Minutes of February 18, 1963 meeting of Studebaker department heads.

ENGINEERING

1. Super Hawk and Lark

Mr. Hardig reported that in accordance with a decision by the sales department, engineering is revising the releases to carry the complete performance package (including the speedometer) across the board, every model, every color exterior, and every interior – both the R1 and R2 engines. The discussion which followed covered these points:

a. Mr. Bender advised that sales will promote the Super Lark and Super Hawk – the 2-door F4, the Hardtop, and the Hawk – but they have asked that it be released across the board on the records (it will not be given to dealers that way) because they expect to get orders requesting the performance package on other models, and they want to be able to fill them. He added that all of these items are available to the dealers anyway. In fact, some of them have been released since last September.

b. Dr. Lamberti observed that if it is released as a program, there is more impact, and Mr. Dredge remarked that we started this promotion aimed at a special hot rod car. If we suddenly begin advertising that our whole line is specialized, we will lose the effect. The industry doesn’t do this. If you order a Sprint, you get a Sprint just as it is specified by the factory and in no other body style, etc. Mr. Bender replied that we are not promoting the whole line, but we don’t want to turn down any business. We have to put a radiator emblem on our Super Lark to distinguish it because it is a car that is already available. We have already sold about 3,000 of them, with the exception of the track rods, which have now been released also. The only thing really special about the model is the radiator emblem. If someone orders something based on what has already been released, what else can we do but sell it to them.

c. Mr. Hardig mentioned that we will now have to have a grille medallion for the R1, and Dr. Lamberti remarked that it will lessen the snob appeal of the medallion on the R2. Mr. Bender said these cars are being promoted as high performance. The R2 is the duplicate of the engine in the cars that are involved in the performance runs, but people will undoubtedly want the R1 also – they are both Avanti engines.

d. The release as set up will also provide for Avanti red and all color combinations across the board, and the red paint is more costly.

e. Mr. Dredge suggested that we start to think about this whole situation in relation to the ’64 model, and there we should pick one model – one body style – and make a hot rod out of it. At the Chicago Auto Show, every manufacturer had a hot rod model.

Mr. Hardig is going to paint the grille and the headlight bezels on a unit the same color as the body and show it to sales – it gives the car an entirely different look. (Mr. Soelch commented that if those are brought in without the chrome on them, it makes another option.) Dr. Lamberti wondered if two-tone might be something that could be considered for next year to help identify this car on the road.

Sales has asked that bucket seats be added to the regal models across the board.

2. Trailer Hauler

At the request of sales, engineering has begun releasing the trailer hauler. The tooling will be between $1,200 and $1,500.

3. Trim and Color Show

At the show last Thursday, 3 fabrics and 10 exterior colors were chosen. Engineering will get a color between the two light greens and paint a car to show the dealer council. The colors that were selected last Thursday are listed below:

White Red Silver

Dark Green Light Green Dark Blue

Light Blue Gold Medium Brown

Black

We are going ahead with the paper work on the paint and will probably get the paint chips on Wednesday to send out to the vendors. There is no danger of obligation on paint in the event the dealer council would not approve of the selections. However, there is a danger of obligation on the trim, so we are holding up on that until after the dealer council meeting.

Mr. Wood of sales will advise Mr. Hardig what color to paint the Fiberglas/metal prototype.

4. Dealer Council

Sales will advise engineering which day they want to show the dealers the cars.

5. Diesel Taxicab

Weather permitting, the performance runs will be finished around the first week of March.

6. Holley Carburetor

The Holley people will be here today or tomorrow to bring us up-to-date on their carburetor for the 6-cylinder. If we go to their carburetor, it will have to be a running change on the ’64 model because the carburetor will not be ready until the first of next year.

7. Special Truck

Mr. Hardig suggested that the renderings that were submitted be analyzed and that we start mocking up, so far as the cab configuration goes. We will have to wait until we get a little more data from the users as to their requirements before we can do much on the van. Dr. Lamberti assumes there will be a meeting this week of Mr. Egbert and sales and engineering, and he feels we should come to some agreement on the specifications before we start the clay mockup or incur any additional expense, tie down dates, etc.

8. Post Office Van

All releases are completed and in the cost department.

9. 1964 Model

There have been 15 chassis groups released and 15 die models as of last Friday.

