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Diversification Is Key To Studebaker?╟╓s Progress South Bend Auto Division Success Is Major Current Objective Sherwood H. Egbert President of Studebaker Reports Studebaker?╟╓s Progress To Shareholders EMARKABLE construction changes are underway among a tract of weathered brick buildings in South Bend. These structures are as much a part of Indiana history as the storied banks of the Wabash. The buildings house the automo- tive division of Studebaker Corpor- ation, most experienced vehicle builders in the nation ?╟÷ if not the world ?╟÷ with 111 years of vehicle history on the credit side of the ledgers. A little more than two years ago, a young business architect arrived in South Bend from California to survey the leaning corporate walls and sagging financial rooflines of the Studebaker home place. His name was Sherwood H. Egbert, and he soon decided that something more drastic than paint, plaster and a general shoring-up was necessary. He proceeded to pick up a set of blueprints left over by a previous group of contractors. Then he began to make changes and to mark out some new plumb lines for the re-building job. His obvious task was a big one - jack up the whole establishment and carefully lay a new foundation under the entire corporate structure. New Financial Foundation The new financial foundation is labelled "diversification?╟Ñ on the 1963 blueprints. The mortar used to bind the cornerstones together is marked profits. And the weathered walls of the automotive division, now stand straight and plumb again, with funds on hand to pro- duce a spanking new automobile for 1964 and to again seek success and profits and the world?╟╓s automotive marketplace. Thirteen major cornerstones have gone into this new foundation for Studebaker thus far, many of them rolled into place by Mr. Egbert and his new management team, some left over from previous manage- ment architects. The stones now in place are la- belled Studebaker of Canada, Ltd.; Franklin Appliance Division, Dom- owatt, S.p.A. of Leini, Italy; Trans International Airlines, Inc.; Mer- cedes-Benz Sales, Inc.; Onan Engine-Generator Division, Gravely Tractors Division, Clarke Floor Ma- chines Division, Schaefer Commer- cial Refrigeration Division, STP Chemical Compounds Division, CTL Missile-Space Technology Di- vision, Paxton Supercharger-Prod- ucts Evaluation Division and Stude- baker International, which is the overseas sales arm for all the others. Purpose of the stones is to pro- vide the profit base for the largest of all divisions in the Studebaker corporate structure. This is the frankly ailing automotive division, which is now winning a battle to regain its place in the nation?╟╓s in- dustrial sun. When Mr. Egbert came to Stude- baker after a successful career at McCulloch Motors in the tropical climate of Los Angeles, he set forth a quadrangle of guide lines, like any good architect and builder. Strengthen Automobile Business The first line he described this way: ?╟úto strengthen our competi- tive position in the automobile busi- ness?╟Ñ and he continues to remind all who inquire that this is the first and the most important of all his guide lines. Studebaker?╟╓s involvement in automobile and truck manufactur- ing beset with problems as it is, is still the chief aim in life for the "outh Bend corporation. ?╟úThe auto business,?╟Ñ Mr. Egbert will tell you most blunty, ?╟úis where the money is ?╟÷ and you can bet were going to re-build our part of it.?╟Ñ But to whip things into shape so that the auto division can find its STUDEBAKER?╟╓S SUPER LARK, which set a new mark of better than 132 m.p.h. at Bonneville Salt Flats. Car has all Avanti mechanical features in low-cost Regal chassis. way into the green pastures of prof- it, Mr. Egbert has carefully driven his stakes into the other three com- ers of his basic quadrangle. These stakes are tagged ?╟úTo get an in- creased share of military business; to set up and expand our Inter- national Division and to continue and expand our diversification pro- gram.?╟Ñ These are the guide lines and during the year just completed, this is what they did for Stude- baker?