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A number of men have dreamed of establishing
their own companies and challenging the hegemony of Detroit,
Japan, and Germany. John Z. De Lorean, the former General
Motors golden boy, is the most recent example of dreamers
who've seen their visions demolished and dropped in the junkyard.
De Lorean joins the other failed independents--including Malcolm
Bricklin, Earl “Mad Man"” Muntz, Preston Tucker,
and Henry J. Kaiser— who thought they had their hands
on the car of the future.
Blake, by contrast,
believes he has found the keys to the golden kingdom in the
shape of a 1963 Studebaker. In
fact, while bread lines rival assembly lines in Detroit, the
tiny Avanti Motor Corporation, the six-largest in the nation,
expects its best year ever, doing what it has always done:
building one model, a $24,995 base price, four-seat luxury
sedan. Built, in the age of micro-processors, entirely by
hand. The Avanti is a veritable rolling sculpture. “Detroit,”
says Blake, “might as well be
in another universe.”
He's right. In 1982, Avanti--building
only about 200 cars, about as many as GM produces in an hour—broke
its production record. The chairman of GM, Ford Motor Corporation,
and Chrysler need not fear competition from a car company
150 miles south of Detroit. Blake's
ambition is more modest. He wants, simply, to manufacture
“the best built car certainly in this country, maybe
even the world”— a domestic alternative to high-priced,
high-status automobiles such as Mercedes-Benz, BMW, and Jaguar.
A tall order, perhaps, but many people inside and outside
the industry, having examined the Blake-Avanti
team, believe it a winning combination. You talk to Blake
enough and you know he's not sprinting.
“He's taking a long, slow approach
that will pay off in the long term,”concludes one automotive
writer. “there is great potential for the Avanti, and
Blake has the resources and the talent
to do it.” The venture is not without risk. “There
is a market for this exclusive type of car,” says a Chicago
automotive industry consultant. “But I don't know of
any company that has cracked it except as an offshot of a
larger company's distribution system . . . Anyone who puts
all his resources into a splinter market is taking too big
a risk, by my conservative standards.”
Blake is coolly
confident, however. "I'd have to be a real no-braino
if this doesn't move," he says. Blake
has a proven product, a known market, low overhead, little
debt, an experienced work-force, and a profit history that
shows nothing but black ink for nearly two decades. “It's
a business a lot of people would like to get involved with,
an ideal situation,” says an other industry analyst.
Only a few bankers would think otherwise, Blake
would surely add.
If you tell Steve
Blake he doesn't look like an auto company executive,
he takes it as a compliment. A shade under six feet, fair-skinned
and thick-chested, with a slight paunch he attempts to hold
in when around photographers, Blake
could easily pass for a decade under his age of 39 years.
The tip-off that he does not belong in a Motor City executive
suite is his manner. He's neither conservative nor dry in
style, and has more one-liners than a Borscht Belt comedian.
(Comparing De Lorean's recent troubles with Avanti's small
scale: “We can't afford coke. We give away a pound of
cream cheese with every car instead.”)
Competitive, compulsive, Blake
roams the cavernous halls of his 1891 automotive assembly
plant attired in standard Washington khaki pants, blue button-down,
and navy blazer with loafers— a uniform that sticks out
baldly amid Indiana's DeKalb hats and denim. His enthusiasm
is undeniably infectuous, his knowledge formidable. Constantly
talking or joking, he does not betray the fact that he has
been subsisting on three hours sleep a night for longer than
he cares to remember.
Blake does not
worry about sufficient demand for the Avanti. “There
will always be an expensive car market,” he believes.
During the Great Depression, he notes, companies such as Packard,
Duesenberg, and Cadillac broke all sales records. In 1981,
domestic and imported 'luxury' cars accounted for about 250,000
sales. “During the worst depths of the automotive depression
in 1979 through 1981, Mercedes sales increased almost 100
percent; Rolls Royce increased 20 percent and BMW sales increased
more than 30 percent. What's that tell you?” he asks.
