Receivership: March 1933 to March 1935

1930 – 1935

How it was spent: The collapse was prepared in the good years. Erskine kept faith that prosperity was returning and held the dividend: huge dividends were declared in 1930 and 1931 while the market collapsed, draining the company's cash — "ultimately they were broke by 1933," in museum archivist Beckman's summary. He also acquired 95 percent of the White Motor Company's stock, at an inflated price and in cash. Wage cuts and layoffs followed the crash; the Rockne, on which the recovery plan rested, could not sell in a market that was buying almost nothing. By 1933 the banks were owed $6 million, though current assets exceeded the figure — the company was not balance-sheet bankrupt but out of cash and credit in the month of the national banking crisis.

The fall: On 18 March 1933 Studebaker entered receivership. Erskine was pushed out of the presidency in favor of cost-conscious managers. On 1 July 1933 he shot himself. The receivership passed to the two sales-and-production men of the 1920s company: Harold S. Vance and Paul G. Hoffman, who persuaded the court that the creditors were best served by keeping the company in production. In August 1933 — the 26th, in the Drivers Club's dated notes — Pierce-Arrow was sold back to a group of Buffalo businessmen for $1,000,000, returning the luxury marque to independence (it survived to a 1938 liquidation, outside this record). The model line was scaled down and costs cut through the works.

The recovery: By December 1933 the company was back in profit, with $5.75 million of working capital and 224 new dealers signed. With the substantial aid of Lehman Brothers, full refinancing and reorganization were achieved on 9 March 1935: a new Studebaker Corporation emerged, with Hoffman as president and Vance as chairman. The company that came out of receivership was one of the Depression's notable industrial rescues — achieved, uniquely among the major failures of 1933, without the enterprise being broken up or sold.

Sources:

1. Standard encyclopedia history of Studebaker — the 1930–31 dividends, the White Motor purchase (95 percent, inflated, in cash), the $6 million owed the banks, the receivership of 18 March 1933, Erskine's removal and his suicide of 1 July 1933, the December 1933 return to profit with $5.75 million working capital and 224 new dealers, and the reorganization of 9 March 1935 with Lehman Brothers' aid and Hoffman and Vance at the head.
2. South Bend Tribune (2026) — Beckman on the dividend policy: "that drained Studebaker's coffers, and ultimately they were broke by 1933"; Hoffman and Vance persuading the judge to continue production; the scaling down of the line and the Pierce-Arrow sale in the receivership (the sale price and date from the Buffalo histories and the Drivers Club notes cited in the Pierce-Arrow entry).
3. Hagley Museum and Library, Studebaker Corporation records note — the receivership of 1933 and the 1935 emergence.