwindling sales and mounting losses. By 1933 they had less than 10% of the U.S. passenger-car market; the same four companies lost $9,600,000 (piled atop a $19,500,000 deficit in 1932). For most independents this was too much; they fell like a row of paper soldiers. In the fallen line was many a proud trade name: Willys, Pierce-Arrow, Graham, Auburn, Studebaker, Peerless, Reo, many others. A few tough ones came back.

Although some of the more capable independents were making money, this situation was little changed when war started. But when the auto industry began all-out war-production programs, their prospects improved over a weekend. The very tools, machinery and plant which millstoned them as automakers were their salvation as munitions makers.

Thus smart Packard jumped the gun on other automen, got U.S. Navy orders for marine engines back in 1939, British orders for Rolls-Royce aircraft engines a year later. Soon other independents were in the grab bag too. Nash now makes airplane propellers and engine parts, will soon turn out giant flying boats way down in New Orleans; Hudson, new Oerlikon anti-aircraft guns and Naval ordnance goods; Studebaker, trucks and aircraft engines; Willys, jeeps and other items. The independents have more than $1,000,000,000 in war orders.

This war work not only makes use of their recently idle plant & equipment, not only gives them valuable manufacturing experience, not only puts the bankrupt back in business, not only means profits and dividends. It also means that after the war the motor industry will not consist of three huge successful companies and a handful of independents struggling against odds. All the signs point to a motor industry in which the Big Three will have to face the competition of a vigorous brood of independents, wise in know-how and better founded financially than at any time in a decade. Thus last week Nash, Hupp, Hudson and Packard were the four most active stocks on the New York Stock Exchange--and all four hit new highs for the year.

Main reason for this rally was higher profits. Last year Hudson, Nash, Packard and Studebaker cleared $12,900,000, highest since 1936 and 450% more than the year before (against a 4% profit increase for General Motors and Chrysler). And many of the independents may do 50 to 200% better this year than last. Long accustomed to pinch-dollar tactics, they are not frittering away this new-found cash. Some of it may be handed to long-starved stockholders, but the biggest part will be used in ways that will make them stronger companies when peace returns.

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