Minutes of April 1, 1963 meeting of Studebaker department heads.

STAFF MEETING – April 1, 1963

ENGINEERING

1. Garnish Molding

We are still holding the car for Sales to look at and give us an answer on whether we will go with the body color for the garnish molding. It was the consensus that the chrome strip on the inside of the Cruiser on the B pillar should be eliminated – which will save 40 to 50 cents. (Mr. Egbert has concurred.)

2. Franklin Plastic Parts

The Franklin people were in last week. They will quote on 20 plastic parts. Many of them will carry into ’64 if the prices are right.

3. Nameplates

Mr. Hardig reported we are still waiting on the new names. Mr. Bender said that the agency and Sales are doing a survey which will be completed on April 5 and assured Mr. Hardig that Engineering will have it by April 8. He went on to tell of the survey being made by Sales to test the present names among people who presumably know Studebaker. The survey disclosed that people have a wrong impression of the lineup of our cars; that is, they rated Daytona as the top of the line, then the Cruiser, then the Regal, then the Custom. In addition, they learned that the Lark is a deteriorating kind of thing as a designation; and they reacted to the name “President,” as being a larger car than the Lark. The agency is working with the new names.

Mr. Hardig mentioned that all of the moldings are out except about 80%, which will be out by Thursday of this week. According to our present plans, the Regal and those models that are equivalent will be the only ones that have the name in the molding – the rest will have the names below the molding.

4. 1964 Passenger Car Releases

We have one die template drawing left: the tail light lens from Autolite. We still have two or three on the Hawk series: one is the grille die template drawing, which will probably come off late today or the first thing in the morning.

5. 1964 Truck

Mr. Hardig asked about heavy duty springs – which have been brought up at various times since 1956. It would mean $21,973 in tools and a piece price penalty of $13.34 (It is a long-tool item.) He noted that there is total tooling of $33,824 against a $50,000 budget. Mr. Challinor commented that this is primarily a severe-usage export unit where the failure rate is higher. Mr. Hardig remarked that we have had complaints on both domestic and export units. Dr. Lamberti suggested that a meeting be held to determine the feasibility of these heavy duty springs inasmuch as there is not much volume on them. The total trucks sold in the whole class are only a few hundred.

6. Power Steering for ½ and ¾ Ton Trucks

Because the setup as we have it is not just right, we plan to release modifications of the two items involved, at a cost of $3,500. Ross Gear is working on it, and it will be released in a couple of weeks for the ’64 truck.

7. E48 Truck

Mr. Hardig reported that it would take 60-75 days and cost roughly $3,000 to rebuild the E48 truck that is at the proving ground to bring it up to the latest specifications tied in with the proposal. These dates are determined by the vendor on the transfer case, the axles, etc. (Mr. Soelch will try to better the price.) Mr. Hardig said we will put a new cab on it rather than rebuild the present one because it costs less.

This is a 2½ ton truck, cheapened up; or it is our own 2-ton truck, heavied up. The cost is about $1,000-$1,500 less than the M35 (gas version 2½ ton truck). Also, our truck weighs less than the M35.

Mr. Thomas observed that there are two areas of prospects for this proposal. One possibility is sales to the U.S. Army, which would be for units to be used in the U.S.; and the other possibility is sales to other governments, which would require demonstrations overseas. Several months ago, we sent copies of comparison reports which we developed to distributors who indicated an interest and wanted prices, but none of them have asked for a demonstrator. Export doesn’t want to be charged with that amount of money unless we have more to look at.

Dr. Lamberti remarked that the Washington people feel they should have a vehicle like this. Mr. Kidder will call Mr. Thomas because they feel that AID or MAP countries could have use for this truck, and they want to go ahead with it. Dr. Lamberti feels it has enough potential to warrant the expense, which perhaps could be a share type of thing with part of it to export and part of it to the account for developing units for the Army.

Mr. Hardig noted that if we were to release it for production, it would cost approximately $8,000 for tooling.

