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Home > Featured Auto Makes > Hudson  (Part  1 2)

Hudson   Part 2: 1916-1925 (1916-1925

By John Bentley

Revised by Jeremy Wilson

From near-failure to the largest producer of 6-cylinder cars in the world is the Hudson-Essex story.

Following the introduction of the revolutionary new Hudson Super Six in January 1916, Ralph Mulford, a leading driver of the day, was quick to realize the unique advantages resulting from the first fully balanced crankshaft and non-detonating, high compression cylinder head with a 5 to 1 compression ratio. In April, Mulford set a new mile-record of 102 mph at Daytona Beach, Florida, and followed this with a new 24-hour record at Sheepshead Bay, New York, where he averaged 74.8 mph. These achieve­ments gave Hudson sales a big stimulus, but this was not enough to offset the increased costs resulting from a manufacturing policy started the year before.

Along with Ford, Hudson was about the only company whose stock was not held by the public at that time. All transactions were on a credit basis, the company paying its bills as the money came in for the cars. This meant operating on a dangerously small margin, based on the assumption of a minimum sale of any given model. How small this margin was had been shown by the 1915 annual statement.

Although sales the previous year had totaled $2,500,000, actual profit was only one-tenth this sum, against which greatly increased advertising costs of $571,000 had to be offset. Hudson had embarked on a costly national advertising campaign which included such media as the Saturday Even­ing Post. Roy D. Chapin, president of Hudson, had therefore decided on a new production policy intended to help balance the budget more prudently. Whereas un­til then Hudson cars had been assembled from components supplied elsewhere, it was decided to make these parts at the factory. Another reason was dissatisfaction with the Metal Products Company, suppliers of many es­sential Hudson components, whose prices were too high.

Until then, Hudson had boasted that its cars benefited from a galaxy of specialist engineering brains on the outside; now it was necessary to condition the public to accept the opposite. This was the least part of the problem, since popular opinion took the view that there already were too many mediocre cars slapped together from high-grade component parts, but lacking proper design.

In 1916, Hudson therefore found itself in a big parts-manufacturing program for which it lacked a properly trained working force and a coordinated plan of manage­ment. The result was that on some days there were too many transmissions and too few axles, while on other days the opposite might obtain.

Despite the success of the Hudson Super Six--10,000 cars were sold in the first six months--profit margin continued danger­ously low. Roy Chapin and Howard E. Coffin, a director, considered re-capitaliz­ing the company at $20,000,000 by offering shares on the stock exchange and so ridding the company of financial problems; but this course was decided against. By taking the initiative in the closed car field that year, Hudson sold more closed cars than either Chevrolet or Ford. This move saved the situation and a crisis was averted.

January 1917, saw the New York Auto­mobile Show held as usual, although the U. S. was rapidly being drawn into World War I. Business continued, however, and the Hudson Show exhibits in bright colors caused much favorable comment. When war was declared on April 6, the U. S. had four and a half million passenger cars and 25,000 trucks--not nearly enough to go around. The tremendous impetus given to auto manufacture by sheer need was per­haps one of the reasons why even the war failed to have any immediate effect on pro­duction.

Appointed in November to serve on a newly formed Highways Transport Com­mittee by the Council of National Defense, Roy D. Chapin recruited a volunteer force of over 20,000 men in every state, equipped to answer questions on highways and trans­portation. This organization which included numerous automobile and tire dealers, proved invaluable in decongesting cities whose traffic problems created serious bot­tlenecks in clearing war supplies.

By the spring of 1918, development work on a four-cylinder F-head engine with overhead inlet and side exhaust valves was sufficiently advanced to warrant using it on a new Hudson-built car named the Essex, a product of a separately financed company. However, fear that public reception might be cool kept the car under wraps. For one thing, the proposed $1,595 price tag seemed too high. The original plan had been to reach a mass market at close to $1,000, but rising material and labor costs prevented this. Automobile factories found it in­creasingly hard to get steel allocations and many of them were converting to war pro­duction. Hudson, meantime, had climbed into the higher price range and was con­sidered a quality car in the $2,000 bracket.