Avanti has spent nothing on advertising
in years and possesses a company profile so low that most
people don't realize it still exists. Nevertheless, the company
recieves about 50 letters and queries each day— some
with international postmarks— from people interested
in the car. “In the past, people have been willing to
go to great trouble to buy this car,” notes Blake,
including a 12-week wait from production start to factory
roll-out. The recent factory backlog of 51 cars —“ordered,
not completed”— represents about two months' production.
One of Blake's
first priorities upon assuming control of the company last
October was to commission its first market survey. The poll,
conducted through a small 'executive' publication with a "mature"
high-income readership, yielded over 6,500 responses from
people who wanted to learn more. In its 19-year lifetime,
Avanti has built only 2,500 cars (as of March 1983). A peek
at what passes for the Avanti production line demonstrates
why interest in the car remains high. There the claim "best-built
car in the country" is more than an idle boast.
Watching Alice Cwidak, a small, white-haired
woman barely taller than the cars on which she works, apply
by hand real leather to a custom interior is to see why each
Avanti consumes 1,000 man-hours in the making. (Most Detroit
products take only 40-80 hours.) Avanti cars are constructed
not on a mechanized assembly line, but upon wooden trolleys
pushed from station to station, moving only when employees
are satisfied with their work. Cwidak, a 14-year employee
and , like many of her colleagues, a Studebaker
alumna, calls it a 'TLC car' as she carefully works the leather
with her skilled craftswoman's fingers. The United Auto Workers
union has failed each time it has tried to organize Avanti's
120 employees.
“Quality control is superb,”
says Auto Week magazine writer Randy Leffingwell, an Avanti
aficionado familiar with the operation. Building an automobile
of this high caliber is no easy assignment. Each car, for
example, not only recieves 16 coats of primer and paint, but
is sanded by hand between coats. While the heads of the Big
Three talk optimistically of automating workers on the line
out of existence, the closest relative to a robot in the entire
300,000 square foot Avanti factory is a Mr. Coffee machine
outside the foreman's office.
That 1983 Avantis exist at all should
rate as a minor miracle. By all rights, the Avanti should
be a ghost car, an interesting but forgotten footnote in Americam
automotive history. If Blake's attentions
were centered on another automobile, his optimism would perhaps
seem misplaced. Then agian, the Avanti was never intended
to be just another car. The car was conceived in the Studebaker
offices during the Kandy Kolored Tangerine Flake Streamline
Baby days of 1961.
Sherwood H. Egbert,
the newly named president of the nation's number five auto
manufacturer, was determined to turn around the ailing company
with an offering radically different from the good, stolid,
middle-class, and utterly boring cars on which the firm had
staked its declining fortunes. Impressed by the nimble, sexy
foreign sports cars he had seen, Egbert
convinced the Studebaker board
to let him develop a car better than anything produced by
Detroit, a car rivaling the great names of Europe. The car
he had in mind, he told the board, would boost Studebaker
sales across the line and save the business.
Much was riding on the Avanti, then, before
it ever turned a wheel. Work started in haste. Studebaker
had very little time or money for development. World-renowned
industrial designer Raymond Loewy
was called in and given charge of designing the car. The prototype
was ready for the April 1962 New York International Auto Show.
Overcoming great odds and preasures, the final product looked
like everything Egbert had wished.
It was electrifying.
Twenty years later, the Avanti still looks
as modern as anything driven on asphalt or concrete. Compared
to the guady chrome and tail fins most cars of the sixties
carried, it was as restrained and elegant as a single strand
of pearls and the proverbial little black dress. Its distinctive
four-passenger, fiberglass body
introduced the look—long hood, short rear deck—that
Ford copied for the Mustang a few years later. The Avanti
looked suited to cleaving the atmoshere with a grill-less,
sloping front end and glassed, semi-fastback tail.
Inside, it was just as unorthodox. With
its full instumentation that glowed red at night and essential
switches on an overhead central console, the driver's seat
resembled an airplane cockpit. A
built-in roll bar and padded dash were standard years before
they were offered by other manufacturers. Front and rear stabilizers,
front disc brakes, safety door
latches--the list of advanced features could go on and on.