8. 1965 Truck

We are supposed to start on the light series truck line program (½ ton and ¾ ton) by the end of this week. We don’t have all the specifications worked out as yet, but we should start getting a buck built up this week.

MANUFACTURING

1. Shipments Month To Date Lark and Hawk 4,305 47,449 Avanti 456 2,799 Commercial Truck 497 4,000 Military Truck 529 2,648

2. Military Truck

We only have 173 more to go on the present contract. Our shipment of 529 units for the month of March is surprising because we over shipped last month. We’re getting a new resident inspection officer of the military truck: Burkhart is being transferred, and Sanders is taking over.

3. Avanti

We’re reducing the quantity down to 10 per day, starting this week, and we’re phasing out the body building. MFG will not ship for two weeks.

4. Post Office Job

We know now where we will build this unit if we get the contract. We bid two months ago and were notified last week we were low bidder. It is a $7 or $8 million contract and is for roughly 3,400 units. We should have a prototype in 60 days. We will produce 15 or 20 per day, and production will start about August and run to about July of next year. We will build up the sub-frame and ship it to Lancaster, Pennsylvania, where the body will be built. (One thing that helped us get in on it was that the body builder, Met-Pro, came in with a real low body bid.) We will put the 6-cylinder 170 engine in it.

Mr. Feuer asked about the paper work; he hasn’t seen any terms or conditions on it. Mr. Rickus will make sure Mr. Feuer is on Mr. Fields’ mailing list, and Mr. Timmons will send out a report today, making sure Legal is on the mailing list. There will be a meeting on this vehicle the middle of this week.

SALES

1. Dealer Count

As of Friday night, we had 2,039 dealers, down from 2,044. We have 5 in process, including one that looks excellent – in Hawaii.

2. Inventories

We were shooting for a snowbank of 1,300 at the end of the month, and we ended up with 1,291. We are looking for an inventory in the zones not to exceed 1,100. (We won’t have a final count until this afternoon.) The dealer inventory, as of March 20, was 16,742.

3. Retail Deliveries

We are presently estimating our last 10-day retail sales to be in the neighborhood of 2,000 units.

4. Orders

Our 5-day average order intake on Larks and Hawks last week was 264, which is very close to the quantity that is needed to maintain our 5-day-per-week production. The number of orders was 1,323 as compared with 1,096 for the week before, 1,130 for the week of March 13, and 918 for the week of March 8.

5. Linesetting

Quantitatively, we are framed through April 3, which is for production of April 8, but we have a few problems in model mix. Our F2’s are the bad item at the moment – we are 56 short. We have some fleet business that is pending which we hope to get. Dr. Lamberti noted that the whole mix is heading toward a major mix shift, and Mr. Bender agreed and said Sales is looking at the model mix. Our backlog, in days, is 5.7 for the Hawk and 4.1 for the Cruiser – after framing of April 3. There will be a meeting to look at the schedule on Friday of this week.

We have 558 orders that are available for fieldsetting, of which 236 are dealers’ orders that the zones have not yet fieldset. In addition, we have Pennsylvania business that is under litigation. They are being held up for possible appeals that could be made under the action the Rambler dealer has taken. We are sure of getting this business, but we can’t have it until the State of Pennsylvania is in the clear on the legal difficulties. Dr. Lamberti suggested that Mr. Feuer call his counterpart at AMC.

6. Avanti

Mr. Bender commented that our present situation looks ridiculous, based on intake of Avanti orders last week – we averaged 4 per day. As far as production is concerned, we are framed through April 11, and beyond that we have 6.6 days of orders. As far as working days are concerned, we are set for 7 days beyond April 11. If the order intake doesn’t pick up, this will narrow quickly. Dr. Lamberti observed that this, of course, causes a problem on deliveries. Right now, if a customer places an order, he would not get the car through production until April 29. Mr. Whitmer is trying to see if we can reduce the number of units in the system. Mr. Bender said that would help on some of the special orders, but it wouldn’t change the overall picture. He went on, we need to have another look at this: the orders during March averaged 7 per day, about 700 or 800 dealers have the Avanti, and most dealers only carry one or two – the demonstrator plan has caused some dealers to have two.

