We’re starting production this morning on the new contract on the military truck.

2. Avanti Back Glass Popping Out

Mr. Whitmer advised that we ran a test on this problem and found that the glass did not pull off the fence under a 200 lb. load when we made a U section out of the clip. The glass came out of the rubber, but it did not come out of the fence. Mr. Whitmer feels it is a good fix, and Dr. Lamberti added that it is also an easy fix for service. He doesn’t believe there should be too many of them because it only happens at high speeds. He explained that our Avanti is an aerodynamically clean car, and its design permits a smooth flow of air across the roof and down the back. As the air flows over the back glass, it exerts a downward pressure at the top of the glass and creates a suction at the bottom. Any disturbance of this airflow causes a turbulence which reduces the pressure at a given speed. A 200 lb. load simulates the effect on the glass of a speed of 120 mph, or – with any kind of obstruction – a speed of up to 140 mph. For example, if a window is open, the pressure could be reduced to the point where the car would have to be traveling at 140 mph before there would be a danger of the back glass popping out. Mr. Whitmer reported that we will start this noon making the fix on the Avantis we have here.

When Mr. Feuer asked about the ones that are already in service, Mr. Challinor answered that we have had about 7 cases like this, and he believes we will have to wait until we have one rather than go out and campaign all the cars, because it would cost a lot of money.

3. Hoods Flying Open

We’re turning down the little flat section on the latch where the hood would hang up, and the operator couldn’t tell if the hood was latched or not. In addition, the safety latch is being turned crosswise of the body. This is a positive fix and an easy fix for service. We started making this fix last Friday.

Dr. Lamberti recommended that service make the dealers aware of this fix and the Avanti fix and have the clips out there in case the problem came up, but he didn’t recommend campaigning either one.

SALES

1. Dealer Count

Total dealers as of Friday 2,040

2. Orders

Last week we have shown some real improvement on the order intake:

Orders 1st Two Weeks 5-Day of April Average

3. Linesetting

On the regular line, we’re framed through the 10th, which is production of the 15th. On the Avanti, we’re framed through the 25th for production of May 13. This is the total orders we have for the Avanti, but we have about 600 orders for the regular line over and above those that are over at the factory for linesetting. We have been receiving May and June orders which are not included in the above totals.

Dr. Lamberti asked Mr. Detzler if Sales expected an influx soon of orders as a result of sales promotion on the Avanti. He answered, frankly, we don’t expect a rapid buildup of Avanti orders. This, again, is a case where we aren’t going to get an influx of orders – our dealer inventory is high right now.

4. Inventories

5. Sales Promotions

Mr. Detzler gave a rundown of the program Mr. Bender outlined in last week’s meeting: We’re running a retail bonus sales program for the months of April and May, and we’re confident that it will get us an increase in business. We have established a quota for dealers. We ask them to reach 75% of their quota. Once they have reached this point, we go back and pay them $50 for each retail delivery over 50% of their quota. (We would like to have gone farther as our competition has done; that is, make it retroactive to the first unit sold, but our budget won’t allow it.) The quotas are reasonable, and the regional managers are enthusiastic. On the quotas for the Avanti, we took the larger markets (A, B, and C) and established a minimum quota of 2 in those markets; retail delivery No. 3 will pay $100. In smaller markets, the payment starts with car No. 2. For trucks, we have established a quota of 2.

6. Truck and Avanti Model Change

Sales has sent a letter to all dealers in which we advise them that we are not obsoleting the current model truck; therefore, we will not pay the 5% model change charge at the end of the normal ’63 model run. Now we have both the Avanti and the trucks on this basis.

Mr. Feuer asked when the mechanical changes will go in the truck, and Mr. Detzler wanted to know what they were. Mr. Hardig replied that they are just things we have received complaints on, and they will go in as soon as the material is available – which will be after shutdown. Mr. Detzler observed that we don’t lend much credence to our “no-change” philosophy if we go in with changes, and Mr. Feuer added that we would have a stronger case if they didn’t go in at model change.

Mr. Dredge indicated he is steadily being asked if there is a model change on the Avanti, and Dr. Lamberti remarked that there is supposed to be no model change; but if we want to call it the Avanti II, that would seem to indicate a model change. Mr. Feuer feels we are already in trouble with the new model changes all coming in at the new model introduction time. The drip rails will come in June, and this is a big part of our program, according to Dr. Lamberti. However, most of the changes on the Avanti will go in at new model time because we have about 850 units of the present material. At the present production rate, we will run out at just about model changeover time. When Mr. Feuer asked about the headlights, Mr. Hardig told him it could be the first part of August, or a decision could be made to change that.