Whereas Hudson had paid its few di­rector-shareholders a $3.00 dividend in 1915, this return was reduced to $2.60 for 1917 and $2.40 in 1918. Hudson earnings that year slumped to $1,200,000 compared with $1,500,000 in 1917. Chapin, however, still refused to become involved in large bank loans such as the $75,000,000 debt that hung over Henry Ford. Instead, Hudson plunged with even greater activity into postwar readjustments.

First showing of the Essex took place on January 16,1919, and against the likelihood that a car-hungry public would now re­spond, Chapin contracted for a million dollars’ worth of new machinery and equip­ment for Hudson and Essex. He also added 75,000 square feet of space to the factory. All this was predicated on a gamble that the Hudson-Essex group would sell at least 40,000 cars--a 70 per cent increase over 1918. The result stood to make or break these two firms, but Chapin’s shrewd gamble came off. Total 1919 output peaked at 41,566 cars and the Essex venture also proved fully justified. The 20,000th Essex rolled off the line on December 6, 1919-- this newcomer having captured many stock car records and even carried the mail across the U.S. That year, Hudson dividends climbed back to $2.60 and the earnings were $2,287,104. The company had success­fully weathered its most difficult period.

To Hudson’s general manager, W. J. McAneeny, went the credit for getting the Essex venture financed by New York banks, while Chapin’s brilliant over-all strategy entrenched him firmly as one of the industry’s leaders at a time when many of the big men were through. This was the year 1920, when the Dodge brothers died of pneumonia, William C. Durant was out of General Motors and on the wane, and several prominent companies such as Chal­mers-Detroit went to the wall.

By mid-1921, the postwar boom col­lapsed liked a punctured balloon and the resultant industrial crisis came near to top­pling even the Ford empire. Hudson-Essex earnings, however, were still over $915,000, though production dropped to less than two-thirds of the previous year, when the companies had merged. Chapin and his partners therefore decided to pass up the annual dividend for the first time in a dec­ade, even though their personal incomes were derived from this source. As a result, the cash position of the joint companies re­mained in a fairly healthy state, vital at a time when the price trend was declining sharply. For instance, while in the summer of 1921 the Hudson sold for $2,400 and the Essex for $1,600, by the end of the year these tags had been cut to $1,700 and $1,100. Roy Chapin’s ingenious mind found a way to exploit even this difficult situation. That closed cars were not making as much headway as they should was due to only one factor--the high price differential be­tween the touring car and the sedan. This varied from $200 to $1,000 due to high pro­duction costs in making closed bodies by hand. Large stamping presses for steel body sheets were still unknown and costly cabinet work was entailed in shaping at­tractive curves on wooden-framed bodies.

Harking back to Hudson’s 1916 success in the closed car field, Chapin took the view that any serviceable closed body, no mat­ter how rudimentary in appearance might open up a big new market if priced low enough.

Early in 1922, therefore, both Hudson and Essex marketed coaches priced only $100 above the open models. The Essex sold for $1,195 and the Hudson at $1,695. These prices were actually far below cost unless the public bought huge quantities, but again the gamble came off. Customer re­sponse was so great that whereas Hudson’s closed car business along with other manu­facturers had been only a fraction of over­all sales, it rocketed to 55 per cent of the total during the first three months of 1922. As a result, Hudson closed cars outpaced all competition and attracted numerous buyers abroad. By the summer of 1922, Hudson and Essex cars were selling in 50 foreign countries.

The sensational parallel success of the Essex Coach and the unmortgaged position of the company made the Hudson property highly attractive to Wall Street bankers who now approached Chapin to sell out Hudson-Essex and put the company shares on the New York Stock Exchange. Backed by directors Howard Coffin and Fred O. Bezner, Chapin finally agreed but virtually dictated the terms, securing for himself and his 16 fellow stockholders the following conditions: $7,000,000 in cash and $16,000,000 in stock which gave them two-thirds control of the company and in effect left things just as they had been. The bankers agreed.

The Hudson Super Six and Essex line continued basically unchanged until 1925, when Essex abandoned the four-cylinder F-head engine in favor of a six-cylinder, L-head power unit. Roy Chapin relin­quished presidency of the company in favor of Roscoe B. Jackson, designer of the orig­inal Hudson built from assembled parts. During the late Twenties, Hudson be­came the largest producer of six-cylinder cars in the world.

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