In passing, Mr. Hardig mentioned that Chrysler is throwing the Bendix carburetor out because they have been receiving too many field complaints – and they’re going 100% with Carter. (We have stopped our work with Bendix because they have to completely redesign the carburetor for Chrysler.)

3. Avanti – Paint Discoloration

The chemical reaction of the fumes off the windshield washer is causing the discoloration – not the hi-test gas. Mr. Hardig’s group is working on a solution.

4. Avanti – Cold Starting

The new starting motor released will cost 60 cents more and will increase cranking speeds to 60-65 rpm. The new starter, plus 5W oil, should give us 75 rpm at -10º.

5. High Performance Cars

The program has been worked out for the F6 (2-door), J8 (Hardtop), and K8 (Hawk), but it has not been released. We will have special paint color and special interior trim. It will be released by kits, but this has nothing to do with the way sales and public relations want to handle the sale of the car.

6. 500 Special Trucks

Engineering has stopped all work on the special trucks. Mr. Minkel said there is nothing more to report, and Dr. Lamberti asked that manufacturing and engineering be kept posted because it is too big a program to be kept in the dark.

7. 1964 Model

The proposed new paint colors and trim styles are all completed and the cars are at the proving ground. The show will be on February 11 or 12 instead of February 7 as originally anticipated.

Engineering plans to complete 8 prototypes between May 17 and June 29: 2 Y’s, 2 P’s, 1 F, 1 J, 1 L, and 1 K. Mr. Dredge indicated concern about having models available for photographic purposes, and Mr. Hardig explained the way engineering plans to handle this problem. On the Y’s and P’s, engineering will first set them up as standard (the 2 model) and make them available for photography. When they are returned to engineering, they will be set up and trim added for the 4 model and again made available for photography. When they are returned the second time, engineering will put on the trim for the 6 model and make them available for photography again. (Mr. Hardig will get a memo out on these.)

Then Mr. Dredge questioned what would be available for pictures for the long lead-time magazines and pointed out that those photographers photograph all lines at a given time, and they photograph what is available. Mr. Hardig answered that engineering is planning on having a combination steel and Fiberglas prototype by March. This can be set up with the different trims by engineering and can be used for pictures for the long lead-time magazines.

Mr. Dredge suggested the press preview be held on August 14 because he feels Studebaker would profit best with an early show this year. He said to get exposure it is best to get in as soon as possible because if we are showing at the same time as other makes, we don’t fare as well with the Press. He mentioned that the first show would be at a race track in Canada and the second show would be at a race track in Elkhart Lake, Wisconsin. Dr. Lamberti observed that the industry pattern indicated that the date of the show usually depends upon the degree of change in the model, that is, little change, early show date. He pointed out that the first car off the line will be on August 12, and the first week’s production always goes to sick bay. Dr. Lamberti referred to a memo he issued recently which gave realistic starting dates and remarked that these dates were not being forced on anybody – the tooling program has been squeezed as far as it can be squeezed. Excess costs result from crash programs.

8. Econoline Truck Program

Pursuing an idea of Mr. Egbert’s of an Econoline truck for special purposes, Mr. Hardig went over the program with the people from GE week before last. Within the next 2 or 3 weeks, they will supply us with their requirements as far as packaging, service material, cargo space, etc. are concerned.

Last week, we contacted Sears in Chicago. They are definitely interested in something attractive and efficient – about like the Ford Econo-Liner. (In fact, they suggested that we pattern ours after Ford.) They want one door on one side, a double door in the back, one seat, and a protection for the back of the driver. They stated they were not too interested in us telling them how to store their material in the truck; they will decide how they pack their material. Neither GE nor Sears is interested in a lot of power – Sears’ load is 1,400 to 1,600 lbs. Sears just bought 1,200 trucks, and they buy about 12,000 per year.

The Telephone Company is well satisfied with Ford, but engineering will also talk to Westinghouse. After the meeting with Westinghouse, a meeting will be held to determine the specifications for our requirements, as well as the requirements for these three big operations.

9. 6-Cylinder Engine

To get more power in the 6-cylinder, we have special camshafts running and are building a manifold to accommodate a 2-barrel carburetor. We don’t know if we can get it tooled up in time for the ’64 model, but we’ll have a job running with this special manifold in about 4 weeks.

10. Tooling

We’re working day and night on the ’64 model. Out of 49 groups, 24 have been released, and the balance will be going out at about 2 or 3 groups a week. There have been 9 or 10 body groups released.

MANUFACTURING

1. Production

GSA in January:

*Sales asked for 300

588 shipped in January; framed 42 bodies in our own system.

