*Shipped 192 last month.

2. Driveaway

Sales has proposed that there be a driveaway in connection with the introduction of the ’64 model, but Mr. Whitmer feels it would not be feasible because of a number of things, including a tight time schedule, an unbalanced model mix, in-transit time required, heavy workload created by 100 show cars, and manpower required to round up specific cars for shipping. Sales feels it is a way to get exposure on the styling of our new car. There will be a meeting on this this afternoon.

SALES

1. Dealer Count

At the beginning of the week, we had 2,027; we approved 7, terminated 4, and ended the week with 2,030. We have 6 applications in process.

2. Inventory

3. Orders

4. Retail Deliveries (Estimated)

We estimate 60 Avantis retailed in the last period. It is a short selling period: 9 days vs. 10 days in the last 2 periods.

5. Wholesale (April Estimated – To Date)

6. Lineset

We have 1,371 open May orders, plus 60 that require special equipment, and 1,544 orders for June. Mr. Rickus suggested that a meeting be held on this to take a good, hard look at it because we’re spinning off units where we’re not in trouble. He thinks we should look at it material-wise and look at some of the models that we’re long on material on. Dr. Lamberti agreed and noted that we’re long on material for the low-priced car.

Mr. Whitmer asked that Manufacturing be notified if there is a change on the Avanti line speed. He added that the temporary arrangement with the Union will expire May 24.

7. GSA

We may get 18 GSA units out of 400. Ford got a large share of them.

8. R3 Engine Pricing

Mr. Rickus got his letter back from Mr. Egbert with the notation, “$950 + tax, etc.” He will check with Mr. Egbert to see if he is referring to excise tax. If excise tax goes on top of $950, it will bring it up to over $1,000. Mr. Challinor commented that no warranty or service may bring on some problems.

PARTS AND ACCESSORIES

1 Taxicab Operators Meeting

Mr. Challinor gave a lengthy report on this meeting he attended last Tuesday in New York. There were 25 of the largest operators at the meeting – some who use Studebakers. The points Mr. Challinor covered are outlined below:

a. As a result of an article that appeared in the New York Herald Tribune, we had a barrage of questions re whether the Company is going out of the automobile business.

b. There’s a change in the cab specifications for the city, and we will get a copy as soon as it is released. One change will concern the floor well; the city is trying to eliminate personal injury complaints so they are trying to eliminate the floor well. Our car doesn’t meet the specification for the distance from the seat to the roof (we’re short about 1½”). We have been short for about the last 4 years, but we have been pounding the floor pan down on a unit to get clearance and then taking that cab down to get it okayed. We’re not sure we’ll be able to do that this year. The new ordinance specifies that all cabs will be painted the same colors – exterior, not interior. (This information will be passed on to Production Control.)

c. We offered a warranty based on time rather than on miles. We will warrant the transmissions for 9 months and the axles and engines for 12 months – exempting valves on the engines. We told them the warranty would be on a flange axle. Mr. Hardig reminded Mr. Challinor that we may not have flange axles in time; whereupon Mr. Challinor answered that we will go with the other axle because we feel that if we can crack this market, this is the time to do it. With the World’s Fair on, we can get our new car styling exposed.

d. Dodge and Ford paid down time last year; but GM doesn’t pay down time, and we don’t want to. Actually, the operators don’t want down time pay – they don’t want down time. The pay is $30 per day which doesn’t come anywhere near covering the operator’s loss.

e. We committed ourselves to improvements on the cooling system with a higher-output water pump.

f. The operators are beginning to change cabs on a 14-month basis instead of every 1½ to 2 years.

g. Mr. Challinor feels our prospects in New York are excellent. The potential is 800-900 cabs that will be bought in September, October, and November. In addition, the orders seem to be coming in from the surrounding boroughs, which will mean 2,000-3,000 cabs. We have a good chance of getting 800-1,000 orders out of this business. We have heard from operators who are presently using Studebaker, and we expect to get repeat business from them. We have also had 5 inquiries from operators who are not presently driving our cabs. We’re sure of 600 sales if we get one more of our present operators in.

2. District Dealer Meeting

Mr. Challinor reported on a meeting he attended in Ohio with dealers in attendance from Akron and Canton. It was intended to be a sales meeting, but the dealers had brought along their service managers, and the subject naturally turned to service problems. They complained about the quality of the cars they have been receiving out of the zone pool. (These cars have been stock for some time.)

