Avanti:

Commercial Truck:

Military Truck:

Mr. Whitmer reported that 330 military trucks remain to be framed, 408 to be built, and 461 to okay before completion of the current military truck contract.

2. Material Control Area

Mr. Whitmer reported that since the first of the year, $10,000 of overtime has been used for material scheduling. He said a faster and cheaper method of material control must be found or the method of scheduling must be improved.

Mr. Lamberti attributed this problem to the severe cutbacks and suggested that Accounting Dept. help with getting the programming detail underway with the new computer system.

He further stated that every day, 280 cars worth of material is coming into the plant, and inventories already are excessive. This presents a tremendous problem in the material control area. Overtime is being spent to get schedules out so material can be cut back as fast as possible.

An inventory control meeting is scheduled for Thursday, March 14. Mr. Lamberti said it is imperative that a realistic and firm figure be arrived at as far as total runout is concerned. He stated that the plant is now operating on the basis of a program which again has been cut back but not adjusted, and it is impossible to operate from two sets of figures, which is the case at present.

3. Avanti and Commercial Truck

The relationship of truck orders and Avanti orders is not in balance. The line speed on trucks should be reduced according to incoming orders. If orders cannot support the 4 per hour rate, the line speed for trucks should be reduced in order to run the Avanti and truck together and keep them in balance on line speed. Manufacturing is following this closely, but it appears there may be some problem on running the Avanti and truck next week because of lack of orders.

SALES

1. Dealers

Mr. Detzler reported 9 terminations and 3 approved franchises for a total of 2,052, down 6 from a week earlier. However, terminations are non-active dealers, and although dealer strength is decreasing in numbers, the approved franchises represent greater potential. Three franchises are in process, two of which carry a potential of over 100 cars.

2. Orders – Thru March 8

3. Built for Stock

4. Wholesales – Thru March 7

Mr. Detzler said the cooperative advertising program has been moved up from April 1st to March 15th. It is expected that this will result in more wholesale and retail deliveries in the last half of March.

5. Retail Deliveries

Mr. Detzler estimated that retail deliveries for the second ten days of March would be approximately 1700 cars, or .9% of industry, which he estimates at 185,000. He stated that these figures are given without any firm backing.

6. R-3 Engine

Mr. Detzler inquired as to when the R-3 engine would be available. He said Sales has a few orders and would like an indication of delivery dates.

Mr. Hardig reported that Mr. Granatelli expects to finish one engine for Mr. Egbert by the end of March. Another six are in production and it is expected that basic production delivery of these engines will be scheduled for the latter part of April. Costs are being developed, and before selling prices are set, top management will determine the amount which the Corporation will absorb.

A warranty policy was discussed and Mr. Challinor related what he knew of Pontiac’s policy. He stated that Pontiac has a special account set up to cover their high performance engine warranty.

Dr. Dredge said that the R-3 and supercharged Lark and Hawk are a long way from Pontiac and competition because they lack components required for racing. Furthermore, Studebaker does not have a racing program in prospect. The Bonneville runs are to build an image.

Mr. Dredge feels that R-3 customers should be counseled by the dealer and factory not to race the car for anything but drag strip racing, and he suggests that although Chevrolet places windshield stickers on some “hot” model Corvettes stating that the cars are not to be driven on the street, these Corvette owners knowingly buy these cars for highway use. Mr. Dredge thinks R-3 owners will similarly drive their cars for pleasure rather than racing. He believes the R-3 is docile enough for street use.

7. Spring Colors

Two spring colors are being developed – the green on the ’64 prototype and a second color which has not yet been approved. Engineering is looking for a color that will blend with all trim combinations.

Mr. Hardig stated that May and June production cars will be the only cars with spring colors.

8. Axle Ratios

Since we are going to use a flange axle for 1964, a meeting will be held in Mr. Lamberti’s office next Tuesday to determine the number of axle ratios available in 1964. An inventory and usage report is being prepared by Production Control and Engineering is setting up recommended axle ratios for the various transmissions, all to be presented to Sales so everyone will be together as to the number of axle ratios which can be cut out of the system.

9. “Full Speed Ahead” Program

In reply to a question from Mr. Lamberti regarding the conference room operation, Mr. Detzler said that although it had been discontinued, pressure from the zone level had not been reduced. He said he did not have total expense of this operation, but before the two months had been completed, the telephone cost was over $27,000. He admitted that personal calls from top management are effective, but he does not give much credit to calls to dealers from lower level personnel.

Mr. Challinor feels that the most effective way to increase sales is to concentrate advertising, sales promotion, etc. on the percentage of dealers who have facilities, salesmen and potential rather than spreading the efforts across 100% of the dealers which includes those who sell less than 5 cars per year.

10. Sales Presentation Program

Mr. Detzler announced that a presentation of the sales program and planning to be put in effect for the ’64 model year will be made to top management on Wednesday, March 13, and later to the automotive staff.

PARTS AND SERVICE

1. Parts and Accessories Sales

Mr. Challinor reported that January and February sales were right on target, despite the fact that the forecast for 1963 had been increased $700,000 over 1962. Although the forecast was based on a larger number of new car sales, special merchandising programs will maintain dollar volume.

2. Carburetor Campaign

Mr. Challinor reported that the last shipment of the yellow dot carburetors out of depots to zones has been completed and the carburetor is now available throughout the United States.

3. Avanti – Hard Starting

This campaign is 72% completed. Service field check shows that dealers have taken this very seriously and have gotten the matter under control.

