Roughly, by June 1, all the changes on the Avanti will be in. No date has been established on the drip moldings. We will hear from the supplier on that today or tomorrow.

4. 10 Fleet Units

Mr. Duncan of fleet sales has asked engineering to build 10 more diesel jobs in the next 60 days. Mr. Bender said sales wants to get them into the hands of different companies in the field and asked when they would be ready. Mr. Hardig replied that he doesn’t see how engineering can build these 10 jobs in 60 days with the staff we have and the work we have on hand, including the ’64 model. Dr. Lamberti agreed that we can’t hold up on the prototypes and suggested that maybe they could be made in manufacturing. Mr. Hardig commented that there were a lot of hand pieces. He added that engineering will see how many they can do, but they don’t expect to get 10.

5. National Dealer Council

The ’64 prototype to be shown at the meeting is scheduled to go into paint late this afternoon. Sales wants the showing to be held on Friday morning at 9:30 at the proving ground so that Mr. Minkel will have time to discuss the model with the dealers after the show. If it is a clear day, all the paint colors will be lined up on the apron, but the trim will be in the garage. The prototype will be down on the apron. The details will be worked out with sales before the meeting.

Dr. Lamberti invited the group to look over the paint and trim showing at the proving ground late this week.

6. New Piston

Mr. Hardig showed pictures of how the pistons look after 1,100 hours, and Mr. Bender remarked that this piston is the reason why the State of California wrote us out of bidding on their business. Mr. Challinor pointed out that the problem has been lack of oil control. The scoring problem is so serious that we have even had to replace blocks. Mr. Hardig commented that on the new piston, we reduce the scoring and thus increase the oil control, and Dr. Lamberti observed that on our Siamese bore system, the heat problem is critical. Mr. Challinor is sure the new piston will eliminate the problem, and we will spend as much money this year as the piston will cost. Dr. Lamberti added that in a 10-12 months’ program, we have had a cost of $10,000-$12,000.

7. Holley Carburetor

Holley is spending $50,000 for new tools for a carburetor for us, and we would have to spend $7,420. If the samples they produce after the first of the year do not meet our requirements, we will be refunded the amount we spent. If they do meet our requirements, we are to release it as an option source. By giving them the authority to spend $7,420, we will have another carburetor on the shelf. They want to have a 2-year contract. If we split our business between two sources, it will raise the price, Mr. Soelch remarked, and Mr. Hardig answered that the yellow dot is fine now, but we have had problems with Carter on quality before. Dr. Lamberti indicated that we can work out the mechanics, but it is important to have a second source – and Messrs. Bender and Challinor agreed.

8. Flange Axle With Tapered Bearing

For 1965, the rest of the industry will have flange axles with a tapered bearing (eliminating the ball bearing). Dodge Dart and Valiant have the flange axle now; Chevy is changing over; and AMC will be 100% by ’65. We could be the first to have flange axles with tapered bearings for ’64. The penalties: the 6 would cost $2.71 and the 8 would cost $2.79. This compares with $1.70 for the 6 with a ball bearing, and $2.50 for the 8 with a ball bearing. In addition to the penalty, we would have one other problem: we will have to assemble the shafts here or send the brakes to Ft. Wayne and have them assembled there – but the Union would probably object to that. Mr. Gallagher said it wouldn’t make any difference with the Union; do it the most economical way. To do it here is the most economical, according to Mr. Hardig.

Mr. Hardig recommended that he be given permission to release this. If we are going to go, we have to let Dana know immediately because they are investing $750,000 on their own. Mr. Soelch mentioned that the tooling time makes it necessary to release it now. Dr. Lamberti said we have a number of reductions on the ’64, and we may be able to put in some engineering improvements, but we have to look at the places we put additional money into the new car. Also, there’s a runout problem on this which we will have to investigate, whereupon Mr. Soelch agreed that there would be a problem in production control. We will have 33 different arrangements which will make it difficult to have them come out even at the end. Our standard axle with the power lock is not selling – we have 400 of them. The cost of this axle over our standard was $12.50, but to send them back to Dana to have them reworked would cost $18.00. Mr. Hardig suggested that the change to the new axle could be a running change.

9. 1964 Model

Out of 55, 39 (or 70%) of the body releases have been finished. We released 20 die models last week. All told, we have 111 die models for the ’64 model, and so far we have 66 of them released. About 90% of the balance is items of 14 weeks and less tooling time.

10. 1964 Truck Releases

Mr. Hardig thought a meeting should be set up with sales and engineering to discuss the truck releases – better clearance in the dash to provide for the diesel engine, outside moldings, etc. Mr. Soelch reported that the new axle has already been released to Rockwell. (In this connection, he mentioned that Clark had raised their price again – this time to over $6.00.)