╟╓s profit structure. Consolidat- ed net income for 1962 was $2,- 561,794, the annual report sets forth. This compares with $2,535,- 724 in 1961, the first of the Egbert years. Studebaker had tax carry- forward to its credit both for 1961 and 1962 and will continue that ad- vantage for 1963, final year of the tax loss provision. Operating income was $489,460 for 1962 compared with an operat- ing loss of $3,133,143 in 1961. Both years benefitted by non-recurring income, $2,072,334 in 1962 and $5,668,867 in 1961. How closely has Mr. Egbert fol- lowed these guide lines? Restyled Auto Line His first moves, true to his re- solve, were in the automotive divi- sion. They involved an almost over- night re-styling on the company?╟╓s traditional Hawk line of personal cars, with a new roof-line, new grille and improved performance potential. He next turned to an all-new ve- hicle which he named the ?╟úAvanti,?╟Ñ an Italian word that translates to ?╟úforward,?╟Ñ which is the only direc- tion that Mr. Egbert seems to recognize. This vehicle, which en- compassed more new ideas in engi- neering, styling and basic construc- tion methods than any car to come from an American automaker in decades, has done the job it was designed for. It has changed the thinking of American car-buyers about Studebaker?╟╓s future. One major selling appeal of the Avanti, a sports-themed four-seater, is that magic word for auto-buyers, ?╟úperformance.?╟Ñ The car was driven in perform- ance tests last August at Bonneville Salt Flats by Andy Granatelli, an- other new member of the Egbert management team. Granatelli, a STUDEBAKER?╟╓S SUPER HAWK ?╟÷ mid-year performance car with low cost Super Lark as companion car. Car exceeded 140 m.p.h. in performance evaluation tests under official U. S. Auto Club sanction. racing driver and one of the nation?╟╓s standout racing engineers, came into the Studebaker fold a few months earlier when Studebaker bought his Paxton Supercharger Co. in Santa Monica, California, to get rights and tooling for the super- charger which provided the strong new heartbeat for the Avanti engine. So it was only proper that Grana- telli be chosen to develop the per- formance image of this new Egbert- conceived vehicle. Develop it he did, by establishing 29 new national production car land speed records on the vast salt flats at Bonneville, Utah. The car, a production R-3 model, ran better than 168 m.p.h. over the timed, two-way flying mile and kilometer, and wiped rec- ords off the books for all distances, flying and standing start, through 10 miles. The Studebaker management team saw the interest created by these performance evaluation tests and pressed even more strongly for a performance image which trans- lates directly into safety, a favorite theme of Mr. Egbert?╟╓s automotive ideas. Insist On Safety Factor ?╟úWe know that turnpike and super-highway speeds today run well into the 70-80 m.p.h. range for thousands of motorists,?╟Ñ he points out. ?╟úIt has been our concept here at Studebaker that for cars to be safe, manageable and stoppable from these speeds, we should engi- neer them and test them at the highest possible speeds to insure the greatest possible safety margin for our owners. We have selected the Bonneville Salt Flats as the lo- cation for such tests since they can be conducted with more safety on the vast salt expanse than at any other location in the world.?╟Ñ Mr. Egbert is always eager to talk safety in his motor cars and takes personal pride in the safety advances his company?╟╓s vehicles have made in the past two years. Studebaker is alone in the industry in fitting seat belts on all cars which leave the factory. It has pioneered the super-efficient caliper disc brake on the Avanti model, co- operating with Bendix, a South Bend neighbor-plant. Bendix builds the brake in this country under li- cense from Dunlop of England. These brakes are now available on every Studebaker built automobile. Another high point on the Stude- baker safety record is the built-in roll-over bar incorporated in the Avanti chassis. This feature already has established a record of life sav- ing. Safety leadership is also pres- ent in the cone-type door latch, most accident-proof in the industry a feature frankly borrowed from Mercedes Benz, which is distributed in this country and in Canada by the Studebaker organization. Full- circle heavy duty frames, once al- most abandoned by the U.S. auto industry, have always been parts of the Studebaker safety concept. These rugged frames will continue to be part of every 1964 Studebaker. Comfort A Must Passenger and driver comfort is another ?╟úmust?╟Ñ item on the current automotive features list at Stude- baker. All South Bend cars have flat floors, big doors and ample headroom for the tallest passen- gers. Mr. Egbert himself is 6 ft., 4 in. tall. And he insisted that he be able to sit upright in the rear