7. Trucks

We have orders on hand for framing through April 8, which covers the production through April 11.

8. Wholesale Shipments

We estimated 4,200 Larks and Hawks for last month, and we will make that – we know now of 4,300. On the sale of consigned cars in the zones, we had a target of 450 for the last half of March, and the zones reported 452, including those sold out of South Bend. Our estimate on the Avanti is 397, which is about 35 short of what we predicted. On trucks we estimate 479, or 30 short of what we predicted. On total units, we will exceed our prediction.

9. Sales Promotion Program

Mr. Bender explained the program Sales is inaugurating in an effort to stimulate retail, which results in better wholesale. In broad terms, it could be called a trading allowance for our dealers, and it will run during the months of April and May. This has been generally used by everyone in the business this year except GM. (GM-Olds has a program in the Readers’ Digest with a winning number gimmick.) The rest have had some kind of program like this since the first of the year. We are not meeting their deals, but we think ours will appeal to our dealers and will let us live within our budget.

We have established retail quotas for the months of April and May which are designed to eat up runout and enable us to end up on September 20 with dealer inventories not to exceed 6,500 1962 models. On the basis of the inventory, the dealer becomes eligible for this trading allowance when he reaches 75% of his quota for the two months. We start paying him $50 per vehicle for everything he sells after 50% of his quota. In other words, it is retroactive to 50% after he reaches 75%.

We are setting the Avanti on the basis of a bogey. All A, B, and C dealers – as we classify them – who sell more than 50 regular cars per year, have a quota of 2 per month for April and May. Beyond that, we pay $100 per car; that is, if he sold 4 units during this period, he would get $400. For smaller dealers, it would be one per month for the two months.

We have established a bogey of 2 truck units during the months of April and May for all dealers and pay – based on his retail in excess of 2 during these months – at the rate of $50 per vehicle.

We feel this program will enable us to hit our retail targets and allow our dealers to be more competitive. The only real exclusion on count is in the fleet business where a special allowance of $75 is already given.

At Mr. Feuer’s request, Mr. Bender explained how the quotas are established. Retail quotas are related to the retail sales of April and May of last year. The figure we are using is approximately 90% of the total retail for these two months last year. This is used for all dealers who were dealers last year. For the new dealers, we use their potential classification, and their quota is established on the average of that particular classification. We are permitting our zones to make some adjustments to the quotas when there are good, sound reasons for doing so; e.g., if the dealer sold less cars in that period last year than his current selling rate. Announcement has not been made to the dealers and will not be made until after Wednesday of this week. They will be notified by mail that is sent from the zones tomorrow evening.

Having started in April and May, we will probably have to continue some kind of program during June and July. If we make what we estimate, our cost will be in the neighborhood of $250,000.

10. Citizens for Studebaker

We have no report yet of sales due to this program. Mr. Bender spent some time Saturday afternoon at the Broadmoor Shopping Center where there was quite a bit of activity. While he was there, there were 2 real prospects at the display: one for the camper and the other for the Wagonaire. Mr. Whitmer said he had heard complaints that the people didn’t know enough about the cars at the Town and Country display. Mr. Bender explained that the dealers didn’t feel that was the right place to have salesmen – they wanted to have them at their own dealerships. The idea is to encourage the people to buy Studebaker and suggest that they visit the dealer of their choice. It would take a long time to train people to know all about the products.

PARTS AND ACCESSORIES

1. Campaigns

Our campaign on the points on the Avanti has now been completed. We have accounted for all but 3 cars, and we are following on those.

On the carburetors, we have everything out and are getting them back in large quantities to get back to Carter.