11. Keys

We are investigating taking some of the combinations out which will eliminate quite a few of the notches. We will stay with aluminum to have a stronger key.

12. Model X

Dr. Lamberti announced that the new name for the ’65 job is “Model X.” It was approved, styling-wise, by Mr. Egbert a week ago Saturday.

MANUFACTURING

1. Production

Larks and Hawks:

Avanti:

Framed in South Bend 116

They only shipped us 126 last week, and we built 147, so we used some out of the bank that is ahead of the line.

Commercial Trucks:

Military Trucks:

We have shipped 465 this month and have 15 to go to fill the schedule; however, they will let us overship.

2. Seat Belts

In order to install the seat belts in production, we have to put in the carpets, which creates a possibility of dirty carpets. Also, to install the belts, we have to cut a slit in the carpet, and if the customer doesn’t want seat belts, when they are removed we will have to replace the carpet. Therefore, Mr. Whitmer recommends that the seat belts be placed in the trunk, and it will be the guard’s responsibility to see that they are still there when the car is shipped.

Mr. Hardig reported that the State of California held a special meeting concerning seat belts, and they insist that beginning March 1, all of their seat belts must have a special code stamped on them. Mr. Hardig also told of a special meeting called by the Safety Committee last Friday regarding seat belt failures. Mr. Challinor commented that our belts test 1,000 lbs. over what is required by the State of California and that we have shipped back 5,000 belts that were not satisfactory.

3. Rustproofing

Mr. Whitmer suggested building up a passenger car following Ford’s procedure, but to fix up a truck would be difficult. He will discuss it with sales.

SALES

1. Dealer Count

As of this morning:

We are continuing our review and termination of non-producing dealers and will probably put another 75 or 80 out.

2. Inventories

3. Orders

The order situation is tight. We are lineset for framing through February 27, minus 72. (These will probably clear up this morning.) We plan to work 4 days this week and 5 days next week – this is a little nebulous at this time. We should have a better reading on it within the next few days.

4. Retail Deliveries

We believe Studebaker retail will go over 2,000 for the second 10 days in February and that industry will be somewhere between 180,000 and 190,000. For the month of February, we project retail sales around 6,000, including GSA, Avanti, and 1962 and 1963 passenger cars. We may wash out our ’62 models in the last 10-day period. We expect Avanti shipments for February to be around 600. Dr. Lamberti mentioned that we don’t expect to work any overtime on Saturdays to okay cars as we did in January because the order rate doesn’t warrant it.

5. Cooperative Advertising

On Saturday, after the dealer council meeting on Friday, we will have a meeting of our zone and regional people. We have decided to go on our cooperative advertising program for April, which will be based on the wholesale for the month of March. We will set up a reserve of $40 per car actually shipped to dealers during the month of March. The dealers can draw on this fund provided they contribute a like amount. In the dealer advisory meetings in the zones, the dealers indicated that they preferred that we do not continually have cooperative advertising but that we do it in programs such as this. In these programs, the dollars and cents are pretty hard to estimate. In the last program, we set up somewhere around $225,000, but we spent somewhat less than that. The feeling is that it had a good impact on our business – mostly in the larger markets.

6. Phaseout

The sales department feels that the 70,000 unit phaseout for passenger cars can be done. The schedule will be 35 per hour for 5 days per week until June when the rate will be 60 per hour. There will be penalties involved because of Memorial Day and the Fourth of July, but then we can start our ’64 launching at this same rate. (The launching period has to be at some time.) Dr. Lamberti remarked that Program 7 is committing materials and that the obsolescence penalty will be determined at the March 15 scheduling meeting.

The Avanti schedule is 600 per month for the next 3 months. The order intake is not running 30 per day. For the last 3 days it has been picking up, although some of those cars are going into zone stock and demonstration service.

7. Direct Mail Program

We have launched a direct mail program wherein dealers supply us with the names of approximately 100 Avanti prospects or suspects and we send them a personal letter from Mr. Minkel, along with a direct mail piece that describes the Avanti and a post card asking him to take the card to his dealer for a viewing and demonstration of the Avanti. Also, a list of 2,000 company presidents will receive direct mail on the Avanti and an invitation to visit the dealer. In addition, we are encouraging the dealers to put the Avanti out on demonstration for hours or days at a time.

8. Demonstrator Program

We are setting up a program with dealers to encourage them to get Avantis in demonstrator service and to have an Avanti on display at all times. If the dealer will agree to put a demonstrator in full-time service and will keep at least one additional Avanti on display for a minimum period of 60 days – and actually promote the sale of Avantis – at the end of 60 days, or when he retails his 4th Avanti, we will give him a demonstrator allowance of $200. This program is intended to help the dealer underwrite the cost of an Avanti demonstrator and to assure us of getting active demonstrator promotion from our dealers. Mr. Bender anticipates getting maximum Avanti volume from larger dealers who will probably be the ones who participate.

