This is a complete version of the January 21, 1963 minutes. The earlier version posted here on 7-25-11 was only an excerpt and was given the number Lamberti papers #4. For further background information on this topic see the forum topic entitled “The Lamberti papers #1.” This post on Oct 26, 2011.

STAFF MEETING – January 21, 1963 (Mr. Egbert was present for a portion of the meeting)

ENGINEERING

1. Avanti – Owens-Corning

Mr. Hardig reported he had received a call from Stewart Loud of Owens-Corning telling him that the winner at the SAE meeting had selected the Avanti over a Sting Ray Corvette. The winner was Mr. Miller who is with Amplex of Chrysler. The award is a standard car with a heater, and the winner must pay for any additional equipment he may want. Mr. Loud will call Sales today to see when they can get the car, and someone from Sales or Public Relations will attend the presentation. (Chrysler has been very interested in the Avanti – it is the only company that doesn’t have a new type car like this.)

2. Identification Plate – Jet Thrust Engine

Mr. Hardig said the plates are ready, but Mr. Dredge suggested the plates be revised to show it is an Avanti engine. He said it has been the practice of industry to use the name of the hot model in cases like this and gave the Ford Thunderbird as an example: every Ford that has a T Bird engine shows, “Thunderbird Powered.” Owners are proud that they have a Thunderbird engine in their Ford, and the secret of the “kiss-off” Ford advertising is T Bird power. “Jet Thrust” doesn’t mean anything; whereas “Avanti Supercharged” does. It is also important because of the tie-in with the performance runs. Mr. Dredge felt the present plate could be retained and another plate added showing the word, “Avanti”; that is, Avanti Jet Thrust Power or Avanti Supercharged Jet Thrust Power.

Mr. Detzler indicated that Sales feels the word “Avanti” connotes a car model, not an engine; and they wish to relate the plate to the engine. He said the plate serves two purposes: 1. buyer pride – plate indicating a superior engine package, and 2. trade-in value – dealer has visible proof car is more valuable. However, Mr. Detzler asked Mr. Dredge to discuss it with Mr. Minkel. (They will notify Engineering.)

2. Perkins Diesel Engine

The engine will be back from Detroit either Friday of this week or next Monday. Engineering will run tests to see if the noise has been overcome. If so, they will install it in a new 1963 taxicab, and Mr. Minkel wants to use it for some tests. Engineering will need an appropriation from Sales for the new body.

3. Special Diesel Trucks

Mr. Corcoran of Truck Sales put in a bid last Friday for 500 trucks, and Sales will know by Wednesday, January 23, if we got the bid – it would mean about 4 million dollars worth of work. It is the type of program that is impossible to run in our system, but a meeting was held Friday to see what we could do. The following dates apply only if the bid comes in on the 23rd: engineering work completed January 29; prototype completed February 15; material in by March 1. Since there is a performance bond to finish by May, we will have March and April to build 500 trucks, which will mean a 50% increase in the plant for those two months. Mr. Feuer said there were no firm delivery dates but had promised the first truck in 30 days. Mr. Lamberti observed it would be closer to the 5th week.

4. 1964 Model

Mr. Hardig advised that the die model releases are on schedule. After Tuesday, Engineering plans to rework the left-hand side of the clay model to match the right-hand side ’64 version. All major sheet metal parts have been let out, and all tooling has been established. All of our ’64 fabrics are in, and we should have all seats trimmed up this week. There will be 15 cars painted up in time for the show in February.

5. 1963 Model Phaseout

Engineering will have phaseout established by the end of the week. At the next scheduling meeting on February 15, we will establish the total runout quantities.

6. Avanti – Hard-Starting

New distributors were started in production on January 10; and on the 17th, we started to rework all the cars built in the plant. A bulletin is being issued recommending 5W oil in cold areas where the temperature dips to -10º. Parts and Service will campaign the cars in the field, beginning with the East Coast. There are about 2,200 cars involved, and Service expects to have them all completed by the first week in February. Mr. Capsey said there were about 100 Larks in the snowbank with Avanti engines in them, and Mr. Detzler said those must be credit holds. Mr. Hardig remarked that it hasn’t been finalized who will pay for the campaign. Mr. Egbert told Sales to make a real plus out of this and be sure that every man who owns an Avanti is called to be sure the car is running perfectly.

Mr. Hardig told of the tests they have been making in the cold room in connection with hard-starting and the results they have had. Mr. Capsey added some of the experiences Quality Control has had.

7. Carter Carburetor

The yellow dot carburetor will start in production January 28. This carburetor is better than the blue dot, although complaints from the field dropped completely with the use of the blue dot carburetor. Carter will replace, 100%, the carburetors built into the first 13,500 units, but we will pay the labor expense. Among other lines using the Carter carburetor are the Lincoln Continental and Corvette.