2. Avanti Complaints

We are receiving dealer claims on water leaks and a large volume of complaints on paint, and every paint claim is $225. Mr. Challinor reported that the claim costs are growing into high figures. Dr. Lamberti suggested to Mr. Whitmer that he have top people check every car and Mr. Whitmer replied that since we are down to 10 per day, this can be done. He added that they are still being checked 100% for water leaks; whereupon Mr. Challinor asked if the inspection methods have been changed because the quality is not as good. Dr. Lamberti noted that they are all run 11 miles, which Mr. Challinor feels is not enough – they have to be shaken down. Mr. Capsey said we do shake them down. When the streets are too icy, they are driven around the lot. Mr. Challinor commented that the dealers are also questioning why there is low mileage showing on the speedometer instead of at least 50 miles as they expected. They expected a 50-mile test run to be made on each car.

Mr. Challinor told of an incident involving Kerr, our dealer in Cleveland. After sending down a crew of three men (service, inspection, and engineering), they have the problems under control, problems which Mr. Challinor believes are typical of what we have from other dealers. He also talked about a car in Chicago. The body cracked; it was fixed, and it has cracked again. Dr. Lamberti asked if it was the paint cracking – he has never heard of cracks in the Fiberglas, except that it may be a fine-line crack at a bonding joint.

3. Oil Leaks

Mr. Challinor mentioned two instances where leaking transmission fluid and oil were caused by the cardboard protective sleeve on the torque converter snout which had not been removed at the time of the transmission installation; and as a result, it had damaged the front pump seal so that the fluid leaked from the transmission.

4. Back Glass Blowing Out – Avanti

A discussion concerning the back windows blowing out of the Avanti covered the following points:

a. They all happen when the car is being driven at a high speed.

b. The fence is supposed to have a drilled hole – Engineering called for a drilled hole – instead, it is being notched out, and it doesn’t hold the screw. The reason given was that it is easier to put the screw in a notch.

c. The hook is wide enough to span the notch, and the clip is what is supposed to hold the glass in.

d. In testing, when the clips are on, you can’t pull the glass out with rubber suction cups. Upon checking the complaint cars, the clip was still on.

e. We have 115 bumpers in the Avanti line now, and there will be more bumping in today – there will be close to 200 bumpers again.

Dr. Lamberti and Mr. Whitmer will look into this problem, and Mr. Challinor will check to see which windows are down and how many when this happens.

QUALITY CONTROL

1. Brakes

We are 75% clean on this program. The brake drums are coming in real good – no shipping damage, and there are not as many out of round. They are now being received by semi-trailer. The vendor is handling them better up there, and we’re trying to handle them without bumping them. We are continuing tests, and we know we can get away from the shudder. We no longer have the hesitation in the brake.

2. Oil Leaks

A real program is underway, but all the material isn’t in yet. Mr. Hardig commented that he had one we couldn’t stop. We pulled some out of production, and Mr. Hardig told about a method of grinding they discovered is being used in production which he feels is causing the leaks.

3. Cleveland Trip

Mr. Capsey reported that the dealer, Kerr, was pretty sore about the Avantis. He had also received about 7 Larks, and the only complaints he had on them were that one sun roof had a little patch job done on the roof which they didn’t let dry before they operated the roof, and someone had bent the sliding roof on the station wagon. He said if he had Lark quality in the Avanti, he would be satisfied. Mr. Capsey commented about how much more time is spent inspecting the Avanti than is spent on the Lark.

PURCHASING

1. Japanese Vendors

Regarding the blueprints that Mr. Gale took to Japan, Purchasing received quotes Friday from 5 of the 22 different suppliers. So far, two have reported back, and those two have asked for details because he didn’t take the details. Two of the five were directly from Japan, and the other three were from Chicago – originally from Japan. On just about every quote that we have received, they are talking about quantities of 150,000, 250,000 and 350,000; and they can’t quote on everything that comes up. Mr. Soelch said he needs an interpreter. He feels we are wasting time – although we are going on it. (We can’t test them.)