MANUFACTURING

1. Production

Larks and Hawks:

Framed 44,900 / Built 43,850 / Okayed 43,710 / Shipped 41,327 /

Avanti:

Bodies Received 2,401 / Built 2,296 / Okayed 2,184 / Shipped 2,098 /

Framed at South Bend 92

Through Dry Sand 71 / Through Paint 45

Mr. Whitmer indicated that a decision would have to be made regarding how many Avanti bodies will be produced in South Bend. Dr. Lamberti answered that we have cut back to 30 per day, 600 per month, and after the forecast meetings this week, we will decide how many will be framed here and how many in Ashtabula. We need to run until March 1 to get the backlog worked off, and Program 7 will reflect all the changes.

Commercial Truck: Built 3,320 Okayed 3,290 Shipped 3,187

Military Truck: Built 2,046 Okayed 1,997 Shipped 1,805

SALES

1. Dealer Count

As of Friday, 2,065 – up 2 from last week, and one in process.

2. Retail Sales 1st 10 Days 1st 10 Days Feb., 1962 Feb., 1961 Studebaker 2,017* 1,396 Industry 154,000 155,000 Percent 1.31 .9

*Includes 389 GSA

3. Inventory

Dealer 17,443 Retail Stores (2/14) 1,259 Snowbank 1,735* Zone (2/10) 980 (normal)

*Includes 330 credit and other holds

4. Scheduling

Mr. Bender reported that our order intake has been running at a rate which is less than it takes to sustain a 5-day week at 35 an hour. The order rate of travel went from 174 to about 160 per day. For the last 5 days, the rate was 140. It is very possible that we will have a 3-day week again this week. At the moment, we have a great amount of pressure out in the field to step up the order intake. Both our retail sales movement and our wholesale for February are down from our projections.

The scheduling meeting will be held tomorrow at 1:30 in the Industrial Relations Conference Room. At the meeting the phaseout figures will be determined as far as the Larks and Hawks are concerned.

5. Sales Promotion Programs

The programs planned for presentation this week have not been finalized. They will probably be presented next week.

PARTS AND ACCESSORIES

1. Carburetors

There was a slowdown on the receipt of the carburetors. The vendor ran into trouble on the flow test and shut down production until they were able to meet our specifications. They are in production now and are going to try to pick up the lost schedule this week. Service has sent a sample carburetor to each member of the dealer council and suggested that they test it. This was done to give them an opportunity to test it prior to the meeting.

2. Oil Leaks

This is something Mr. Challinor expects to be brought to the dealer council meeting because even the new seal has not corrected the problem. We have made a number of installations on our test cars, but so far we haven’t met with success. The percentage of complaints on the 8-cylinder engines is very small. The taxicabs don’t have trouble because of the lower rate of speed; it is the people who drive the higher rates of speed who have trouble. Mr. Hardig has checked the type of seals that other manufacturers use. Dr. Lamberti mentioned that oil leaks in our cars seem to be a chronic complaint.

QUALITY CONTROL

1. Body Plant Program

This quality control program is beginning to show some results. This phase of the program is about 35% complete, and our charts show considerable improvement. Mr. Capsey will bring some charts on quality control to show to the group.

2. Keys

Mr. Capsey showed several keys that had broken. It was mentioned again that the design of the key is probably what is causing the problem; our ignition key has a larger lip than our trunk key. Mr. Bender wondered if it could be the lock – the lock seems to turn hard even when the weather is not cold. Mr. Capsey suggested it could be the many cuts in our keys that make them weaker. You can get a set of 12 or 14 keys at GM and be able to open all of their locks; whereas, we have 250 different lock combinations (Ed: On the original copy of the minutes, the number 250 is circled in pencil and in the margin is written “E-Gads”). In addition, our present locks do not have a protective cover that is as effective as the ones our locks used to have, which makes them more vulnerable to the winter weather.

PURCHASING

1. Seat Belts

Mr. Soelch commented on the communications regarding the recent release on seat belts and wanted to know quantities, by colors, so that they can be ordered. Mr. Dredge said we didn’t dare let it be known ahead of time, or someone else in the industry would have gotten in ahead of us. Mr. Bender told of the price: list price, $9.25 for the belt, plus 50 cents for installing, for a total of $9.75 each, or $19.50 for two front seat belts installed. It is Mr. Bender’s understanding that it is still an extra-charge item. All cars will be built with two front seat belts and shipped to a dealer on that basis unless he specifies otherwise – similar to the way it is done on the Avanti. Mr. Whitmer remarked that presently we only put the belts on the cars that are serviced for retail delivery, otherwise they are put in the trunk and the dealer installs them.