7. Avanti Factory Float

Dr. Lamberti reported that we’re going to try to cut the float down to 140 – the float causes a delay in the customer receiving his car. With 140 float, it would mean it would take us 14 days out of the float. With the new system, we should be able to get 3 weeks’ delivery for a customer – at the rate of 10 per day. (MFG is now painting by percentage.)

8. Scheduling

We didn’t have the meeting last week on the final runout. It looks like there will not be any changes so there is no need for a meeting until April 15, which is the regular scheduling meeting. The only changes that might take place would be a model mix change. Mr. Soelch mentioned that this could affect the material: we could be over on some and have to order additional material for other models.

9. Options

There will be a meeting sometime this week on options. Mr. Detzler commented that there are, no doubt, areas where we can reduce the options.

PARTS AND ACCESSORIES

1. Citizens for Studebaker

Mr. Challinor told of damage being done to cars on display in connection with the Citizens for Studebaker program. He said a beer bottle had been thrown through the windshield of an Avanti, there was a broken window in one of the campers, and a number of additional items of minor damage that his people are repairing. He stopped some kids from taking a radio out of a car at Shoppers’ Fair on Saturday – there was nobody attending the cars. Mr. Hardig remarked that the cars were only manned about 10% of the time and recommended that they get the JC’s or the retirees to help. Mr. Dredge suggested that if Citizens for Studebaker can’t find a way to man the displays, we should pull them in. Mr. Gallagher believes our retirees would be our best bet, and he will check this out with the committee, as well as how well the police are checking these lots – which they are supposed to be doing.

Dr. Lamberti wondered if more information could be put in the papers by the committee. We had fanfare at first, but now people are asking what the cars are there for.

2. National Safety Drive

The State of Kentucky opened the National Safety Drive. The governor is favorable to Studebaker, and we were able to get him to put the safety sticker on the Avanti. (Mr. Challinor will get pictures and publicity material on it to PR.) He showed the group a picture that had been taken. We are planning to send the car back down there next week to show to dignitaries who will be there for the Derby. After that, we will sell it as a police marshall.

3. R3 Engine

We’re going to have a meeting this morning after this meeting on service and warranty for the R3 engine. We have checked with GM Pontiac. (Ford says they are going to have a racing car.)

4. Avanti

Mr. Challinor asked Mr. Whitmer about the Avantis that are coming back for rework. Mr. Whitmer told him we will pick out the best one and the worst one and decide what we’re going to do with them.

5. Complaints

We’re getting a considerable volume of complaints to deal with, but they’re the usual thing – nothing new that hasn’t been covered.

6. Operations Business

Business is 1% off from forecast which we attribute to accessory sales. These always drop off when there is a drop in the sales volume. We expect to make it up with sales of air conditioners. Also, we have five promotion programs: VIP program, AC spark plugs, etc. The interest shown by the dealers on these programs is very good.

QUALITY CONTROL

1. Receiving Inspection Lab

We have been reviewing field complaints and find that about 50% of them are due to parts that we purchase; e.g., electrical parts, climatizer motors, etc. On these claims, we get some money back for the parts, but we’re stuck for the labor. (Sometimes we can negotiate for part of the labor costs – per Mr. Challinor.) We’re going to round up some inspection equipment so we can functionally test some of these parts and run endurance tests on them. Our setup won’t be elaborate, but we will have something. We began to gather some equipment last year, but this year we will have a better chance to get started. We will contact some more of the people who furnish the parts to see if they can’t set up ways to test them. Mr. Feuer felt the terms of our purchase order should allow for more than the material, and Dr. Lamberti explained that they will stand for the part, but not our labor to put it in. He complimented Mr. Capsey on the idea of the lab.

2. Avanti Quality

Quality inspection has been tightened up on the Avanti line.

3. Quality Seal

Mr. Capsey asked if we haven’t outlived the gold seal we put on the windshield. He wondered if we could get the employees to come up with a new design (say a blue ribbon) to make them feel they were instrumental in getting the imprint put on the car – they might be interested in trying to do a little better. Mr. Gallagher thought the idea of them feeling they have a part in it is good, but he doesn’t think it is quite the thing for a contest. He suggested thinking of it in terms of the new model, whereupon Mr. Capsey told him we have just about enough of these gold seals to finish up this model. Dr. Lamberti mentioned that we have some new badges of quality that we worked on some months ago, but it was felt that it would be better to wait until the ’64. Maybe we could work up a new badge in 3 areas: on the engine, on the body, and on the total car. Mr. Challinor suggested a dual pledge of the quality of the car – the Union and the Company. Maybe the pictures of the Company president and the Union president could be put on the sticker. Mr. Feuer recalled a program that Rambler had, A-Okay, where they tied the Union in with it. He cautioned that we be careful what is put on these stickers: it ties in with the warranty of the automobile – legally.

