Roy D. Chapin: The Man Behind the Hudson Motor Car Company

XXV. Again at the Hudson Wheel

CHAPTER XXV AGAIN AT THE HUDSON WHEEL problems which Roy Chapin faced on his return to JL Detroit in March 1933 were appalling. The nation was in the midst of the worst financial debacle in its history. The Hoover administration for three years had made many efforts to reverse the downward spiral of industry which had been precipitated by the stock market crash in October 1929. Occasionally new signs of life had been manifest and certain economists felt that the trend of recovery was well under way. According to this view the uncertainties regarding the monetary and other economic policies of President-elect Roosevelt destroyed public confidence and were responsible for the banking crisis. Where the credit or blame for various phases of the situation will ultimately rest will be determined only by some future generation which can look upon the scene dispassionately . It is unquestionably a fact, however, that Roy, on being drawn into one of the vital issues of this crisis, found his task to be complicated by politics and personalities beyond his control. Detroit, in March 1933, was in perhaps the most perilous financial condition of any city in the nation because it was concentrated particularly on one industry, automobiles. This peril had been known to the Hoover administration and to the financial world for several weeks, and Roy had been working ceaselessly with President Hoover and others in the attempt to find a solution. The immediate issue had centered about the Union Guardian Trust Company, a unit of the so-called Guardian group, which had been badly shaken by the decline in the automobile industry . The Union Guardian's investments were to a large extent 245 246 ROY D. CHAPIN secured by Detroit real estate, which had become very nonliquid in character due largely to the decline in automobile manufacture, sales, and employment. 1932 had been an appalling disappointment to all the leading motor car makers. In spite of the succes (Testime of the Terraplane, the company's sales dropped 30% from the year before, and other makers had also suffered greatly. The resulting decline in payrolls and revenues obviously had affected the resources of all the Detroit banks, and the fact that the Guardian Trust was known to have a large amount of automobile industry deposits added to its vulnerability. Early in 1933 hundreds of depositors were withdrawing their accounts in ever-increasing numbers, and something drastic needed to be done to save the Union Guardian. The situation was not simple, as the Guardian Detroit Union Group included twenty-three institutions in the state. If the Union Guardian, or any major unit of the group, went under, every Detroit bank would be threatened, and financial collapse in Detroit would spread throughout the country. Mr. Hoover had already faced a similar situation in Chicago, when the so-called Dawes bank, headed by former vice president Charles G. Dawes, was in danger of going under. With the strong approval of Mr. Hoover, the directors of the Reconstruction Finance Corporation had extended a credit of $90,000,000 to the bank. That had been in June 1932. There had been howls of criticism, charges of political favoritism, but the panic in Chicago was stopped and the bank had stood firm, without loss to either the depositors or the Government. In February 1933, Mr. Hoover proposed to apply the same remedy to the Union Guardian. Here, again, there was danger of criticism, because the President and the R. F. C. would be putting a liberal view on the bank assets. If, however, everyone involved could agree on a financially sound plan, it seemed that the thing could be done. While the Union Guardian was in a bad condition from a The Chapin family in 1932. Left to right. Roy, Inez, Roy Jr., Joan, Jack, Sal, Dan, and Marian. (Courtesy Chapin family) Roy, Joan, and Inez at Joan's debut in 1935. (Courtesy Chapin family) AGAIN AT THE HUDSON WHEEL 247 bookkeeping standpoint, it had a record of earning power which convinced the President that the R. F. C. would be warranted in extending credit without fear of ultimate loss. If the existing major creditors would agree to subordinate their claims until better times, he believed that the bank could work out of its difficulties, and far-reaching disaster be averted. Roy Chapin was assigned to...