The sales portion of the meeting included a pitch to get the dealers to call on four fleet accounts and an attempt to get them to read the NADA task force report on how to bring up their service business.

The dealer attitude was good except for the same concern about whether we would stay in the automobile business (the article also appeared in the Columbus paper). To dispel some of this, we used some material showing that we’re holding steady inventories to support them in the field. Also, we told them that the tooling had been released and mentioned that what it would cost them to go out of business would be peanuts compared with what it would cost us. The feeling of the dealers was that they didn’t know all these things were happening at Studebaker and now they felt they were in a position to answer questions that were asked them. Mr. Challinor feels we need more meetings like this. In addition, he suggested that there be a letter sent to dealers over Mr. Francis’ signature to support Mr. Egbert and the Automotive Division by saying that we are going to stay in the automobile business. Dr. Lamberti observed that this kind of thing is hurting our ’63 sales and may hurt our ’64 sales – it will make our runout a real problem. He agreed that more meetings should be held; maybe we need someone from home office. This ’63 is lagging; maybe the situation is beyond the particular help of the district and zone managers.

Mr. Dredge commented that automotive writers feel that there is no doubt but that we are going out of the automobile business because of the sales trend and the large loss. For every article like this that appears, we stop 50 to 100 of them, but we can’t control the Press. The article referred to is AP which doesn’t say we’re going out of the business; it says that one of the questions that will be asked Mr. Egbert at the shareholders’ meeting is, “Are we going to stay in the automobile business?”

3. Service Campaigns

These are almost completed.

QUALITY CONTROL

1. Water Pump Complaint

We found that a certain make of fan belt will cut down a lot of the noise that has been blamed on the water pump. It looks like we’re going to be using just one make of belt.

2. Reconditioned Avantis

We believe we can recondition these cars with about 50 man hours of labor, on the average. The cost will run between $275 and $400 – and the body is the least problem of all. These cars have about 1,500 miles on them, and they have been run hard. We have had to steam clean the whole engine.

3. Lease Cars

Mr. Capsey told of a lease car that had been taken to Freeman-Spicer for a routine checkup – there wasn’t anything wrong with the car – and the charge was $34.57 ($32.50 labor and $2.07 parts). If this is an example, Mr. Capsey believes we will have some pretty sizeable bills on our lease cars, and it will reflect on the quality of the product. Mr. Challinor commented that in our agreement with the dealers in the area, we indicate that we will pay them a flat amount of money for the service they render on regular mileage checkups: $64 or $64.50. Mr. Rickus believes that, with the new arrangement of placing the retail delivery preparation with the dealer, this kind of thing will not continue.

4. Water Leaks

Our biggest problem left is water leaks over the doors – which can be controlled pretty well on the dollup line.

PURCHASING

1. Flange Axles

Mr. Soelch mentioned that if we plan to use flange axles on taxicabs this fall, we will have to talk to Dana because they are not figuring on these axles until the first of the year. Dr. Lamberti noted that we have to use our existing inventories and reminded Mr. Soelch that Mr. Challinor had said we can live with the ‘63’s.

INDUSTRIAL RELATIONS

1. Union

a. Locally – Labor relations are quiet although there is some concern about the cost reduction program; that is, if it affects skilled trades. People have been asking about the furlough program and why it can’t be operated again – although it was taken out of the Company policy a couple years ago. People in the plant are anxious about getting some particularly good people back for the ’64. They don’t want to lose them. On the other hand, with furlough, you’re paying half pay out for no service received – and we’re trying to get cost out of the operation.

The Union nominations are in May, the election in early June, and the installation in mid-June. Messrs. Fox and Frick are running mates.

b. In Denver, the teamster’s agent has proposed that all of his demands be dropped except one token wage increase. We took away certain benefits formerly enjoyed by salaried personnel which will no longer be available now that they’re going to the Union: vacation benefits, sick leave benefits, etc. This is getting back to the people and they’re not quite sure that they made the right decision in voting for the teamsters. Our position is not quite 100% correct because, in many areas, a modified type of benefit is given to Union people. We hope to stall the negotiations and possibly get the teamsters out.

c. The New York Retail Store contract expires June 1. Jack Sheppard is making a nationwide swing around the country, and the Union is put out that he won’t be there for the opening session. This one could be trouble this year – as usual.