4. Avanti Seat Backs

The new version of the Avanti seat back is now going into production and before the week is over, Sales will be advised when it will be available. In the meantime, the vendor sent shims to be used with the present pads until they have the molds for the new version.

5. Product Quality

Normal owner complaints are extremely costly to Service. In February, 274 complaints were received which were serious enough to warrant follow-up by the zone organization. He said brake pedal complaints are increasing and special consideration must be given to the master cylinder because there is no way to correct in the field except to replace.

QUALITY CONTROL

1. Brake Drums

Mr. Capsey reported that a program has been started on brake drums which he feels will eliminate much of the trouble. All drums will be shipped by truck. Tests are being run on variable brake drum configuration.

2. Brake Pedal Travel

Bendix is sending a man to investigate the brake pedal travel problem.

3. Soft Ceiling in Station Wagon

A new set of bows is being designed which will improve the appearance of the ceiling.

PURCHASING

1. Phase-out

Mr. Soelch said that in order to avoid an inventory of 600 to 700 axles at model changeover time, it will be necessary for Sales to give Purchasing a final phase-out figure on Thursday, and orders will have to come in according to their phase-out figure.

There will also be some axle shafts beyond release which will carry on into 1964. These will be running change on the model 27 axle.

Model 44 axle will start in production at the beginning of the ’64 model program.

2. Flange Axle

Dana Corporation will assume the cost of tooling for the flange axle, and although no commitments have been made by Purchasing, Mr. Soelch has given Dana a letter of intent in order that they might proceed with tooling.

3. Prices

Because of the cutbacks, suppliers are coming in with price increases which to date have been refused.

In Mr. Soelch’s efforts to obtain price decreases, one vendor told him that no decreases would be forthcoming until he had proof that Studebaker’s volume would be more than 70,000 per year. He suggested that when volume reaches 90,000, then price decreases could be negotiated.

FINANCIAL

1. Tooling Commitments

Mr. Rickus reported that tool commitments for the Lark and Hawk last week amounted to almost $150,000 for a total of $1.1 million, leaving a balance of $5,000,000.

Mr. Soelch said that, actually, commitments totaled a great deal more than shown on Mr. Rickus’ report because they are waiting for individual part numbers for the dies before they can be locked into the report. He said tooling commitments are well ahead of last year.

INTERNATIONAL

1. Argentina

Mr. Thomas reported that our Licensee in Argentina has just merged with another company controlled by the same group, and Export received a cable advice that the Government has approved the merger and has issued a program for the new company. Therefore, for the first time in five or six months, there seems to be a possibility that Studebaker may be able to start business in Argentina.

2. Geneva

Mr. van Merkensteijn plans to attend the auto show in Geneva and will meet with dealers while there.

LEGAL

1. Dealer Franchise

Mr. Feuer reported that a new form of Dealer Sales Agreement has been prepared which is unique in the industry with respect to obligations of the dealer. The present industry franchise permits cancellation of a dealer only if the dealer is doing less business than dealers generally. In the Studebaker situation, this may mean a common level of mediocrity. The new franchise will establish individual sales quotas for each dealer, resulting in a gradual upgrading. The franchise also imposes specific requirements as to improvements in facilities, employment of personnel, etc. The franchise withholds the right to sell the Avanti, trucks or new products unless the dealer complies with reasonable requirements established by the Company to handle these products.

2. Foundry Work

Mr. Feuer will prepare a commission contract to cover outside foundry work solicited by someone who has been retained after Mr. Lamberti furnishes the necessary information.

MILITARY

1. M-44 Truck

The unit number by which the engineering package is affected was changed from 2,001 to 3,001. The additional 1,000 units will carry production to January or February of next year.

2. 602 CKD

No further information is available except that the Government is negotiating with International Harvester.

3. 25-K Proposal

Our Washington office reports that this looks more favorable than information out of Wright Field which indicated that Studebaker was at a disadvantage pricewise.

4. E-48 Truck

An attempt is being made to sell this vehicle to the Government for military administration, fleets and military assistance programs. It will do about what the 2½ ton truck does but costs approximately $1,000 less. An unsolicited proposal is being submitted.

5. 2½ Ton Truck Study

The military has asked for a lightweight truck to compare with our M-44 military truck. An unsolicited proposal will be submitted on a truck weighing 7,989 pounds with a capacity of 5,400 pounds. It has more mobility than the 8x8 and is less expensive than the XM 410. It weighs approximately 1,000 lbs. less than the XM 410.

6. Turtle-Type Cargo Carriers

Two proposals will be submitted this week on small cargo carriers of the Turtle class – one, on an 1/8th ton vehicle, tracked, and another on a ¼ ton unit which is about the same as the 1/8th ton except that it is propelled by a gasoline engine.

7. 5-Ton Truck

Mr. Isley said a request for proposal was received for a 5-ton truck. He doubts Studebaker’s ability to bid on this proposal because Engineering and Purchasing lack sufficient personnel to process the paperwork on such proposal along with the M-44.

PUBLIC RELATIONS

1. Supercharged Lark and Hawk

Mr. Dredge has demonstrated these cars to four magazine men. He stated that the people who have seen these cars are impressed with the performance but are critical of the rear axle wind-up on the Lark and he requested Engineering to look into this matter. Except for this one criticism, Mr. Dredge said the Lark performance far exceeds his expectations. He stated that these supercharged cars are docile enough for family driving, yet powerful enough for drag strip racing.

Mr. Dredge is withholding publicity until he knows when the cars will be on the market. It is expected that they will be in production by the end of March, but Production is waiting for orders from Sales for linesetting. Sales is getting out advertising promotion literature on these models next week.

RDP