PURCHASING

1. Truck Trim Releases

Mr. Hardig told Mr. Soelch that Engineering is working on the door foundations.

2. Stationery

Last week, we ran out of H orders and couldn’t place any orders for about 1˝ days. We have been having to make all kinds of emergency orders. Schillings worked all night on one of them. Mr. Bumbery told Mr. Soelch that they will buy all the stationery with the new Logo, and he didn’t want to bring in Purchasing until the thing was entirely worked out. Mr. Soelch observed that we’re paying a penalty, and Mr. Isley noted that Clarkes are thinking of throwing out some stuff they had because it was such bad printing. Mr. Detzler added that we had to have a rerun on the price labels because they were so bad. Mr. Soelch told the group to go to Mr. Bumbery if they needed any stationery.

3. Avanti Model Change

On some of our Accounting forms, they request that the percent of business for the model year be shown. Mr. Soelch believes they request the information because they want to know where the breakoff is, but he will check with Accounting to see if it can be omitted.

INDUSTRIAL RELATIONS

1. Union

We are on the verge of a breakdown in negotiations at the M-B master warehouse. At Roselle, New Jersey, they accepted our offer in a vote of 12-10.

2. Government Bonds

The Treasury Department is promoting a freedom bond program this year. It will be a wide-sweeping re-solicitation of employees for a bond drive. Through the offices of Mr. Egbert and Mr. Burlingame, we have notified them that we will participate. Studebaker’s percent is very low in the industry. GM has a program where the employee has a deduction, and they match it with savings bonds and company stock.

The campaign will start May 1 and run through July 4. We have to get it in before July 4 to get it finished before the United Fund program begins. Mr. Gallagher told the members of the staff that they would be requested to let their people help on this program.

The new checks we have for our hourly people allow for a separate deduction, which will simplify the deduction process. Prior to this time, it had to be handled in a roundabout way through the credit union. There is no problem on the checks for the salaried people.

Mr. Gallagher feels that the Government considers this as part of the performance of a company.

3. Training Program

We have been reviewing our training and development programs and have been in touch with several outside concerns which provide middle-management training. One is the Alexander Hamilton Institute. Mr. Gallagher believes we have a void in terms of middle management, and he is seriously considering inviting them to bring in a program. It is a 2-year program with 1˝ hours per week, and there are rigid controls on the people who participate. It is a combination of class and correspondence. There are tests and questions and discussion outlines that are developed and written by qualified people. There is an instructor that visits according to the needs of the class. It is self-policing – we do not require a staff. This is a serious development program, and the people must be reminded that they are doing this for their own benefit. Although there would be a few foremen in, it is not aimed at them; it is for middle-management managers. Along with it, they have an executive night. This training would go across all areas of the Company, not just foremen where we are stressing now – it would include people in Sales, Finance, etc. We would like to invite prospects to look into the program in late May, but the program would not start until next October.

LEGAL

Mr. Feuer had nothing to report.

INTERNATIONAL

1. Argentina

We expect conclusion this week in Argentina; then we will know whether we can start to move that material. Reports are that business is not as bad as the newspapers report.

2. Belgium Assembler

Mr. Thomas showed the group some pictures taken of the cars assembled by the Belgium assembly plant. One he showed was for distribution in Belgium, and the other one was for Holland.

APPLIED RESEARCH

1. M44

We’re having another meeting on the engineering package tomorrow. We expect the definitive contract to be signed today.

2. 25K Loader

We were supposed to have heard something on this on the 5th, but we have no information on it yet.

3. Turtle

We finally sold one last week to the Italian Army. We made the proposal last December and got the order this past week.

4. 1/8 Ton, ˝ Ton, and 2˝ Ton

We have not heard anything, but I expect to be in Detroit next week.

5. 8 Ton 8x8

We’re starting the final typing on the technical proposal today. It is due a week from tomorrow.

6. 5 Ton

The technical proposal is in final typing now.

7. M602

We have decided to bid on this, but the RFP isn’t out yet.

