Mr. Whitmer reported that 4,125 have been shipped, and we want to get out 5,500. There are only 66 waiting for shippers and 196 in the not-okayed bank. There are 1,689 at Chippewa; and with 1,100 to be built yet this month, some will have to come out of Chippewa in order to get the 5,500. About 70 per day will have to come out of snowbank.

Mr. Whitmer answered Mr. Bender that 218 GSA units have been okayed. Sales would like 315 shipped this month, and they all have to be retail serviced.

Avanti:

We are scheduled for 4 per day, starting this week.

Commercial Truck:

Military Truck

2. Avanti – Paint

Mr. Whitmer asked about changing from metallic paint because we have so much trouble with it in production – Turquoise, especially. Mr. Lamberti told how Corvette got away from metallic paint by using darker colors and indicated that we could consider going to a deeper enamel paint in a running change. Mr. Feuer said only one color should be introduced at a time so that it wouldn’t indicate a model change.

SALES

1. Dealer Count (This Morning)

*San Francisco and a sale for the Kansas City Retail Store (should know today if we will be able to sell it).

Sales plans to terminate 100 inactive dealers over the next 30 days.

2. Retail Deliveries

Mr. Bender reported that Sales expects retail deliveries to be 2,400-2,500 for the last 10 days of this month with 200-300 of them being GSA. We are working for 6,700, including GSA. (Last year, 4,337.) The daily sales rate was down a little last week, probably because of the weather – 4 or 5 zones have had very bad weather.

3. Special Truck Order

As of Saturday, the people have taken no action, and Mr. Corcoran does not know when we will know. They have made their tests on the truck we let them have and have said that Studebaker out-performed the Ford. They are presently seeking financing. Mr. Lamberti asked that a memo be circulated to interested parties giving the details, and Mr. Whitmer pointed out the need for information to set up scheduling.

4. Avanti – Orders

We have built roughly 1,900 and have orders for 2,900. With 650 next month, production will be right up with sales at the present order rate – assuming all orders are good. Mr. Lamberti wondered if Sales had checked the validity of the old orders. Mr. Egbert wants 900 produced in March and 900 produced in April, and Manufacturing doesn’t want to build up to a high rate by the first week in April and then have to drop back to 24 per day. Mr. Bender said that Sales took the wraps off the Avanti last Monday and has started promoting its sale – they’re now looking for orders and are going to advertise on the basis of early delivery. It will take about two weeks to get a real feel of the reaction. Manufacturing would like to know what the picture is by the middle of February so that plans can be made. The projection for 1963 is 10,000.

5. Operation Center

The Center will be continued here as well as at the zone level, although the information received will not be as detailed. Retail sales will be reported for dealers who, during 10 months of 1962, sold 6 or more vehicles. The dealers are selling out of their inventories and not reordering. Operation Center will be retained for February.

6. Inventories

Dealer (as of the 20th) 18,200

7. Sales Promotion

We think part of the pickup in retail has been due to cooperative advertising. We won’t know the cost of the program until about February 20. Until we learn what the impact is, we will use national advertising in February and are considering another cooperative advertising program in March based on the dealers’ wholesale purchases in February.

Mr. Bender will make a flip chart presentation of current sales promotion programs next Monday and outlined the direct mail program Sales is working on now. We are mailing 800,000 pieces to Ford, Plymouth, Rambler, and Chevy owners, starting about March 11. It will be launched with zone managers next Monday and at dealer meetings immediately following. Everyone taking a demonstration ride will get a Hi Fi record (which dealers will pay for at $1 each); and in states where it is permitted, they will have a chance to win an Avanti, a trip to Europe, or a minor prize. It’s based on the Readers Digest idea of a number that you take to the dealer’s showroom.

PARTS AND ACCESSORIES

1. Carburetors

Because of the flat spot in the carburetors, the campaign has been delayed. We expect to get the last carburetors by February 20-25.

2. Keys

Mr. Challinor urged that something positive be done about changing the aluminum keys because we had 7 of them break last week. He feels it is particularly important with Avanti owners. A brass key was suggested. Mr. Lamberti said that aluminum is stronger than brass and that the trouble was probably due, in part, to the design of the key – the ignition key has a large finger grasp portion in relation to the rest of it; whereupon Mr. Challinor reflected that he hadn’t received a single trunk key complaint. Mr. Hardig will tabulate who of our competition uses aluminum keys, although in a previous tabulation it was learned that 90% of competition is using aluminum. Industry went to aluminum because of weight.