PARTS AND ACCESSORIES

1. Carburetors

As Mr. Challinor reported last week, we lost ground on the carburetor campaign because of a problem in the vendor’s plant. However, we expect to get 5,000 this week, which will leave 7,500 to go. The reaction to the carburetor has been excellent; in fact, we are getting requests to replace the blue dots with yellow dots because of the better performance. This is the best carburetor we have had on the 6-cylinder for about 2 years.

2. Hard Starting

The cold weather Friday brought on another round of starting problems here and in Chicago. We are dealing with these on an individual basis. The 4-pole starter seems to help the cold starting – seems to give an insurance factor that gets them started. We have only had trouble with 3 starter solenoids across the country. The one on Mr. Egbert’s car was returned to the vendor.

3. Water Leaks

Mr. Challinor has 180 complaints on water leaks on the rear doors, and he can’t do anything about them except replace the floor mats. With our present release, we can’t correct the problem and keep it corrected. Mr. Hardig noted that the new weather seals were supposed to have come in on the 18th but haven’t been received yet, and Mr. Challinor commented that if the new seals work, he will campaign the water leaks in the field.

QUALITY CONTROL

1. Quality Control Program

Mr. Capsey passed around several charts showing the progress of the quality control programs in the various areas of the plant. He explained that the peaks represented the cutbacks and the bumps. For the military trucks, the peaks represented the paint trouble on the body. The chart for the body plant shows almost a 25% improvement in some of the areas. There is a chart for every floor on a sampling of 25 cars. (Quality control does the sampling.) The defects are noted on the charts, and the information is fed back to the worker. This is a very effective method – Mr. Whitmer commented that there is a general improvement throughout the plant.

PURCHASING

1. International Buying

Mr. Soelch reported that there are a number of problems involved in international buying. He gave some examples: (1) A Japanese company has asked for detailed information on a convertor, but Long, our supplier, does not want to furnish information for competition on the convertor. (2) The tooling lead time is much too long to be practical. (3) The weight of some parts would make them expensive to ship. Dr. Lamberti suggested that Mr. Soelch make an analysis of the whole program and show why some of the foreign buying is not feasible.

2. Canadian Buying

This program is not moving very fast, according to Mr. Soelch. We have cut our schedule back to where we have material through May, so there isn’t much business here for ’63, and the parts that Canada uses are not to the specifications that our engineering has, so when the parts come in, our engineering turns them down. Mr. Doelch will send blueprints to them on the ’64 model, but they will have to be sent in ahead. You can’t get the Canadian suppliers to come in and look at the clay the way the domestic suppliers do. Dr. Lamberti said to give them stock items: hub caps, headlamps, etc. Stay away from anything that involves a high amount of engineering. We’re hitting for $2 million; after that we can slack down. A spread sheet will be used to help decide which items will be given to Canadian suppliers to help offset the $25 per car for transmissions on Canadian production.

3. Steel

We will start banking steel in May, June, and July on a continuing, additional 60-day basis to take care of us on the ’64 model. It will mean $1.5 million of excess inventory. We have asked our suppliers to do the same thing. Steel negotiations will start on April 30, with a 90-day cooling period – so a strike would probably not occur until August.

4. Tooling

We have estimates now on costs for every tool; and before the estimates are exceeded, Mr. Soelch will negotiate with the vendor to get the tooling within the budget. In addition, we have forms for following the tooling to be sure that it is on target. Reports are being issued on tooling progress and costs.

INDUSTRIAL RELATIONS

1. Detroit Workmen’s Compensation

According to a conversation that Mr. Gallagher had with Ed Cushman and his assistant (Ed Cushman claims to have the ear of George Romney), the climate in Michigan on workmen’s compensation isn’t likely to change – all appointments Romney makes are subject to approval. These gentlemen told Mr. Gallagher that our settlements are very good on this type of case. We’re settling at an average of $3,300, and the maximum on lung cases is $10,000+. Their advice was that whenever you have to shut down an operation where dust is involved, be sure that you can absorb the people in another operation. Mr. Feuer commented that the biggest problem in Michigan is that there is no limitation on the time cases can be filed. Indiana has a 2-year statute of limitations; also, we are insured in Indiana.

2. Union

Mr. Gallagher reported that across the nation, there are 3 or 4 strikes in process which were caused by working standards. It seems to be a quiet year, and with elections coming up the way they are, this is not normal. Here at Studebaker, there is talk that Les Fox will run against Woody Frick, and then talk that he is not going to. If Les would run against Woody, we could expect trouble because people would be lining up behind each man. It has been quiet so far, and we don’t see anything that promises trouble at this time. Considering that Woody is coming up for re-election, their cooperation on the Avanti line has been remarkable. They have been told that they have everything they’re going to get over there. It is amazing that the freeze is still on.