MANUFACTURING

1. Production

Larks and Hawks: Framed 40,262 Built 39,155 Okayed 39,012 Shipped 35,942

Avanti: Last Week January To Date Bodies Received 126 334 1,855 Built 140 349 1,737 Okayed 136 329 1,574 Shipped 110 251 1,458

Mr. Whitmer expects to average 28 per day for the next 9 days, which will put the total for January over 500.

Commercial Truck: Built 2,708 Okayed 2,681 Shipped 2,553

Military Truck: Built 1,557 Okayed 1,508 Shipped 1,225

The military truck shipping was held up for a few days because of a paint problem: the vendor had changed paint, but they have come back to Brody paint. The vendor’s workmen are painting them, and the vendor is taking the responsibility for the trucks in the field that have been shipped. The Government released 225 military trucks Friday.

SALES

1. Dealer Organization

Total dealer count as of Friday 2,084 Corning and Johnstown, N.Y. in process 2

2. Orders

Through January 18 3,081 To date 41,087

3. Inventory

Snowbank (Friday night) 1,786 Credit holds 516

4. Retail Deliveries

January 10, 1963: Studebaker 2,023 Industry 170,000 Percent 1.2

1962 1961 Passenger Cars 79,827 73,579 Trucks 5,990 5,646 Total 85,817 79,225

Sales expects the second 10-day period in January to be a little better – possibly 2,100. However, we should hold the same percent because industry will probably go up a little also.

5. Wholesale

Mr. Detzler reported that Sales expects to come within a couple of hundred cars of the 6,000 estimate (including Avantis). We’re planning on 5 days’ production for this week and next, and we hope to get 20-25 per day out of the snowbank. Sales is working a dealer driveaway on a few of the nearby zones to try to pick up one or two hundred. Mr. Detzler felt that a number of the City of Seattle orders were probably 6’s.

6. Boiler Room Operation

This program will operate through the month of January, and Mr. Minkel is working on a program for February. Sales is concerned about the March 1 tax on the cars we have. Charts in the operation center show sales through Saturday of 3,711 from the start of the month and 1,864 for the first 10 days. The difference of 1,847 would be the second 10 days ending on the 19th. The report on Saturday didn’t include a great portion of Saturday business, which is a heavy day.

7. Avanti – Orders

Avanti orders total 2,880, with approximately 1,100 not lineset. At the rate orders are coming in (average about 7 per day), we can be pretty close to fulfillment of backlog in February. Mr. Lamberti wondered if the 1,000 orders are firm. Also, inasmuch as we are building 28 per day and 140 per week, does Sales have a program on Avantis? Mr. Detzler explained some of the difficulties encountered with the dealers in connection with the delay on Avanti deliveries. He said in some cases, the customers grew tired of waiting and cancelled their orders, leaving the dealers with Avantis in stock; and in other cases, customers are calling in to South Bend. At any rate, Sales feels that we are now at the point where really old orders have been met and we can ask for orders without being on the defensive. Mr. Lamberti observed that some dealers have sold 8-12 Avantis; whereas other dealers haven’t yet received their first car. Mr. Detzler answered that dealers who are selling cars have to be looked on favorably when a big item comes along. In answer to Mr. Detzler’s query, Mr. Lamberti said there would be 150-200 Avantis out of our plant in February.

A discussion followed concerning the overall value of the small dealers in the dealer organization. The following points were made.

a. As far as servicing small dealers is concerned, we don’t expend a lot of effort. Their sales rate will remain pretty much the same if we call on them once a month or every 6 months; however, they get full benefit of sales and service literature.

b. We have several hundred dealers who buy less than 5 cars per year. This represents 4,000 to 6,000 units in total volume which we don’t want to lose.

c. We pay a premium to get a car to a little dealer in an out-of-the-way place which is a penalty we pay to keep him. We can’t get a unit to him via truckaway, so we have to pay a drop-off charge.

d. We don’t go off the beaten path to sign up a dealer. If we get a call, we check him out; and if he meets our qualifications, we take him – but we don’t go looking for him.

e. We have had several proposals re how to handle the small dealers differently, and we examine those proposals. It is largely a matter of zone direction.

QUALITY CONTROL

1. Avanti – Finish

Mr. Capsey reported that we have always had some vertical streaks on the fenders. These are called bond burn and are caused by the way the bond is applied. We are testing two bodies, and if the test works out well, we may be able to get a better appearance on the side of the car. We have a body from Mitchell-Bentley which we are using and will send to MFG when we are through with it. MFG is painting at temperatures near 350 – which they never thought was possible, and which is getting close to the danger point on resin. The people from Corvette are having so much trouble with their paint, they visited Ashtabula to see what we are doing. (We went to St. Louis to see what they are doing.)