2. Canadian Vendors

They want to work on chassis springs and everything else, but we can’t get them down here. They want to handle it by phone. Mr. Soelch indicated that they have to come down like the other suppliers do because we don’t have enough engineers to lay out all the details for them. They want blueprints laid down with all of the specifications on them, but they won’t come down, and they won’t send samples. Mr. Soelch is placing as much in Canada as he can, but he has to get the ’64 show on the road, and this is the reason we won’t have any more from Canada than we do. When we get to the point where we can’t wait any longer, we place it with an American supplier.

3. 1964 Model

We are moving on this as fast as we get it. Mr. Soelch is concerned about the new names. He has heard that the rumor is we won’t get them until the end of April – if this is true, the cars will go out without names.

4. Stationery

According to Mr. Harman of Purchasing (no one discussed it with Mr. Soelch), Messrs. Cox and Bumbery have picked a supplier in Chicago to furnish us with all of our stationery. However, Mr. Soelch pointed out that there are a lot of envelopes and certain size forms that we have run in small quantities; and we have about one-half dozen local firms who do these small jobs. Also, we had 8 hot jobs the other day, and the outfit in Chicago wants 90 days before they will go on it. If the local outfits only get rush jobs with little profit, they won’t cooperate – the local people aren’t going to be cooperative on time or cost if the jobs with all the gravy go to someone else. Mr. Gallagher asked, what about the program, “Buy Local”?

INDUSTRIAL RELATIONS

1. Electronic Data Processing

Mr. Gallagher asked who was handling this program. He said that nobody has told Personnel, and he feels they should be notified so they can coordinate. He said they keep getting rumors and questions, but they don’t know anything about it. How will it affect Personnel, and when? How will it affect people who are performing work that will be done by EDP? Dr. Lamberti told him that it was coordinated under the methods and procedures section of Accounting and suggested that he contact them about doing personnel records on EDP. Mr. Gallagher said if Mr. Cox is heading it up, he will check with him on two areas: (1) dislocation of people in the Company, and (2) doing personnel records on EDP.

2. Union

We lost the Gravely election in Ft. Scott, Kansas by 7 votes. Now, in view of our warehouse experience where we learned the people were sorry about the way they had voted, we’re going to drag all the way through these negotiations to try to still keep the Union out some way.

3. Citizens for Studebaker

Mr. Gallagher commented on the bad timing of having the Moore article appear in the same issue of the Tribune that the Citizens for Studebaker program was covered. Dr. Lamberti wondered if something couldn’t be done about it because it is a bad influence on those working with him because nothing is done to take Moore to task. Mr. Gallagher explained that he can’t do anything unless Moore criticizes the product. (He wondered if the author was really Moore.) Mr. Hardig felt that the Tribune could screen things like that when they come in.

4. Discharges for Theft

The police department and prosecuting department did not have the courage to prosecute him, and all Studebaker did was fire him (Richards). Mr. Gallagher commented that with the local pressures on witnesses, etc., we don’t favor going through the courts. You have to prove it is your property and that it is missing from your inventory, and we cannot identify these items as definitely Studebaker property. We can keep him fired circumstantially, but you can’t prosecute him on that basis. Richards was hired by Drewrys.

LEGAL

1. Chemical Compounds

Mr. Feuer reported that the Law Department approves a lot of documents that go out to the public, but sometimes something goes out that they should have seen but didn’t. As an example, he told of a memo that Parts and Service sent to the zone offices in February of 1962 which boiled down to an obvious attempt to control the price of STP. He urged the group that before they send out anything that has to do with prices, to please check with Legal.

2. Avanti

With the cutback in the Avanti, many of the ’64 changes will not be until July and August because of parts backlogs. Mr. Feuer feels this would hinder our plan not to consider it a model change. He is afraid that if it goes into the fall, the dealers will begin to think it is a model change and want model obsolescence.