INDUSTRIAL RELATIONS

1. Cafeteria Arbitration

The arbitrator held that the Company, under this contract, does not have the right to contract out work on these premises that will be performed on a continuous basis by non-Local 5 employees. The Slater Company can stay and administer the work, but the people who do the work have to be Local 5 members. So Mr. Cox will have to go back and renegotiate with Slater; however, the contract with Slater provided for a renegotiation in the event the arbitrator decided this way. The savings we hoped to pick up were tied in to the workers being non-Local 5. So we will not realize the savings we had hoped to. This change must be accomplished as soon as practical.

Mr. Gallagher commented that there were two hearings, and between the two hearings, things changed considerably – at the time of the first hearing, we were running well in the factory. On the plus side, in this award it was made clear that the Company has the general right to contract work out (which we do a lot of) and this has confirmed, without a doubt, that we have this right. The only restriction is that we cannot have people come in here and work on our premises on a continuing basis; on an intermittent basis it is permitted. We lost the specific case, but we accomplished a lot by the award in clearing up and allowing us certain things.

2. Political Program

Mr. Gallagher has been asked to tell the staff committee that the Company is considering initiating a program of political activities – an offshoot of an editorial by Mr. Egbert that appeared in the Spotlight some time ago. There is a very fine program that is in use all over the country and is used in this community by some companies already. Frank Rosenbaum will be coordinating the program, and we will draw on our reservoir of trained conference leaders. The object is to educate all employees politically, and encourage them to be active in politics. It would be on the employee’s own time.

3. Personnel Count

As of 2-15-63: Total Salaried 1,791 Total Hourly 4,945 Total 6,736

There have been 101 salaried separations, and a few are still coming through.

Laid Off 1,894* Bumper Floats 790 Bumps in Progress 117 Open Job Assignments 48 Total Accountability 2,684

*Includes 592 hourly count in connection with the last schedule change.

4. Schedule

Mr. Gallagher commented that this will become a serious thing with the bargaining committee if we continue a 3-day week. In negotiations, we secured a competitive advantage over many other companies in this area because in the SUB plan, our control point is 32 hours; for others it is 40. For less than 40 hours, the amount of benefits paid to the employees has to be reimbursed to the SUB fund if the schedule is above 35. We have an agreement that if the schedule is down to 35 per hour, we would not have this reimbursement. There is a letter saying that, if practical, the Company would schedule alternate weeks instead of scheduling short weeks. Mr. Gallagher believes that after a few weeks of 3 days, we will have considerable pressure from the Union because at this rate, we will use up the total SUB fund before the model changeover. We can’t lessen our position on the State compensation schedule because we are already paying maximum – and a 3-day week, in effect, causes the Union to subsidize the State payment. Mr. Bender said this should be the last 3-day week. We feel the retail rate is accelerating to where it will support a 5-day week. There is a remote possibility that we could shut down only one of the two days: Friday or Monday. The idea of the shutdown of two days was to help the model six problem. Dr. Lamberti pointed out the problem that would be created, image-wise, if we worked alternate weeks. Also, it would have an adverse effect on the delivery date of orders to customers. He suggested that Mr. Gallagher tell the Union that February is a low month and that March should pick up. Mr. Gallagher observed that we could tolerate this one additional 3-day week.

5. Safety Regulations

We have heard nothing more on this.

LEGAL

1. Lawsuit

We settled a lawsuit in Tucson, Arizona, for $16,000. This was a dealership that had gone down since the death of the owner, and the widow was terminated at the end of ’58 because her sales were low. She felt she had been denied an opportunity to recoup her losses with the Lark. The law department didn’t feel we could fight the case because the personnel involved are no longer with the Company. We felt we were well off to settle this case as we did.

This case presents a dilemma to Studebaker because in the future, when we have a hot car, we will try to eliminate the poor dealer in the market in favor of a better dealer because the representation is not adequate. Mr. Feuer feels we are running a risk when we do that.

2. Avanti

The 5% obsolescence letter on the Avanti has been issued. Mr. Bender will check to see if we also want this type of letter on the trucks.

FINANCIAL

1. Car Leasing Program

All exempt employees, Grade 5 and up, who are presently driving a company car and want another one can lease it at the following rates per month:

Daytona $40 ) Convertible 62 ) Wagonnaire 44 ) -- With Cruiser 42 ) Overdrive Hawk 48 )

For automatic, add $1 per month; power steering, add $1 (where it isn’t standard); air-conditioning, add $2.

These rates cover insurance, license, registration, warranty, and taxes. It is for 12 months and can go as high as 15 months. It is at the discretion of the Company.