Forced to use Studebaker's
tame 289-cubic-inch V-8 engine, the
project managers despaired of achieving the level of performance
the car demanded until they slapped on a Paxton
supercharger and found themselves with a power plant churning
out about 300 horsepower. Stock Avantis set more than four
dozen United States Auto Club records. One experimental model,
the unique, fearsome R-5 Due Cento, had not one but two superchagers
beneath its hood, pushing it to a top speed of 196.62. Most
drivers saw the car from one angle: the rear.
The first production cars to roll off
the line in South Bend caused a minor stampede. The automotive
press rubbed its eyes in disbief over the car it had been
dreaming of for years. Orders, despite a then-high price of
$4,500, poured in. Sherwood Egbert's
gamble had succeeded beyond the wildest hopes of Casanova
let loose in a convent school. Yet little more than a year
later, after fewer than 4,700 Avantis had been built, Studebaker
announced it was closing shop. How could this happen?
As with any product so advanced, there
were production problems. A common customer complaint was,
“The rear window pops out at speeds over 115.” Delivery
dates were missed and orders canceled as engineers attempted
to perfect the car. Studebaker's
directors, waiting until success was within their grasp, decided
to follow through on their threats one month after Egbert
retired, his health broken by the strain. Days before Christmas
1963, the company announced it was transferring all manufacturing
operations to Ontario, Canada, where it would produce only
the Lark, an economy vehicle as exciting as a pile of wet
feathers.
In South Bend, where the company locally
called 'Stude' still employed 6,000 workers in its last days,
residents were shocked. But for the appearance of a saving
angel, the Avanti saga would have ended right then. Nathan
Altman, a 50-year-old South Bend 'Stude' dealer, saw no
reason why Avanti production could not be taken over by one
of the Big Three, believing one of the majors would jump to
offer the car under its own marque. Detroit saw things from
a different perspective. It would be less than flattering
to their own products if they wisked the Avanti into production.
The few executives who deigned even to see Altman
told him his idea was rediculous, and that he would do himself
a favor to forget it and go back home.
Altman had large
reserves of Hoosier grit and tenacity. He would return to
South Bend, he decided. He also decided to buy a portion of
the former Studebaker complex
himself and build the car properly: by hand. The Avanti has
that way of captivating people. Gazing upon the factory floor
and a dozen new cars, Altman's younger brother Arnold, when
asked of his brother's motivation in launching the Avanti
Motor Corporation in July 1964, said, "Look at that car.
Doesn't it do something to you?"
With Altman's
auto dealer partner, a few family members, and close friends
the only stockholders, progress was swift. The Studebaker
board sold the rights to the car and all the parts, dies,
jigs, molds, etc., required to make it, plus two massive brick
plants totaling 500,000 square feet. The price, though never
publically disclosed, was a bargin. The first Avanti not to
bear the scripted Studebaker
"S" logo was built after some difficulty. The next
year, 1965, they rolled 45 reincarnated Avantis off the line.
A devout car buff, Blake
claims to have owned hundreds of automobiles, collecting them
the way some men pocket spare change. During the late sixties,
he even dabbled in car racing for a short time. His entry
into the auto industry, however, was through the back door.
A few years before, in 1976, he had invested in a friend's
'little sleepy' Ford-Lincoln-Mercury franchise in the New
Hampshire mill town of Claremont, a few hours' drive north
of Boston. Within months of fleeing the hassles of Washington
real estate to relax in bucolic New England, he found himself
taking over and managing the dealership.
The firm was doing between $2 and $3 million
worth of business annually when he took control. Within three
years, volume was over $10 million, a feat accomplished partly
with an aggressive television ad campaign featuring ÒCrazy
SteveÓ jumping out of snow banks to sell cars. "It worked."
