Rescue By CurKss-Wright?

A deal was in the making last week for ailing Studebaker-Packard to sell control to thriving Curtiss-Wright. Despite its critical shortage of cash and falling sales (TIME. April 23), S-P had much to offer: two famed lines of cars, a solid reputation as a defense producer, plus $70 million in losses, including a record $14.3 million deficit piled up in first-quarter 1956. The losses could be turned into a tax saving of at least $35 million by a prosperous purchaser.

To Curtiss-Wright, one of the biggest makers of aircraft engines in the nation. S-P seemed a custom-made bargain. By taking over SP, Curtiss-Wright could gain a valuable defense subcontractor and further its long-term goal of diversification into civilian production. SP, which has 6,440,455 shares outstanding, offered to sell Curtiss-Wright 7,000,000 unissued shares of treasury stock at $5 a share. Thus the automaker would immediately raise $35 million, while Curtiss-Wright would gain 52% control of SP. The most attractive feature of the deal: If Curtiss-Wright's earnings stay at the record $36.8 million-a-year level set in first-quarter 1956 (up 35% over the same 1955 period), the aircraft company could in four years more than recoup its $35 million purchase price with tax savings from SP's loss carry-forward.

Conditional Contract. If the deal goes through, a group of 23 banks that had refused the automaker's requests for additional capital in January will extend it another $15 million; insurance companies which had given S-P $25 million in long-term loans two years ago agreed to postpone the first payment, which is now due next year.

More help was expected from Washington. Curtiss-Wright had made it plain that it was not interested in bailing out S-P unless the auto company could land some hefty defense orders. To push the deal, the Defense Department indicated it would award S-P new contracts for J47 jet-engine parts, trucks and ground-to-ground guided missiles which S-P has helped develop through its subsidiary, California's Aerophysics Development Corp. The U.S. would thus make use of more than $100 million worth of Air Force-owned machine tools which have lain idle in SP's Detroit plants since the Government canceled a $426 million order for jet parts in 1954. At the same time the Administration could take credit for saving 1) a vital defense industry from possible liquidation, and 2) the jobs of 22,000 auto workers at a time when unemployment was on the rise throughout the auto industry.

Pick & Shovel Man. If Curtiss-Wright takes over, S-P plans to continue making both lines of cars, though it will only face-lift its 1956 models for next year. S-P is expected to consolidate auto production in a single plant, leaving either its South Bend or Detroit factory free to handle an increasing amount of defense orders, both for the Government and as a subcontractor for the aircraft company. Curtiss-Wright has a $665 million backlog in military and civilian orders, could use SP's facilities to fill them.