INTERNATIONAL MOTOR CAR CLUB
- A Worldwide Packard Club -

Yet, by 1929, Packard dominated the luxury car market and was outselling its major competitors combined.

Competitive conditions and production technologies used in the United States automobile industry changed extensively during the 1920s. Packard adopted the new technologies and adopted to changing market conditions in order to compete. Many of Packard's competitors did not change with the times and left the door wide open for the Packard Motor Car Company to become the dominant luxury car builder by the end of the decade.

The story of how Packard's rise to dominance occurred is the subject of this article.

Packard Product Line in the 1920s

During the 1920s, Packard's product line evolved from having the Twin-Six as its principal product to focusing on the straight-eight engine, which, in one form or another, became the mainstay of the Packard stable for over thirty years. Of course, along the way, Packard built some very fine and luxurious six-cylinder models as well.

At the end of World War I, Packard's product line for 1919 consisted of the Twin-Six. However, the Twin-Six became a bit aged, and in September 1920, Packard introduced the Single-Six Model 116.

The Single-Six, though, due to relatively high prices (chassis at $3000 with the five passenger sedan costing $4950) and a narrow product line (there was no seven-passenger model, for example) was not an outstanding market success. Prior to the production interruptions of World War 1, Packard built 10,645 Twin-Sixes in 1917. In 1920, 5,194 Twin-Sixes were made along with 1,042 Single-Sixes for total output of 6,236. In 1921, Packard built 7,684 cars with 6,374 of them being Single-Sixes (Kimes, pp. 224-227).

Although the initial introduction of the Single-Six may have had disappointing results for Packard, it must be put into the context of the 1920-1921 economic contraction and resulting decline in luxury car sales that lasted until 1924 (see Figure 3, page 24). Packard, though, was not content to use a weak economy as an excuse for poor market performance. Therefore, in response to the disappointing sales of the Model 116 Single-Six, Packard introduced restyled Single-Sixes in 1922. The new models had more graceful styling and included a line of seven-passenger sedans.

The market rewarded Packard with sales of 15,377 cars in 1922 (Kimes, pp. 227-233, 806).

Although six cylinder cars continued to dominate Packard output through 1926, an important product development occurred in 1923 with the introduction of the Single-Eight (straight-eight) Models 136 and 143. The Single Eight became the Packard that replaced the Twin-Six, which was phased out in 1923. By 1925, the combination of the popularity of the Single-Six and the excitement generated by the new Single Eight propelled Packard production to a lofty 32,391 (Kimes, p. 806).

Although six cylinder sales remained strong through 1928, Packard solidified its position as a builder of supreme motorcars with the introduction of the Standard Eight in September 1928 for the 1929 model year. The Standard Eight replaced the Packard Six at the lower end of the Packard line, but with a price of $2435 to $2835, it was anything but a cheap or popular priced car. Pre-depression Packard production reached a peak in 1928 with output of 49,698 cars with the Standard Eight accounting for almost 20,000 of those units. Although output dropped slightly to 47,855 cars in 1929, Packard ended the Roaring Twenties as the pace setter in the luxury car market (Kimes, p. 806).

Ralph C. Epstein, in his classic 1928 analysis of the pre depression auto industry, The Automobile Industry: Its Economic and Commercial Development, observed that between 1903 and 1924 there were 180 companies that manufactured automobiles on a commercial scale. That number does not include hundreds or even thousands of firms that built only a car or two.

Of those 180 companies, only 59 remained as of 1925. The average life for all 180 companies was 8 years and the median was 6 years. Only 20% survived 16 years or more (Epstein, 1927, pp. 157-160). By 1926, the number of surviving firms declined to 44 (Epstein, 1928, p. 176). Attrition continued through the 1930s and early 1940s. By the outbreak of World War 11, only 9 firms were actively engaged in the production of automobiles (Ebert, 1997,p. 1). Packard, of course, was one of those survivors, but many of its luxury car competitors were in the corporate graveyard by World War 11.
 
Timothy Bresnahan and Daniel Raff, in a 1991 study, examined the reasons auto firms failed in the 1929-1935 period. They concluded that firms whose plants and organizations embodied mass production had a competitive advantage. Mass production firms that were able to achieve low average-cost survived the shakeout. Firms that exited the industry tended to be low in labor productivity, which had the tendency to drive up the unit costs (Bresnahan and Raff, 1991, p. 330).

David Hounshell, in a 1984 analysis of American production techniques between 1800 and 1932, however, makes a persuasive case that this argument overlooks the fundamental difference between Taylorism and Fordism.
 
According to Hounshell's analysis, Taylorism takes a given production process and improves the efficiency of the workers through time and motion studies and implementation of incentives, such as a piece rate system of payment. Taylorism took production equipment as a given and sought to achieve efficiencies through improvement in labor processes and organization of work.

Ford, however, established a system by which the machine set the pace of the work. The Ford work processes were mechanized and workers were then found to tend the machines. Whereas Taylorism sought to improve the efficiency of workers in a given production process, Fordism sought to eliminate labor through the use of machinery (Hounshell, pp. 249-261).

Ford's competitors became interested in the efficiencies achieved at Ford, and the technology diffused quickly through the industry. However, by the time 15 million Model T Fords were produced, the Ford system itself demonstrated serious weaknesses. Competition began to engage in frequent model changes, but Ford production technology was so specialized that the change over to the Model A brought serious problems to Ford (Hounshell, pp. 260-261).
 

In the 1920s GM established a policy of producing a line of cars in each price class from the lowest priced to the luxury cars. The price steps between the lines were narrow so that no wide gaps existed in the overall product line (Sloan, p. 65).

Alfred Chandler in his 1964 work, Giant Enterprise, observed that by the mid 1920s marketing was a bigger challenge than production in the automobile industry. Production expanded rapidly in the early 1920s, from 1.5 million cars in 1921 to 4.3 million cars in 1923. From 1923 until 1929, sales averaged slightly less than 4 million cars per year but production capacity reached 6 million units. Marketing cars, not to first time buyers, but to the replacement market, became the major challenge, according to Chandler (Chandler, 1964, p. 13).
Chandler concluded that General Motor's response to conditions in the 1920s was to steadily improve the performance of cars and make frequent style changes with the emphasis being on expanding its share of the market (Chandler, 1964, p. 16).

Daniel Raff, however, argues that the marketing innovations at GM were effective only because the company could exploit innovations within the factory. According to Raff, central to the strategies of the firms that were successful in the inter-war period were production plans that minimized costs and provided a practical foundation for marketing ideas profitably (Raff, p. 725).

Raff's analysis concludes that GM's significant marketing innovations were effective only because they were made possible by innovation within the production process itself. The GM system differed from Ford in that GM did not have machine tools dedicated to a single part or operation, but rather the operations were dedicated through jigs and fixtures which were less expensive to replace or update. The ability to quickly change jigs and fixtures made model changes less expensive. By following a common parts strategy across several lines of cars, but differentiating those lines through styling and design, GM achieved significant economies of scale.

That strategy, in turn, enabled GM to meet its competition with lower costs and, therefore, increase its market share (Raff, pp. 724-745).