STUDEBAKER PROFITS DECLINE 60% IN YEAR

The New York Times
March 12, 1918

Total Sales Reach $50,147,516 in 1917, a Decrease of $11,841,078 from 1916.

MORE VEHICLES ARE SOLD

President Erskine Says Heavy Loss is Due to Disturbed Conditions Caused by War.

The report of the Studebaker Corporation and its subsidiary companies for the calendar year 1917 shows total sales of $50,147,516, against $61,988,594 for 1916—a decrease of $11,841,078 in the year, while net profits declined from $8,611,245 to $3,500,741, a loss of $5,110,504, or close to 60 per cent. in a single year. The net earnings for 1917 represent 9.11 per cent. on the common stock as compared with 26.1 per cent. for 1916. In August, 1917, the Directors cut the dividend on the Studebaker stock from 10 to 4 per cent.

The heavy loss both in gross business and profits, says President Erskine in his report, "occurred in the automobile division of the business, after our country entered the war, and largely because of the disturbed conditions that afterward existed. In the first quarter we sold 16,083 cars, against 15,580 in the same period of the preceding year, but in the remaining nine months we sold only 26,274 cars, against 50,305 cars in the same period of 1916. Our net profits suffered greater shrinkage proportionately than sales, because of the curtailment in production we were required to make in May, and increases in costs of raw materials, wages, and selling expenses.

On the other hand, partly owing to heavy Government orders, Mr. Erskine reports, Studebaker made and shipped more vehicles in 1917 than in 1916, receiving orders for 73,000, compared with 56,000 in 1916, and shipping 56,000, against 46,000 in 1916.

"Having telegraphed the President on Feb. 6," says Mr. Erskine, "that our plants were at the disposal of the Government, we commenced, early in April, to receive Government orders for large quantities of articles of character suited to our equipment and in line with our manufacturing experience, and as these orders required immediate attention and prompt shipment, it became necessary to reduce our manufacturing schedules of automobiles and vehicles and rearrange our plants on a war basis."

The cost of financing operations in wartime proved much higher, the report reveals, and to carry their heavy surplus inventory investments the company had to obtain bank loans which at one time totaled $13,231,500, an increase of about $7,060,000 over the average for the previous year. Before the end of the year, however, this figure was reduced to $7,400,000. At present the company's Chicago plant is leased outright to the Government, and a great deal of Government work is under way at the others.