The Nyloncraft bulletins that were posted in our plant have been removed. These bulletins listed, by name and address, the people who were working in the Nyloncraft plant during the strike and called them scabs. The bulletins called on the people of Studebaker to do something about it if these people were their friends or relatives. Mr. Gallagher pointed out that these bulletins could have been put up by any worker on the line – not necessarily by the Union.

LEGAL

1. AMC Complaint

We have had a complaint from AMC regarding advertising by one of our dealers. Certain statements were made that were not correct, e.g., items of equipment that are standard on our cars are not available at any price on the Rambler: padded dash, etc. Mr. Feuer indicated that this emphasizes the necessity that we follow the procedures that are established. Dr. Lamberti asked Mr. Feuer for a memo concerning this. It has caused ramifications in our subcontract work with AMC where we are in line for some 6-cylinder business for their ’64.

2. Chemical Compounds

We have been served with a Grand Jury subpoena. Apparently one or more of our dealers will be called also. This is in reference to certain marketing methods of Chemical Compounds.

FINANCIAL

1. Tooling

There was $400,000 in Lark tooling committed last week, bringing the total to $900,000. The Avanti tooling to date is $50,000, making the total committed $950,000 against $6.7 million.

2. Truck Inventory

An analysis has been made of truck inventory to pinpoint large items and decide what can be done to get the inventory down. A decision will be made later this week as to what will be done with the Argentina material; that is, whether it will be reworked.

INTERNATIONAL

1. New Zealand Assembly Plants

We have been given governmental approval for assembly plants in New Zealand, and we hope to have the new import license within the next two weeks. We have requested 300 for the first 12-month period. This program, when accepted, will give us the largest number of units of any U.S. make assembled in New Zealand.

This is one of the few VW assembly plants that has no participation from VW. (They were actually interested in us through VW.) Mr. Thomas remarked that we should not antagonize VW; they are a natural combination with us for export. Mr. van Merkensteijn is planning a trip to VW next month to try to smooth things over a little.

2. Australia

Australia will do 1,600 units of the ’63 model, which is about 400 above the ’62 model. We are making an analysis, hoping to introduce the 6-cylinder model there this year because we could expect to get 2 or 3 times the volume we are now getting by going to the 6. Up until now, there was no car in the market that could compare with our 8 in terms of size and power, so we used it to get a start. Now we will use the 8 as a base to go to the 6. Rambler has just announced the 6-cylinder Classic, which will be about $45 above our 8. (In other words, they are stretching to the limit to get the 6.) So we expect to be under them substantially. However, Valiant has subsidized their 6, and they are far below what we could have accomplished in the initial state.

3. Boxing

We have firm estimates from our assemblers now to keep our boxing going through June.

APPLIED RESEARCH

1. M44

We will have another meeting with the people from ATAC tomorrow, and within the next week, all the problems should be on top of the table as to what the Government must do to meet the time schedule.

2. M602 CKD and 25K Loader

Nothing to report.

3. E48

We are working on a proposal for export sales to foreign aid countries.

4. Turtle

We have not yet received a firm order on this. We expect an order from ARPA when the Colonel returns from his trip to SE Asia.

5. ½ T vehicle, ? T Vehicle, 2½ T Study Program

These proposals are all on schedule and will be out the first part of March.

PUBLIC RELATIONS

1. Performance Runs

Mr. Whitmer reported that Mr. Dredge is coordinating the Mobilgas Economy Run and the Daytona Runs. At the Pure Oil Runs, a dealer ran an Avanti – except that he didn’t get the car started so, actually, the Avanti didn’t really participate (although the newspaper releases did not present it that way). Now we have coordination between public relations and engineering. We got the 6 out of the Economy Run because it still had our old carburetor in it (the 8 with a 259 engine will be in); and at Daytona, we will at least have the best information to the participant.

MISCELLANEOUS

1. Avanti

Dr. Lamberti said there will be a meeting regarding our production rate compared with Ashtabula, and Mr. Gallagher should attend. Corvette wants Morrison to build more bodies for them, and he wants to know what our plans are. We would like to put off the decision until May to see what the sales picture is. We can build 25 or 30 per day here, but to go up to 40 or 50 would require additional equipment. His operation is more efficient than ours, and his production cost is less than ours.

In connection with his visit to Corvette, Mr. Gallagher reported that, by visual comparison, we have a better dust control system than they do, and our line looks better than theirs. However, they are conveyorized and have a good pace on the line. Our workers wear protective clothing furnished to them; they offer this clothing to their workers at cost.

2-27-63

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