An Airline for Studebaker

Nearly two decades have passed since burly Sherwood Harry Egbert, the flamboyant and forceful president of Studebaker Corp., learned to fly as a Marine Air Transport officer. But "Woody" Egbert is still as fascinated with flight as ever. In fact, says a friend, "the only time he can relax is when he's at the controls of a plane." Last week Egbert's predilection for planes became more than a hobby. Subject to CAB approval, Studebaker announced its purchase of Trans International Airlines, Inc., a profitable California nonscheduled carrier that grossed $6,000,000 last year. The price: $10 million in Studebaker stock.

Amateur Airman Egbert was clearly delighted at the prospect of getting his hands on Trans International's DC-8 jet and four Lockheed Constellations, which the airline uses principally for military contract work. But the Trans International purchase was only the latest step in a pell-mell diversification program under which Studebaker has bought up nine companies at a total cost of more than $100 million in cash and stock.

Studebaker launched its drive to diversify in 1959, but corporate attention was diverted from the task by the encouraging success of the early Larks. Egbert put the program back in gear in 1961 and in the last 20 months has added five companies to a stable of subsidiaries that now includes manufacturers of refrigerators, freezers, electric generators, oil additives and superchargers. Today auto sales account for 60% of Studebaker's gross, v. 79% only seven months ago.

With huge tax losses to carry forward, Studebaker went looking for profits against which to apply them. Says Egbert: "Every one of the companies we have bought was operating in the black." In many cases, Studebaker has been able to slice overhead by combining operations with its new subsidiaries. The parent company's styling department, for example, now serves all divisions. And so far, the diversification program has paid off handsomely: where it managed to avert a loss of $3,100,000 in 1961 only by selling off its plastics division, Studebaker showed a profit of $776,000 for the first half of this year.

With its 1962 auto sales up 46% from a year ago, Studebaker has no intention of getting out of the car-making business. But if overwhelming competition from Detroit giants ever does force the South Bend assembly lines to halt, Studebaker means to be ready. And that means more diversification. Egbert is not ready to say what's next. But, he assures coyly, "we're not sitting on our hands."

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