A discussion of Avanti scheduling covered the following points:

a. We are scheduled for 900 in March, a schedule in which we would have to increase the production rate from 30 to 42 per day. Mr. Whitmer asked if we should put in enough tooling to handle the schedule on a one-shift basis, which would amount to an additional investment, or if we should train supervision for a second shift. Mr. Whitmer needs to know so that he can go into it by February 18 – or the following week at the latest.

b. Dr. Lamberti commented that we will handle it in the best interests of the Corporation. We want to avoid the effect on the Avanti image that would occur if we had to cut back. We’re up to 30 per day off the line. Should we stay at 750 per month or go to 900? It appears that about a line rate of 36 per day – which is about 750 per month – plus overtime, would give us the best plan. This is about 800 per month.

c. Right now, we still have 57 bumpers in the Avanti line (total of 89 for the plant). Workers bump into the Avanti line because the work is steadier.

d. Mr. Minkel said we can use 640 Avantis in February and 750 in March, and then 500. Our current rate can take care of this very well. He said sales has no feel for how the car will sell when it is really selling, and he sees no reason to increase the production schedule as far as the next 60 days are concerned – just hope we can hold it.

Commercial Trucks:

Military Trucks:

The RIO held up shipments on the last day or we would have overshipped.

SALES

1. Linesetting

We are framed through the 6th (Wednesday), plus about 40 jobs for the 7th. Mr. Bender remarked that right now it is indicated that we won’t work Friday, and possibly not next Monday, and Mr. Minkel said definitely we should shut down Friday and Monday.

Mr. Bender observed that while the drive for wholesale in January took more than 500 units out of stock, it also dried up the order intake for a while. He also noted that the present order intake for trucks is not supporting production. Mr. Whitmer asked sales to let him know if it will be necessary to cut back the line speed because this will affect the Avanti.

Dr. Lamberti complimented Mr. Whitmer on meeting all of his January schedules.

2. Dealer Count

As of this morning: 2,067. Sales is cleaning out dealers of record who have not purchased vehicles in 1962 – and indicated that there will probably be a 60-75 reduction in dealer count next week. When Dr. Lamberti asked what effect this would have on Corporate publicity, Mr. Minkel told him that there isn’t much publicity on dealers. A story appears a couple of times a year on the dealer organizations in the industry.

3. National Dealer Council

Mr. Minkel will check with Mr. Egbert to see if it will be all right to bring the dealer council in next week. They will be shown the trim, the colors, and the upholstery before it is finalized. Mr. Minkel also mentioned the grille, but Mr. Hardig pointed out that it is set except for a little detail.

4. Inventory

*976 are 1962 models

5. Retail Sales

Sales will not have a Studebaker estimate until this afternoon, but Mr. Minkel estimated 190,000 for industry which may give us about 1.2% for the month. Through January 20, we were 1.26%. Mr. Minkel said GM is going great, but Chrysler, Ford and AMC are having trouble.

6. Sales Promotion

Mr. Minkel mentioned that he is trying to decide on sales promotion programs for March and April. The industry launches a big drive for these months, and most of their programs are trading allowances. For instance, Ford and Chrysler dealers are given $50 if they exceed a certain quota and $75 if they exceed a certain higher quota. There is also a kickback to the zone and district sales managers for exceeding quota. Thus, it is more attractive to our dual dealers to sell the competitive make. Our problem is to make an offer which is equally attractive – or more so – to the dealer. We have programs ready to go and will decide tomorrow which one we will use.

Mr. Bill Wood gave a presentation of the direct mail program entitled “Operation Retail.” The regional managers are holding meetings today to present this to the zone managers who will present it to the district managers on the 6th. It will be launched to the dealer organization a week from today. It is the February merchandising program, and the objective is to produce over 100,000 demonstration rides to competitive owners between March 22 and April 22.

The owners of ’58, ’59, ’60 and ’61 model Ford, Chevy, and Rambler cars will be sent invitations with the dealer imprint, inviting them to take a demonstration ride. The mailing will include (1) a product folder where the customer evaluates the special features of our car, (2) a prize folder, and (3) a winner certificate. There is a gift for everyone who takes a ride (a Hi-Fi record, “Broadway’s Best”); and in states where it is permitted, there is a chance to win an Avanti, another model of the winner’s choice, a trip to Europe, and other minor prizes. In states where sweepstakes are illegal, there will be a jingle to complete (skill contest) and a chance to win a Lark or Hawk, a TV set, an automatic washer, or a minor prize. All participating dealers and salesmen are eligible to win a prize also.

Time schedule: Mailing, February 1; Cutoff date for orders, February 28; Competitive owner lists sent to dealers along with winning number lists. (Dealers can order additional prospect lists for special mailings to key people.) The mailings will go out in two flights: March 15 and April 1. The split mailing provides for a more even flow of demonstration rides. Sales expects 1,200 dealers to participate.

