A letter to the holders of P-A stock

July 18, 1928

To: The Holders of the Preferred Stock and Common Stock of the Pierce-Arrow motor Car company:

Since Mailing the circular letter of June 29th, outlining the advantages of an affiliation between the Studebaker Corporation and the Pierce-Arrow Motor Car company, our contact with Studebaker officials has given us the opportunity to gauge even more closely than before, the benefits which would result from operating under the proposed plan.

We realize more keenly the excellent advantages for Pierce-Arrow in unavailing ourselves of Studebaker’s purchasing strength, enormous engineering resources, plant facilities and foundries. The value of these can not be under-estimated.

The problem of distributing and servicing a line of automobiles in limited production is becoming more and more pronounced. a company producing only a small number of cars is handicapped in its efforts to maintain a sufficient staff of dealers and service stations. It therefore cannot compete successfully with companies having large dealer organizations producing a large volume of sales. Only through volume of course, can economical and profitable production be secured.

In addition, our stockholders must not overlook the severe strain on our operations for the past six years resulting from the reduction in 1921 of Working Capital, which has never been replaced.

on December 31st, 1920, our combined capital and surplus was $19,872,958.48 which was reduced by loses during 1921 to $10,909,246.46. The resulting cost of refinancing, interest on bank loans and debentures, the payment of bank loans and dividends as well as investments made necessary by changed market conditions, have resulted in the withdrawal of over $11,000,000 from current Working Funds over the six year period to December 31st, 1927.

During the year 1927, our company showed a net loss of more than $783,000, and for the first six months of 1928, a further loss of $634,000 (June being estimated).

This additional data coupled with the facts outlined in our letter of June 29th should make clear that we cannot be hopeful of any permanent improvement in earnings under present handicaps. A solution presents itself in the proposed affiliation with Studebaker.

Therefore, the Directors and the Management of your Company are unanimous in urging you to assist in making the proposed affiliation with Studebaker possible by sending in your proxy and assent promptly if you have not already done so. The special meeting of stockholders is to be held on July 25th, 1928. Legal requirements are such that it cannot be accomplished unless a substantial majority of these assets are received; and the Studebaker Corporation is under no obligation to proceed unless 90% of these shares of our Preferred and Common Stock assent to the plan.

Very truly yours,

Myron Forbes

President.