FINANCIAL

1. Tooling

This week there were $556,000 commitments for a total of $2.4 million to-date, leaving $4.3 million not committed – as far as the paper work is concerned.

INTERNATIONAL

1. Assembler Prospect in New Zealand

We got a cable this past week saying that the initial import licenses have been approved by the government, and the program is underway. We expect to have 96 ’63 models in May or June. This is a locally owned company whose main business is to assemble Volkswagens.

2. Chilean Company

We expect to invest in this company – the proposal will be for a little bit less than 50% ownership. We will present it to the Board this week.

3. Pickup Trucks

We sold about 120 pickup trucks to the government in S.W. Africa. Over the period of the last 6 or 8 months, we have had about 40 failures on the Pitman arm. We’re trying to get new parts on an emergency basis. They have told us they won’t buy any more Studebakers until this is corrected – even though the present units don’t have this on it. Mr. Thomas asked Purchasing for their assistance in getting the replacement parts. This will determine our future business – how quickly we can get these out.

APPLIED RESEARCH

1. M44

We’re still working on the engineering package. The contract will probably be signed in early May. It has to go through review boards – through channels. Production will begin before the contract is signed through approval of the District, and we also have a legal authority written in the contract to do this. Mr. Feuer will check with Mr. Fields on it.

2. M602 CKD and M151

We will answer a telegram today on each of these indicating we are interested in bidding. The M602 CKD is for 1,144 units, and the M151 is a 3-year program for about 30,000 units.

3. 25K Loader

We received a communication Friday rejecting our revised price, stating it was a late proposal and they couldn’t accept it.

4. 1/8 Ton and ¼ Ton Vehicles

We talked to the people in the Washington area last week, and there seems to be a great deal of interest in these vehicles, but we haven’t found anyone who has the money to do something on it. Everybody says they want one, but nobody gives us an order. We are still going after them.

5. 2½ Ton Truck

This has not been evaluated in Detroit. Indications were that they didn’t intend to award the contract until June, even though the proposal was turned in in March.

6. 5 Ton Truck

Work is going forward on this.

7. 8 Ton Truck

We’re working on another proposal similar to the 2½ ton truck. It is an 8x8 and is about the same size as a 5-ton vehicle. From the information we have, we believe it will eventually replace the 5-ton as a vehicle in the Army. The 5-ton truck that Ford just got the contract on to build 12 prototypes for will eventually replace the present 2½ ton that we are now making, and it will be known as a 5-ton truck. Dr. Lamberti commented that the 2½ ton truck that we’re building has a good 5 or 6 years ahead of it.

PUBLIC RELATIONS

1. Mobilgas Economy Run

Mr. Whitmer reported that Mr. Dredge is somewhere in the wastelands of the West on the Mobilgas Run. He has not had any reports, as of this morning. They are due to arrive in Detroit on Thursday – it started Sunday morning. Only our 8-cylinder 259 Lark is in the program, but various members of the Press are driving Avantis, etc., so we should get quite a lot of play on it.

MISCELLANEOUS

1. Staff Meetings

Dr. Lamberti commented that the next three or four months are trying times for the Company – with sales and production. There is a little more irritation and a little more chipping going on in the organization – which is natural. However, all of us play an important part in the organization, and we work through several echelons of people. If we reflect the wrong thing, it goes right on down through the lines. We should be as optimistic as possible. Even in this meeting, we should have a few positive reports in addition to the bad things. We need the communications of the bad things, of course. We need the statistics, and we also need some positive points; e.g., Mr. Bender’s report on the sales programs this morning. We should come to the meeting with four or five points, and something positive. People are always asking us about the Company, and we have to have something to combat the pessimism. We would do a lot of good to all the people we contact, and we must keep a good positive foot forward. The information that is covered in this meeting must be carried to the people who must act on it in the proper concept. In reference to the Avanti – we must be careful how we refer to the things that take place in this meeting.

4-3-63

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