PARTS AND SERVICE

1. Avanti – Distributors

The campaign is completed with the exception of 350 sets covering Dallas, Decatur, and Memphis, and they will be completed by tonight. All cold areas were campaigned first – not east to west as previously reported. We do not have the new sets in our service depots because we used them for the campaign. However, we will be receiving them now and should be stocked well by the end of next week.

2. 6-Cylinder Carburetor

We’re ready to move – the first 3,000 will be shipped into known areas of difficulty where we have the most trouble. We may not get to some areas for three weeks because we have to do it as we receive materials.

3. Water Leaks

Mr. Challinor reported that leaking at the rear doors is still our most important problem and is costing a lot of money – need to have something to fix it. Service is trying to fight it with a shim.

4. Keys

Two broke last week and have been corrected. Mr. Feuer said he broke off his brass M-B key, and Dr. Lamberti mentioned that his neighbor broke off his Chevy key – the industry is having trouble too.

5. Avanti – Windshield Washer

Service has sent out a bulletin to correct this problem.

QUALITY CONTROL

1. Hood Safety Latches

Some improvement has been made by stiffening up the spring and changing the hook. Last Saturday a hood had to be replaced, and when Mr. Capsey examined it, he discovered that the latch would still hold and the safety hood still worked. Mr. Capsey believes it is possible to close the hood so that the dowel goes beyond the latch and holds temporarily and then lets go; somehow the safety hood is sidestepped. Mr. Hardig said they played with four cars on Saturday and couldn’t get any of them to unlatch. Quality control will continue to work on this.

2. Crash Pads

We can’t get enough parts in so that we can return the really bad ones. Mr. Capsey asked the vendor Friday if we had asked them to make something they can’t make. Mr. Soelch commented that the vendor will change the thickness of the material, and Mr. Capsey observed that that is a move in the right direction, but it won’t solve it.

PURCHASING

1. Steel

The threat of a steel strike has caused a number of vendors to ask Mr. Soelch about our plans. Some of our competition is stocking steel, partly to dodge a price increase. Dr. Lamberti mentioned that in February we are just getting down to normal from the steel we stockpiled last year. He will talk to Mr. Egbert about this.

2. 170 Contract

We’re putting out a blanket-type order. If it goes back to back (when one contract is completed the next one is started at the same production rate), we will need to know so production control can act accordingly. Dr. Lamberti told Mr. Soelch we’re pushing on it.

3. Canadian Vendors

Canada is sending down quotations for practically everything we buy. It is not feasible to transfer some of our work to Canada because we require some of our design work to be done by our vendors, and Canadian suppliers are not set up to do that. Also, they base their prices on 100,000 cars per year. Dr. Lamberti remarked that there is only a certain amount of duty drawback we can use, so we want to pick the deals.

INDUSTRIAL RELATIONS

1. Defense Division

There is a final step grievance on treble pay for defense workers who worked on a holiday. While we didn’t talk about holiday pay in Washington, the general language of the settlement indicated that there would be provision made for supplemental holiday pay. We were interested primarily in the Saturday-Sunday premium, we well as a competitive base wage rate. We accomplished that and tried to make a running change of our own. We have held it open for final negotiations in the future.

2. Personnel Count – Week Ending 2/1/63

Through this same date, there have been 98 salaried employee separations, which represent well in excess of ½ million dollars in base salaries (annual).

Hourly Report:

The Bargaining Committee is unhappy about people in the plant below cutoff date (228). They want us to do some leveling off – which is provided for in the contract. Therefore, starting today, we will be calling back some laid-off people. If they can’t handle the job, they go back on layoff immediately. The purpose of leveling off is to improve the seniority picture.

3. Education – Union

There has been a lot of criticism by the Union of our sales efforts, so Mr. Gallagher arranged a tour for the Bargaining Committee which included a presentation of the retail operation in the Conference Room. The group was very impressed, and Mr. Gallagher complimented sales on the presentation.

4. Snow in Ashtabula

Company members of the SUB Board refused to recognize some payments because they considered the down time on the Avanti line was caused by an act of God in the supplier’s plant. Mr. Willard Sollenberger of Detroit wants to meet with the Company SUB Board on February 15.

5. Union Contract

Mr. Gallagher is analyzing the provisions that have been changed in the Union contract to determine the amount of savings that have resulted. At this time, he estimates it will be in the neighborhood of $78,000-$80,000.

LEGAL

1. Detroit Workmen’s Compensation

Claims Filed_ Settled Amount

Average Per Claim $ 3,300

Claims filed but not settled: 302, with an estimated liability of $996,600 for a total of $1,279,450. Claims are still being filed. (In Michigan, there is no limitation as to the time in which claims can be filed.)