2. Avanti – Rear Glass

These are not bad the way they used to be bad, but we are making sure of quality. We will have some new moldings that will help the appearance. We have a problem when we have a combination of glass that is off a little bit and an opening that happens to be off in the opposite direction, or the operator doesn’t assemble it right. MFG has an operator repair the opening after it has gone through the potato digger. This problem is not holding up production.

3. Speedometer

We still have a kink problem. Mr. Capsey explained that this cable has to be strung in when the instrument panel is put in and, consequently, it gets in the way of the operators on down the line. Quality Control is working on an effective method of keeping the cable out of the way of the workers to prevent its being mishandled.

4. Blower Switch

We have had about 15 or 20 that have to be repaired, and Mr. Lamberti told Mr. Capsey to alert the vendor, so that the problem we had last year won’t be repeated.

5. Water Leaks

Mr. Egbert asked about the leaks in the doors, and Mr. Capsey answered that they are still bad, although we adjust every door with a water test. Mr. Hardig remarked that a saddle-type extrusion is coming through that will help. Mr. Egbert told Mr. Hardig not to put the drip rails in while they are noisy.

PURCHASING

1. Containers

The Waldorf paper people were in last week, and the Wirehauser people are coming in tomorrow. They are making a study of our requirements, Corporate-wise, to see if they can offer us a savings. Although the Franklin Division uses more containers than any other division in the Corporation, we can’t standardize on their cartons because their customers specify their own color, logo, etc. As Mr. Egbert suggested, these people (Waldorf and Wirehauser) will go directly to the divisions. The Corporate colors – red, white, and blue – will cause about a 3% increase in price.

2. 1964 Model

Mr. Soelch reported that Purchasing is letting that out just as fast as they get it.

3. International Harvester

People from IH will be in here tomorrow. They have been calling in for a lot of parts, asking us to make a lot of stampings and machinings for them. There are about 50 parts involved and about 5 men have been calling. Apparently, they are not well coordinated (Chicago priced the package, not Ft. Wayne). Mr. Lamberti mentioned that we are still interested in submitting quotations and prices to them. We have stopped temporarily because it will take about two men a couple of weeks to do it, and this is costly – but we want some business out of it. It could mean about one million dollars worth of business.

INDUSTRIAL RELATIONS

1. Exempt Salaried Program

The program will go into effect February 1. We’re dealing with limited money, but there has been budgetary approval for money to improve our exempt-salaried program in connection with salary ranges and merit increases.

2. Cutback

Automotive roll as of January 18, 1963: Salaried 1,799 Hourly 5,119 Total 6,918

We have 1,810 hourly off since November 15, 1962 Bump Float 94 Bumps in Progress 122 Open Job Status 55 Open Job Assignments 402 Total 673

Total accountability 2,483

LEGAL

Mr. Feuer had nothing to report.

FINANCIAL

1. Retail Stores

In response to questions brought out in the discussion of the dealer organization, Mr. Rickus gave the following report on the retail stores.

Retail Deliveries Average Loss Per 1962 Cal. Year New Unit Sold

Ft. Wayne 649 $ 34 Peoria 227 48 Indianapolis 326 71 Miami 321 325

Ave. All Stores $245

The Ft. Wayne store is the best performer, and none of the stores were in the black. (85% of our dealers were profitable last fall.) Reasons why the retail stores lose money include: We spend quite a bit of money on advertising. For the most part, these are difficult markets – there is no owner backlog, and the store has to generate all sales from scratch. A dealer may have his wife operate the switchboard or some other job, whereas we hire people.

The stores, as a group, lost a little over one million dollars, and this does not include administration costs of the Sales Department, the Accounting Department, or the Personnel Department. (Mr. Gallagher said the personnel turnover in the stores is terrific.) The Accounting Department figures the performance of the stores just as though the sales were made to a dealer. While the stores are not given an allowance for cleanup or model change, they are not charged for the use of the money – finance charges. Mr. Rickus feels this washes out the two they don’t get. Sales has 3 retail store managers, but the stores are the responsibility of the zone manager.

The value of the stores is to have Studebaker represented in markets where we cannot get dealers and to provide volume. The sales they make are sales we would not otherwise have had, and our retail stores are running at about 4% of our total business; in fact, 11 of them are among the top 25 sales outlets, volume-wise. However, so far as cash flow is concerned, they are no better than a washout. The program, at present, is status quo – there are no stores to be opened.

2. Government Audit

The auditors will be here most of this week, and Mr. Rickus cautioned Mr. Soelch not to let them see the purchase orders under any circumstances. He suggested that Mr. Drake work with Mr. McMahon.

INTERNATIONAL

1. Longshoremen Strike

The negotiators have accepted the terms of the mediator, and Mr. Thomas expects the workers to go back by next Monday. Export will start boxing next Monday.