LEGAL

1. Advertising

The Federal Trade Commission has questioned some of our TV ads. They are concerned with the hazards and dangers involved with emphasis on high speed, and they want to know if the speeds can be obtained on the models actually sold to the public or are they exaggerated. Also, can they be operated safely at these high speeds? They asked if an Avanti that can go 170 mph is available to the public. The Government is looking over our shoulder, and Mr. Feuer feels that the R3 engine should become available so that we have a car to offer the public if they want to buy it.

FINANCIAL

1. Inventory

We are continuing to bring in less material than what is being used in production.

Mr. Rickus said that the units in zone inventory that don’t have improvements in them are causing trouble, and he suggested that we step up to these cars as used cars right now. Mr. Challinor remarked that we pay the dealers to bring these cars up to date, e.g., when we take a car out of storage that has been stored for 5 or 6 months, we get a lot of seal trouble, paint problems, rust around the moldings, etc. Dr. Lamberti felt that we should have a program of some type to move out the 4’s that are in storage because the richer mix is going out the door now. He suggested that the district managers be put into the 4’s the next time and spin them, but Mr. Detzler said it is good to have some of these for cleanup.

2. Tooling

We committed $174,000 this week for a to-date total of $3.9, leaving $2.7 uncommitted. Dr. Lamberti observed that we are going to be $800,000 under budget this year, which should help elsewhere.

APPLIED RESEARCH

1. 1/8 Ton Cargo Carrier

We received notification last week of contract award for two prototypes. Mr. Isley will send a memo to concerned people.

2. ¼ Ton, 2½ Ton, and 8 Ton

These proposals are still outstanding. We expect a notification sometime around the first of June.

3. Turtle – Italian Army

We expect to have the parts here ready for assembly next week. Some of the parts are being made in the engineering shop, and some are being purchased. We should have them by the end of the week. Dr. Lamberti mentioned that we need publicity out on this because we’re trying hard to sell it.

4. M44

There will be another meeting tomorrow on the engineering package.

5. M602 CKD

This is in progress.

6. M151

We expect to receive the RFP this week.

7. 5 Ton

The technical proposal has been corrected, and we are probably responsive now, although we haven’t heard definitely yet. We agreed to build trucks according to the package they furnished us.

8. ¼ Ton

The vehicle we quoted has tracks similar to the 1/8 ton because the specifications call for 1-2 psi ground pressure, and you can’t get this with wheels.

PUBLIC RELATIONS

1. Publicity

We have cover stories – lead stories – in just about every consumers’ issue in June and July. These stories are on performance automobiles because that is where you get news stories.

2. Communications

PR was requested to inform members of the staff of major happenings throughout the country; otherwise, people ask them questions which they can’t answer. Examples that were given included Mr. Egbert’s recent appearance on TV which staff members missed seeing, and shareholders’ affairs; the vendors are telling Mr. Soelch that there’s going to be a proxy fight next year.

MISCELLANEOUS

1. Cost Reduction

Dr. Lamberti cautioned the group to handle this as confidentially as possible. We all have targets, and quite a few people will have to be laid off; there will be about 200 to 300 people involved altogether. Nobody has any excess people, and we know that it is hurting. We’re looking at a 90- to 120-day period, and we’re laying off people that we need. All departments are participating, and those departments who are not affected should remember this in their actions and not go forth with any programs that might seem excessive in relation to the cutbacks in the rest of the operations. We want to avoid anything hitting the papers.

Mr. Gallagher observed that people who are laid off will talk about it. People are asking what is being accomplished by this – with the separation pay – and feel we’re not picking up much by way of cost. Mr. Dredge commented that to hope that this won’t hit the papers is likely to be a vain hope; whereupon Dr. Lamberti suggested that it be handled as a part of phasing out the model year.

Mr. Gallagher distributed a memo with information on how to handle the layoffs.

2. Competition – 1964 Model Lineup

B-O-P are going to frames, which will mean some styling changes are going to have to be made. Chrysler will probably have a facelift. AMC will have a new American: the Ambassador will have a minor facelift. On the Ford line, the T-Bird will have a new front end, and the change on the rest of the line will be ‘64½. Fairlane is the biggest change in the Ford line – it will have a new front and a new rear.

The Comet and the Falcon will have a minor facelift. (They feel they need a new facelift on the Falcon, but they wonder if it can get out on time. This has been on and off; it is dependent upon lead times.) Dr. Lamberti noted that in many respects, we could be walking into a very nice field. With B-O-P out of the compact picture, we will be in there with the Rambler, Falcon, and Comet.

eh