Mr. Feuer said that up until now, you couldn’t win a fight on a claim and to challenge the cases would cause a higher average. However, we hope there will be a change of climate in Michigan now with Romney in, and we’re fighting for two cases. When questioned about what could be done to stop the claims (that is, what did AMC do), Mr. Feuer replied that nothing can be done except hope for a better climate in Michigan, and AMC (and other competition) absorbed the people from the foundry into other types of work.

FINANCIAL

1. R3 Engine

The appropriation is No. 9631, and it was written on the 21st.

2. Inventory

Mr. Rickus reported that we don’t have final sales figures, but on an overall basis, Lark and Hawk inventories went down 900 units – Avanti went up about 40.

INTERNATIONAL

1. Overseas Distributors

Mr. van Merkensteijn said we have some very good assembly setups in Australia, South Africa, Israel, and Belgium, but two in Argentina are not so good because of the Government’s financing problems. He plans to go to Argentina and Chili next week. International is trying to improve overseas distributors, but in some territories, it is too late – the Governments won’t let us in anymore.

2. Scheduling

Mr. Thomas indicated that the Belgium parts that were lost are being boxed this week. In addition, the boxing schedule is filled through March, and we may work Saturdays – there is pressure because of the strike – and some of the orders are predicated on February or March shipment. (We don’t have enough beyond March to raise the daily rate.) Dr. Lamberti said it is alright to work Saturdays, but that is additional money, and we are trying to hold costs down – some planning ahead should have been done.

3. 1964 Model

Distributors are asking questions about the ’64 model. South Africa is planning to go to Fiberglas hoods and deck lids, and they need preliminary design information.

APPLIED RESEARCH

1. M113

This contract has not been awarded. It is still in Detroit and, presumably, will go to Washington this week.

2. M602 CKD

There will be a pricing meeting this afternoon, and the proposal will go out Wednesday this week.

3. M44

The first meeting on drawing specifications was held in Detroit on the 29th, and the next meeting will be February 12. We hope to get negotiations underway in about a week.

4. E48 CKD

There has been very little work done on this yet. We expect to have the proposal out in about two weeks.

5. 25K Loader

We submitted our cost proposal for two designs: one used by the air force at $43,000 per unit, and an alternate at $37,000 per unit using commercial components, e.g., Studebaker engine, Borg-Warner transmission. It will probably be a couple of months before the contract is awarded.

6. Turtle

Last week we received an RFP from ATAC for a program to design and build a test unit for them. The proposal is due March 14. We have a modification of the Turtle which has now been built up as a 4-wheel drive unit. (We were pushed into it by Detroit; all vehicles have to be all-wheel drive.)

7. New 2½ Ton Truck

We received another RFP on this truck last week. It is to weigh 8,000 lbs. and is to perform much like the present 2½ ton truck, except that it must be floatable and swimmable and have better mobility than the present truck. The study will be for one year after the contract is awarded, and the proposal is due March 8.

PUBLIC RELATIONS

1. Bonneville Runs

The winter date was chosen for these runs because, if the salt is runnable in the winter, it is possible to achieve better performance because there is less heat (130º in summer, 0º in winter). The project was set up for a stick shift, R2 Hawk and Lark and an R3 Avanti. Mr. Granatelli arrived on Monday and ran the Lark and Hawk on Tuesday. On a 2-way average, the Lark ran at 132+ mph, and the Hawk ran at 140+ mph. These were showroom stock cars. There were no records set because the engine size in the cars was the same engine size that was in the Avanti which holds the record. It was intended to show that an economy model automobile – a production model – can perform. Public relations will issue a release on the two cars after they meet with sales and engineering.

The Avanti was supposed to be run on Wednesday, but Tuesday night the storm broke, and we only got the runs on the Lark and the Hawk – which we think are sufficiently notable to give a strong sales image on economy-performance cars. The cars were well identified, and we have enough color film to do TV commercials. The special specifications can be sold as a kit, or the units can be sold as special cars.

2. Other Runs

The National Drags will be February 15. Mr. Granatelli does not plan to run the F6 or the K at the winter nationals – just the Avanti because the engines are all the same class. Two weeks after the winter nationals, the drag demonstration is planned in which all three cars will be run. We will not be in the Daytona race because except for the Hawk, our car has too short a wheelbase. And our Hawk isn’t likely to be run. Dr. Lamberti referred to the story in the Chicago Daily News concerning the Pure Oil Performance Trials at Daytona Beach, Florida. The article mentioned that the Avanti was down in acceleration, braking, and economy, and he wondered if we shouldn’t have someone at these big events from sales or public relations.