Turmoil Surrounding Tucker Corporation (1946-1948)
The Securities and Exchange commission bothered the Tucker Corporation from its earliest days. The SEC was embittered after small automaker Kaiser-Frazer was given millions of dollars in grants towards development of a new car, and subsequently squandered the money. While Tucker took no money from the federal government, small upstart automakers were under intense SEC scrutiny, and Tucker was no exception.
One of Tucker's most innovative business ideas caused the most trouble for the company and was used by the SEC to spark its formal investigation. His Accessories Program raised funds by selling accessories before the car was even in production. Potential buyers who purchased Tucker accessories were guaranteed a spot on the dealer waiting list for a Tucker '48 car. Tucker also began selling dealerships before the car was ready for production, and at the time of the trial had sold over 2000 dealerships nationwide at a price of $7500 to nearly $30,000 each.
Feeling pressure from the SEC, Harry Aubrey Toulmin, Jr., the chairman of the Tucker board of directors, resigned and wrote a letter to the SEC on September 26, 1947, in an attempt to distance himself from the company. In the letter, Toulmin indicated that he quit "because of the manner in which Preston Tucker is using the funds obtained from the public through sale of stock." Describing Tucker as "a tall, dark, delightful, but inexperienced boy", Toulmin added that the Tucker '48 machine "does not actually run, it just goes 'goose-geese'" and "I don't know if it can back up." In reply, Tucker stated that he had asked Toulmin to resign "to make way for a prominent man now active in the automobile industry." The "prominent man" turned out to be Preston Tucker himself.
In late 1947, a radio segment on Tucker by popular journalist Drew Pearson criticized the Tucker '48, calling it the "tin goose" (referring to Toulmin's "goose-geese" comments) and noting that the first prototype "could not even back up". The first prototype lacked a reverse gear because Tucker had not had time to finish the direct torque drive by the time of the car's unveiling. This was corrected in the final driveline, but the public damage was done and a negative media feeding frenzy resulted. Tucker responded by publishing a full page advertisement in many national newspapers with "an open letter to the automobile industry", where he subtly hinted that his efforts to build the cars were being stymied by politics and an SEC conspiracy. Nonetheless, dealership owners began filing lawsuits to recover their money, and Tucker's stock value plummeted.
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