2. CKD Turkey

Mr. Verdi is in Washington today with Messrs. Kidder and van Merkensteijn. We will try to hold a technical assistance contract with them, even if we can’t turn over the parts. Mr. Lamberti commented that 2 CKD manuals have been sent to two different places in Washington.

3. Field Force

The field force was reassigned by Mr. van Merkensteijn this past week.

4. Belgium Units

Newman and Altman put in a bid on the units that went aground at Muskegon, but Mr. Thomas doesn’t know if they were successful. The replacement units are to be boxed the 4th.

APPLIED RESEARCH

1. M44

No date has been set up for contract negotiations. Word is expected within the next week or so.

2. 2½-Ton Truck

We’re getting set up here for the new specifications on January 29 as a result of the contract negotiations. We will continue every two weeks until it is ironed out between Studebaker and the Government and will try to force a decision out of Chicago by February 1.

3. M113

The bid has been opened, but the contract hasn’t been awarded. FMC was low by $3,300 with amortization of tools and equipment and $400 without amortization. This was just as predicted – we knew about where they would be. It isn’t over yet; a letter has been circulated, and it shouldn’t be discussed too much.

4. Cargo Loader

The technical proposal and the management proposal went out Saturday; the cost volume is due January 31. It will be for 5-6 million dollars, and the number of units will depend on the price. The Government plans to buy at least 100 units, and our cost volume is for 170 units. We have two proposals for building the vehicle in two different designs. The alternate uses the Studebaker V8 engine and a Borg Warner transmission instead of Alison, which makes the engine about $2,000 cheaper and the transmission about $800 cheaper. The alternate price should be considerably lower than what other companies can bid.

5. Turtle

Mr. Isley did not have an up-to-date report.

6. Main Battle Tank

We have something new in the way of track suspension which is getting a lot of interest of technical people at ATAC and in Washington. Our patent people are working to get a patent on it.

PUBLIC RELATIONS

1. Seat Belts

Legislation is pending in 20 state legislatures, including Indiana, and it is also reported that the Federal Government will offer legislation during the coming year on mandatory seat belts. At the meeting in Detroit of the public relations group of AMA, they discussed the possibility of the manufacturers going ahead of the law. The idea would be to have the seat belts installed by the dealer as optional, but he would always have belts in the cars on display in the showroom. Then, if the customer didn’t want them, the dealer could take them off (as he does with white sidewalls). American Motors opposed, but the others were favorable. They want to have action by February 15 or 20. Mr. Dredge feels we may want to jump the gun in advance of any AMA decision in view of the fact that we have a strong safety image.

AMA will promote propaganda against tempered glass all around the car.

2. Crankcase Breather Device

A change in the California law will require, for the ’64 models, a shift from the present AC system to a closed system because the AC system was found to not operate well on used cars whereas the closed system will. Mr. Dredge said the general tenor was that the industry would probably resist the California move and see what happens. California may refuse rights of sales on units that do not have closed system.

3. SAE Meeting

We were well represented by Messrs. deBlumenthal and Stevens. Our Hawk and Avanti were drawing good crowds, and we were drawing good press notices in sports car areas. With two, we have more production model sports cars than anyone else in the industry.

4. West Coast Performance Runs

These runs with the Avanti may tie directly with the sales drive by the end of the month, which would provide copy for stories. There will also be a good sales potential if the speed runs on the Lark and Hawk turn out well. Mr. Dredge suggested that if the runs are successful with equipment proposed as standard, we might consider a ‘63½ model with different fittings, different equipment, and different trim. He compared the idea with what Ford did last year. Mr. Lamberti observed that not much could be done except in paint and asked Mr. Dredge to have Mr. Granatelli write a memo to let everybody know what he is doing because nobody knows what is going on.

GENERAL

1. Mr. Egbert told of the criticism of our water pump by a Miami dealer. Mr. Hardig will check to see if the rpm on our water pump is higher than the industry. Mr. Egbert wants to talk about this later, as well as the fan noise and the axle ratios. He does not want the 3.73 axle put in anymore Avantis with automatic transmission and blower because the 3.54 axle is better.

2. Mr. Detzler read an article from Consumers Report which was unfavorable to Studebaker. In addition to criticism of the product, they had shown our 8-cylinder price against the 6-cylinder price of competition. Mr. Dredge commented that these people are the only people in the whole criticizing industry who buy their own cars and run their own tests without any advice from public relations.

3. Chrysler and Ford have stopped their major tooling for ’64. It will be a facelift for both of them. Mr. Dredge mentioned that Ford’s fast back has been getting a lot of attention. (Because the fast back is only partial, industry term for it is half-fast back.)

4. There will be an R3 engine meeting on Wednesday attended by Messrs. Lamberti, Hardig, Dredge, and Detzler.

1-25-63

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