This program will be Corporate-wide in this country, and there will be six product coordinators under the direction of Paul Wray who will handle the administration. It will be a payroll deduction type of thing. We will begin taking orders next Monday and hope to have the program finished by the end of March. This is not a money-making proposition, it is a breakeven. There are about 250 eligible employees (Automotive Division). Mr. Rickus said the brochure that is being issued will explain how layoffs are handled and if an employee can lease more than one car. Mr. Gallagher noted that it is designed as a fringe benefit, and Mr. Bender reflected that it has created a major problem for the sales department. You’re taking money out of the pockets of the dealers.

APPLIED RESEARCH

1. M44

A meeting was held with the Government last week on the engineering package. Progress is being made, but we don’t know if it is fast enough. We are writing letters regarding the failure of the Government in doing their part in time.

2. M602 CKD

We received word last week that the Government has started negotiations with IH, but we don’t know what the status is. There is no indication that they will go out on a bid for this.

3. M113

This one is dead. We knew of the large tooling involved, but hoped that the inequities would become evident. However, this didn’t take place, and to push it further might hurt us in other respects. Out of the whole situation has come a new understanding. Dr. Lamberti believes there will be some changes in the handling of the contracts. The tooling is not available for the second contract, which ties the bid in to the first contract holder. We had no assurance that we would get the contract the next year if we did invest $7 million in tooling to get this contract. Our name is getting a little bit better known because of our maneuver. Senator Humphrey is behind a move to get more Governmental business in the Middlewest.

4. 25K Loader

We hope to hear this week how this will go.

5. Turtle

We demonstrated the 4-wheel drive vehicle to people in the Washington area last week. ARPA has indicated that after the colonel talks to the people in SE Asia next week, he will order either 2 or 5 field test units.

We have a proposal under preparation at the present time for ATAC for a vehicle along this line. We will be proposing a tracked version because demonstrations they have had in remote areas indicate that wheeled vehicles bog down in the mud. We have an idea of how to build a lightweight track and will build our proposal on that basis.

6. 2½ ton Light-weight Truck

This study proposal is well along. We expect to have the first draft completed this week and will have two weeks to polish it. There is a limited amount of competition on this, namely GM, Ford, and Chrysler.

7. M14

Some time ago we bid on this rifle, and Thompson got the contract. A man from Thompson told Mr. Isley that they have lost $7 million on the contract so far but hope to recoup part of it. Apparently they tool the contract with the idea that they would go into the civilian market with rifles after they got some experience.

8. Miscellaneous

We received an RFP for another small vehicle that is about the same character as the Turtle. It is expected to carry 250 lbs., is to be manually propelled by two people, and must have good off-road mobility characteristics. We are drawing up sketches of two test units for the RFP. There is a ½ ton vehicle that will be very similar. Both of these proposals have to be in the second week in March.

We are also working on two unsolicited proposals: one is on the tracked suspension for various types of vehicles for the people at ATAC, and the other is on the main battle tank.

PUBLIC RELATIONS

1. Seat Belts

It now appears that we have received more favorable and volume publicity for Studebaker from the seat belts than from anything else since the introduction. From time to time we will be on the spot as to our position on belts, and Mr. Dredge would like to see all executive cars and all Company-owned cars installed with belts. He cautioned Mr. Bender to be sure the cars at the auto show have belts in them.

Another plus value of the seat belt announcement was that it provided a press opportunity for Mr. Egbert. He answered questions about the military matter – which gave us good press on that.

2. Chicago Auto Show

The Chicago Show is a harder-sell show than the one in Detroit. Through last night, the crowds were very good, and the manufacturers seemed to have extended themselves with unusual, odd items. Dr. Lamberti said he noticed exotic colors and interiors, and a lot of the competition did not have any cheap cars on the floor.

Mr. Dredge reported that our display has good visibility, and the display is getting a lot of attention. People are swarming around the Avanti, and Mr. Dredge wished we had another one (there were 3 Sting Rays). We could use a teenage sales crew who knows the engine and knows the car; otherwise, the interested kids will trip them up with their questions. Plymouth had 30 or 40 kids around the sport car all the time and had two teenage boys answering questions. People were so much interested in the Avanti engine that Mr. Dredge thought we needed an engine display. Dr. Lamberti added that our display is probably the nicest up there, but we need something to stop the crowds – something with moving parts, etc. The station wagon is not in a position to get the traffic, and our own sales personnel were not identified. (Mr. Bender will check into this.) Mr. Dredge commented that the performance of the sales people was commendable.

2-21-63

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