As a sideline, for his own pleasure really,
he also set himself up as a broker of used luxury and high-performance
cars. Selling second-hand Porches, Maseratis, MGs, Corvettes,
Ferraris, and other makes, at price tags up to $50,000, allowed
him to travel and have fun. He soon discovered, while sweating
blood to sell stripped Ford Fairmonts at $3,995, that a used
Rolls or Lotus would practically sell itself.
By the summer of 1979, the gas station
lines of five years earlier had reappeared. "Big cars
stopped selling," Blake says,
Òeven though I was trying everything within reason to sell
them. But as terrible as my new car business was, my luxury
and exotic cars across the street were selling better than
ever before. ÒWhen it became apparent that my Ford dealership
was dying, I tried to sell out. But no one wanted it. I finally
had to cut my losses and get out. And it hurt plenty. I had
built-up a pretty good-sized operation, so it cost me about
a million in cash to liquidate and walk away.
“It was during this period that I
took in, drove for a while, and then sold a couple of Avantis.
I was really impressed with the car, not only with what it
looked like, but how well it was built. Besides, after growing
up in the business, and having run the Ford agency, I knew
just how well the Avanti was made. I knew that Avanti only
sold about 150 t0 200 cars a year, and every time one came
onto the lot, it was always the first to be sold and usually
at the asking price. One day it just hit me, and I said, 'Jesus,
what an opportunity,' ”
Having decided what he wanted, he telephoned
the Avanti office in South Bend and told the voice on the
other end straight out, “I want to buy your company.”
The reply was every bit as direct. Arnold Altman, who had
become Avanti president upon his brother's death in 1976,
hung up immediately. The pattern was repeated once a month
for a year. In October 1980, Altman relented, partially anyway.
“Either leave me alone or come in and buy the goddamn
place,” he told Blake.
The next morning Blake
walked into Altman's office in South Bend. What he found were
the first of many surprises. The Altman brothers had run Avanti
as a labor of love. In the words of a South Bend banker familiar
with the company, it was “a real Ma and Pa operation.”
The company was archaic in more than a
few ways. The physical plant was labeled by one consultant
as “pre-Henry Ford.” Purchasing duties were handled
by an 80-year-old gentleman who worked the three months of
the year he was not in Florida. (Blake's still trying to locate
him.) “Nate's goal was to make enough money to eat more
than beans and weenies,” says auto writer Leffingwell.
Advertising was unknown. California, the
greatest auto market in the nation, had been ignored. Avanti
Motors was not mismanaged, it was unmanaged. And the factory
and car had been allowed to run and sell themselves. And yet
the company made money; since its birth, profits and production
had grown steadily each year. ÒNo other car company in North
America has done that over the past two decades,Ó Leffingwell
notes. In fiscal year 1982, on sales of nearly $6 million,
Avanti declared a pre-tax profit in the mid six-figures. Company
overhead was low and debt minimal. The potential was staggering
with proper management. ÒWhat this business needed was a young
meshuggener,Ó says Blake. ÒThere
was so much to be done, a guy in his fifties is going to have
five or six years of hard work ahead of him, and there are
easier ways to make money.
Negotiations dickered on for a year, and
were called off more than once. Blake
managed to pick up eight of his former real estate business
associates as investors—all but two from Washington—each
willing to sink $25,000 in the project. A price of about $4.5
million—cash, no paper—had been agreed upon, but
nothing was signed by January 1982. Legal preliminaries and
funding had eaten up $200,000 of Blake’s own money, and
he had zilch to show for it. Everybody thought they were over
the largest hump when Blake finally signed a 90-day, $200,000
option in February 1982.
Instead, the worst was still in the wings.
Nothing scares investment bankers more today than an auto
company, Blake learned. With both a proven product and record,
Blake set out on the money trail thinking it would be a short
hike. No one, absolutely no one, would talk with him. Visiting
banks in a dozen cities: Washington, New York, Chicago, Atlanta,
Miami, Detroit, and Cleveland among them all said the same
thing: ÒToo risky. Get lost.Ó
Closer to home, where he had a known reputation,
Johnston, Lemon, and Ferris and Company told him to forget
the idea. Their response was nothing, however, compared to
the reception Blake received at Security
National Bank, with which he had done business for a dozen
years. After meeting with SNB chief Robert Koontz, Jr., the
bank sued Blake to recover $30,000
he had borrowed on an unsecured line of credit. (The suit
was eventually settled out of court.) Blake
has little good to say of most members of the banking profession.
