Sunday, February 07, 2010

Business: How Government Spending Saved Studebaker During WWII

As the United States attempts to pull itself out of the global recession, one popular chant among some critics of government spending to bolster the private business sector is they "don't believe that government can spend it's way to prosperity". The only problem is that regardless of what some might believe, governments have over and over again proven that they can dramatically boost the GDP output of the economy through massive spending. And individual businesses on the financial ropes have proven that they can be rescued for at least some time through government spending programs.

The most dramatic example was during WWII where both the Allied and Axis nations were able to more than double their nation's GDP output from 1940 through 1945 through massive military spending. For some ailing businesses, this massive financial shot in the arm allowed some companies to continue in business for many more years than many would of. Studebaker was one of the best examples of government spending keeping this financially sick business in business during the war.

With the Roosevelt Administration during WWII, Studebaker was a huge beneficiary of a war spending program called "Lend-Lease" that shipped massive amounts of war materials to allied nations like Britain, the Soviet Union, China and France. For example, two thirds of all of the Red Army military trucks to back up the Soviet built tank fleet were American made, such as the 2 1/2 ton US6 Studebaker trucks. Often these Studebaker trucks were outfitted with Katyusha rocket launchers, which became a fearsome new form of weaponry known as "battlefield class" weapons, where the intent of the weapon was to level the battlefield. Later weapons in this class would include the modern Scud type missiles with nuclear warheads. Studebaker sold 200,000 trucks during this government spending program era of 1940-45.

But during the 1950's, without the aid of government spending, Studebaker had problems standing on there own. Studebaker and Packard were hoping to become part of the giant corporate merger of Hudson and Nash. However, the sickly financial state of both Studebaker and Packard helped to ruin their chances to enter into this financial marriage. When Hudson and Nash merged, and became American Motors Corporation in 1954, it was the world's largest corporate merger ever. Packard acquired Studebaker in 1954, however by 1966 the company announced the end of the road for their automobile business.

So far only Studebaker Avanti has managed to live on by several attempts by small manufacturers. But strangely, a few Hummer-like SUVs called the Studebaker XUV have been produced in recent years as well. And there's a newer Studebaker Motor Company website offering an ambitious plan to offer new Studebaker scooters, motorcycles and a return of the Studebaker line of cars but with hybrid technology. However, so far only one prototype of a scooter that looks exactly like any other Chinese made clone of an Italian scooter exists. Unfortunately, for all of the ambition, the Studebaker company has yet to offer up any real prototypes or drawings.
One unfortunate fact seems to also emerge here though. Some sickly companies can survive for a time with the help of government, as Studebaker has proven. But the strongest companies always appear to be those who are able to manage for themselves using their own direction.


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