PUBLIC RELATIONS

1. Mobilgas Economy Run

Our effort in the run this year was to avoid duplication of what happened in the runs in Florida where the dealer entered, but the car didn’t even run. On the Mobil Economy Run, even if you don’t participate, your car is entered anyway. We changed over from the 6 to the 8, and Bill Corey entered. He ran 5th in his class at 20-56 mpg – the Buick was the winner. The press car was a sister car which they drove in accordance with the rules, and they averaged 23.2 mpg, which would have put that car in second place. With professional drivers, it would probably have taken first place. Its high day was 24.89, which was higher than any day for the Buick. Granatelli prepared this car. The Corey practice car did 23-24 mpg. These cars are in South Bend now. (Corey said the entry car ran fine.) Mr. Dredge doesn’t feel we are in a hopeless position with the V8 because cars it ran against did about the same mileage this year that they did last year. He tried to establish a 2-door sports class next year where we might put in the Avanti and/or the Hawk. There was some interest with Mobil and USAC in that area; in fact, there was some interest this year, but nobody pushed it. The Press cars were an R2 station wagon, an Avanti, and the economy car. The official camera car for the run was a wagon. It broke a tab off the alternator and required an emergency repair. There were a few miscellaneous items of repair and complaints: heater and blower noise. There was an undue amount of noise from the alternator – probably from the alternator bearings – in all the cars.

2. R3 Engine Pricing

Mr. Dredge made some inquiries regarding industry practice. The highest price he found was from Chevrolet on the Corvette, which was $1,258 over the next highest Corvette price. This price covers special brakes and special wheels; it is a complete racing car, including the engine. They no longer offer this since they have withdrawn from racing. The Ford engine price includes the drive line package, and a rough average is $460. (In some cases, they include heavy-duty brakes.)

3. Seat Belts

We have had several inquiries from the Press requesting pictures of Studebaker installing seat belts in the cars. We do not install these belts – the dealers do. In effect, we’re listing them on the stickers, but they’re not on the cars in the dealers’ showrooms. Mr. Dredge stopped in three dealerships and none of the cars on the dealers’ showroom floors had seat belts installed. Mr. Detzler remarked that these were probably inventory cars – before the drive. He went on that this is like the radio antenna: the dealer installs that – we just install the radio.

Mr. Dredge commented that we will have to fake the pictures, or our seat belt story will take a kick in the pants. Mr. Hardig suggested that pictures could be taken of the lease cars, and Mr. Challinor added that if the car is retail serviced, we put in the belts because we lay the floor mats.

Mr. Detzler mentioned that an awful lot of people have the idea that they are at standard cost. Sales has received many letters in this connection. Mr. Feuer remarked that our advertising has never said they are standard equipment. Mr. Challinor pointed out that the dealer can delete them.

MISCELLANEOUS

1. Corporate Image

Mr. Detzler related an incident involving an employee of Excell Corporation who told Mr. Detzler that he had steered away from Studebaker because he didn’t like the specifications. Excell Corporation is one of our vendors, but they only supply vent windows. Dr. Lamberti observed that this is part of the bad image we have with the public – they are looking for anything to say is the reason.

2. Electronic Data Processing

Dr. Lamberti reported that we have put in several systems which provide a tremendous volume of information to give better help in making decisions. It would be impossible to compile this much information manually in time for it to be useful. He showed reports on inventory control and material requirements versus our last program, Program 8, which shows where we stand in connection with excess. He pointed out that we have only $34,000 of a $16 million inventory that is excess at the present time. Each follow-up man knows his excess volume by part number.

This year we also have a system in Manufacturing and Engineering on the tooling. We have a breakdown for the tooling in the shop and another breakdown for purchased tooling. Every week we start with a budget and before we exceed the budget, John goes back to the vendor for a price cut or goes back to Engineering to change the requirement. We have the percent over budget and the percent over estimate on this in dollars and service parts. Also, we get a report every week from the vendors telling us if they are on schedule – if they will meet their promised date.

We have a dollar budget on how we stand with total tooling. At this point, we are several hundred thousand dollars under, even including our contingencies. These systems have helped all of us do a better job.

In Engineering, we’re trying to come up with some idea of our manpower. We set up a 160-day program this year: die template time, die model time, and detail time. The men have been turning in tickets and have been very cooperative. This is a trial balloon this year, but it should help us next year.

In response to Mr. Feuer’s question re how the information was fed into the system. Dr. Lamberti explained that all receiving reports are punched into the cards as they come in, and based on the information in this card deck, the computer issues a material release program. Next we will bring in Sales data. For example, we will tie in all the options. Mr. Challinor commented that he has a study whereby we will use the system to order parts items at the same time they are ordered for production.

Mr. Soelch remarked that if what the vendor comes in with is more than our budget, we can sit down and talk to them about it right now. The new system points it out when it happens not after it has happened.

Dr. Lamberti said we’re getting the second computer underway, so we can begin to think of even more information.

4-11-63

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