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Classics 101: An Introduction to Classic Cars
The articles are presented with the permission of the publishers and authors with full credits on each.
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Today's Economy Echoes the 1930s

The depressing financial news of recent weeks brings back memories of October 1929. There are few among us today who experienced the market crash and the dark days that followed. In the words of one Wall Street official following the big crash, "All at once the inconceivable terrors of the unknown and the unfamiliar are thrust upon the public mind; confidence is paralyzed, and until it is restored, chaos reigns."

Among the many businesses affected by the economic downturn triggered by the stock market crash of 1929 was the automobile industry – both directly and indirectly. The crash affected automobile companies that were already in a precarious financial position and, as times worsened, automobile sales began to decline.

Even before the market crash, the automobile industry was poised for a downturn. By the early 1920s, more and more cars were being purchased on credit--spurred in large part by aggressive advertising campaigns. Market saturation was on the horizon even before the country's economic collapse.

Motor vehicle production broke all records in 1929. Output totaled 5,337,087 units (a figure not topped until 1949). Interestingly, nearly 90 percent of all American cars sold in 1929 were closed models. Only 10 years earlier – 1919 – almost 90 percent of the automobiles sold had been open models.

General Motors Chairman Alfred P. Sloan remembered that "on October 4, 1929, shortly before the stock market crash, I addressed a general letter to the organization (General Motors) noting the end of expansion and promulgating a new policy of economy for the corporation....As it turned out, I was not, of course, pessimistic enough; indeed, it would soon be a question whether we were able to cope with the unbelievable course of events."

As the stock market crashed, Clarence E. Eldridge, REO's sales manager, told the Minnesota Automobile Dealers' Association that part of the blame lay with the automobile industry itself, stating, "There has been built up by this greatest of all industries a capacity for building, and a capacity for selling, approximately twice as many automobiles as the market, either present or potential, can absorb."

Although every automobile manufacturer was impacted by the economic downturn, no segment of the automobile business was hit harder than the luxury manufacturers. Some independent manufacturers were still feeling the effects of the economic recession of the 1920s. Some companies, including the luxury brands, posted strong sales in 1930 and 1931, but then the downward spiral began.

It's been noted by automotive historians that some of the greatest American automobiles ever designed and built were introduced during the Depression years. It's true. But most of these grand automobiles were conceived, designed and engineered prior to the country's economic downturn.

An example: The Cadillac Sixteen was introduced in January of 1930. Nearly 50 body styles were available; 3,251 total cars were sold during 1930-'31 production model run. In 1932, Cadillac Sixteen sales dropped to 300. For 1933, Cadillac announced that sales of the Sixteen would be limited to 400 annually. (Cadillac introduced a V-12 for 1931, thus offering three luxury lines--a V-8, V-12 and V-16, in addition to its popular companion car, La Salle).
The stunning Marmon Sixteen was introduced at the Chicago Automobile Show in November 1930 and went into production in April 1931. Duesenberg sold most of its legendary Model Js between 1928 and 1932. After that, sales were sporadic and the last car was delivered in 1940.

For 1932, five automobile companies offered V-12s: Auburn, Lincoln, Packard and Pierce-Arrow. Franklin introduced its air-cooled Twelve in 1933. Stutz attempted to trump everyone by introducing its DV-32 series in 1932--four valves per cylinder in an overhead-valve, straight-eight engine.

None of it worked. Although most of the cars were spectacular, the American luxury car market would never again be the same. The market for luxury automobiles was literally disappearing.

Sales continued to decline. Marmon closed its doors in 1933; Franklin and Stutz closed theirs in 1934. Auburn was gone by 1936, Pierce-Arrow by 1938. Lincoln and Cadillac survived thanks to the deep pockets of their parent companies. Packard survived by going downmarket. Marmon, Stutz and Pierce-Arrow, in contrast, opted to go out of business rather than build a less expensive automobile.

It must be noted that other factors were at work that also affected luxury car sales. Social pressures certainly made an impact: Many wealthy individuals didn't want to be seen in public in luxury automobiles. And, thanks to manufacturing improvements, one no longer had to pay a premium price to obtain a comfortable automobile.
By the early 1930s, many of the American custom coachbuilders went out of business. Those that remained could thank, in large part, Lincoln, whose president, Edsel Ford, continued to place quantity orders for body styles from the remaining companies--Brunn, Judkins, LeBaron and Willoughby.

As late as 1939, when Lincoln sold only 133 of its big K series automobiles, the company still offered 21 different body styles, including 16 custom bodies. By then, it was obvious to everyone, including Edsel Ford, that the lower-priced Lincoln-Zephyr would preserve the Lincoln name.

The following story may be apocryphal, but has a certain ring of truth to it. In 1940, when asked by a business reporter why Lincoln would no longer build the "big" Lincoln, Edsel Ford is said to have replied, "We didn't stop building them; people stopped buying them."

And that is, indeed, what happened.

This article originally appeared in the January, 2009 issue of Hemmings Classic Car.