There was another financing source, however, even though Òthe
thought of moving the plant made me throw up.Ó Many states
had aggressive economic development authorities to bring in
business and jobs. Ignoring South Bend because his contacts
there told him Indiana wouldn't be interested, Blake
began talks with economic development agencies in Virginia,
Maryland, and, most promisingly, Kentucky. But each fell through.
Then an acquaintance in South Bend suggested
that he visit one of the South Bend banks. Expecting little,
he made an appointment at the city’s largest bank, the locally
owned 1st Source, with $540 million in assets. The City of
South Bend and surrounding communities had benn devastated
by the loss of Studebaker and
6,000 jobs almost 20 years before. The traditionally blue-collar
city had been further hurt by the loss of manufacturing jobs
as company after company pulled up stakes and moved to the
Sun Belt. Blake had not realized
the community pride and determination to rebuild the economic
base were so strong when it became known he was thinking of
moving the Avanti factory elsewhere.
“We believe the car is a good car
and knew the previous stockholders,” says 1st Sourch
Vice President Dan Jones. “We also thought there was
a potential for controlled growth.” An accord was quickly
reached in early May. Avanti would receive a $2.5 million,
10-year loan from 1st Source, of which 75 percent was guaranteed
by the state of Indiana. In addition, the bank would loan
another $1 million as working capital once Blake
raised another $1.5 million.
Blake was far
from home free, though. He still had to come up with that
$1.5 million to close. Compounding his problems was the fact
that the 13 Avanti stock holders could agree on nothing among
themselves. Negotiations crept along in low gear until an
agreement to purchase finally was signed July 1. The price,
including assumption of about $600,000 of Avanti liabilities,
was $4,680,000.
The long scorching summer of 1981 saw
Blake back on the road hunting dollars.
By now it was down to a routine. Potential backers would be
salivating to sign until Blake let
slip he was going to build automobiles. Then their checkbooks
snapped shut as they apologized that their Òfinancial analystsÓ
had warned them to stay away from anything on tires. One private
Midwestern investor had agreed to put up the entire sum needed
when he suddenly got the jitters and backed out. ÒAll of a
sudden I'm 70 percent home free as far as financing and I
can't find any equity," Blake
recalls. He grew desperate as the summer wound down, and perplexed
as to why everyone he approached saw red when he pointed to
Avanti's black ink.
He flirted with dropping the entire idea.
"Many sleppless nights" were spent mulling over
the wisest course. "I finally decided this is what I
wanted to do, and if in the unlikely event I went broke at
it, I'd start over. Big deal."
It was a big deal, though. Blake
had left Washington in 1977 with a net worth in excess of
$3 million. Liquidating the New Hampshire Ford dealership
cost him a hard $1 million. When he started his Avanti pursuit,
then, he was still quite well off with a net worth over $2
million. A week before the scheduled Friday closing, Blake
received a phone call. The voice on the other end was terse,
barely able to rasp the syllables. “Can't take it . .
. Can't go on.”
He immediately recognized the symptoms,
despite a long-distance connection: faint heartbeat, pockets
glued shut with a waxy substance, a canceled check. Autophobia
fever had claimed another victum, this time an out-of-town
investor who had committed $800,000 to the purchase. Eight
hundred grand! Gone! Blake could feel
his pulse accelerate like a supercharged Avanti.
There was only one antidote to turn to:
cash, lots of it. Blake proceeded
to “sell, hock, borrow everything I could get my hands
on personally”, everything he had accumulated during
his real estate days in Washington. Scrambling, he came up
with $600,000. 1st Source lent him another $250,000 personally
with his remaining few assets as security. But he was still
a couple of hundred thousand short. “I honestly don’t
know how I got the son-of-a-bitch together,” Blake says
now.
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