QUALITY CONTROL

1. Pink on the Paint – Avanti

Test panels indicate that it is the die in the fuel that causes the pink color. The color will wash off if it is done soon enough, and if the car has been waxed, there is no trouble at all.

2. Water Pump Shaft – Avanti

The water pump shaft broke in two Avantis: one Quality Control test car and one car at Ashtabula. Mr. Hardig is releasing a new pump.

3. Thermostat

We tested 26 pieces that were returned and found 23 that were all right. It may be that people are changing to hotter thermostats, and we’re paying for it.

4. Avanti Production

A quality control program similar to the one in the body plant is being established in Avanti production. There will be two quality control people assigned to the Avanti production, and systems, procedures, and check points will be set up to get word back to the foreman to let him know what is taking place – to try to stop planned repair. We must have proper quality image on the Avanti. Mr. Lamberti told Mr. Gallagher to let the stewards be aware of this because we’re going to move in. Mr. Whitmer said we may put some pressure on them by sending the line home. There will be a meeting on this this afternoon.

PURCHASING

1. 1963 Model Phaseout

We have to give the Budd Company and others a breakoff time and will need the phaseout requirements from Sales by the middle of next month. Mr. Lamberti will meet with Sales on Wednesday at 1:30.

2. Subcontract Work

Ford thinks they have an order for 3,500 (3 year) or 5,000 (5 year) trucks with a Ford chassis and an Army cab. The cab is the same as we are producing now, and Ford has approached us for a completed cab, including the paint. This could mean over one million dollars of business.

International Harvester has asked us to bid on cabs on the M602. They’re also interested in a quote on stampings. Their people from Chicago will be in here either this week or next. This could mean about 1˝ million dollars worth of business. This cab business wouldn’t interfere with the rest of the line except in the painting where we are restricted to 4 per hour.

We are starting to produce 150 V8 blocks per day for American Motors and expect to begin production of 6-cylinder heads for them as soon as they have been approved.

In addition to these, we are working with Motor Wheel and have two Budd brake drums. We could end up with four or five million dollars worth of work in 1964. Some of the foundry work will be greater than the foundry work on our own automotive.

3. Government Auditors

The auditors have asked to see our purchase orders on the 3904 truck contract. There will be a meeting of Messrs. Lamberti, Rickus, and Soelch concerning this.

INDUSTRIAL RELATIONS

1. Government Survey

Last November a survey was made in our plant (no reason given) by the U. S. Department of Labor Safety and Health. They were here about 3 days and came up with a list of 45 violations – as they saw it – and indications were that all items were to be corrected. We are to notify them by February 5 of the items we agree to correct and those we feel do not need to be corrected. Mr. Gallagher is getting a report on the cost involved. He doesn’t know how far we can go. We could end up in Washington in a legal hearing. A company has very little recourse and can be put on a black list for Government contracts for 3 years.

2. Industrial Relations Meeting in Detroit

The Kaiser Steel settlement was discussed at the meeting last Thursday, and it was pointed out that we no longer have 2 parties in a settlement – we now have 3: the company, the union, and public interest. Although Kaiser Steel said it was only a 2-party deal, all public releases gave the impression that it was a 3-party settlement. Unlike the AMC arrangement, Kaiser profit sharing must come out of labor savings. (Any AMC labor savings washed out during launching.)

Mr. Gallagher feels Detroit is starting to build up stocks – feels AMC is running into a stock problem.

Mr. Gallagher mentioned the importance of hiring negroes to avoid unnecessary Governmental interference.

Mr. Gallagher highlighted the Pat Gosser case in Toledo – a UAW V.P. in trouble with the Government. He was caught rifling a Government file to get material they had on him. In Toledo there is no contracting out unless he gets a cut, and proceeds from all bars in union halls in Toledo go to him.

3. Truck & Avanti Line Shutdown in December

We have been at odds with the Local 5 subcommittee members over the shutdown we had in December when Ashtabula was shut down. We said there is no eligibility for benefits when an Act of God is concerned, even though it is in a supplier’s plant – and the snow in Ashtabula was an Act of God. We have paid some but didn’t go all the way. Mr. Gallagher believes this could end up in arbitration.

4. U. S. Savings Bonds

There has been a lot of pressure brought in Washington for a U.S. Savings Bond drive in May through July. Our Company will be included on a committee of automotive companies in a drive for payroll deductions. (At present, we don’t look too good.)

5. Exempt Salaried Program Presentation

Mr. Ray Plencner gave a presentation on this program. Effective February 1, personnel on the exempt roll will receive increases to bring them up to the new minimums. If the increase necessary to do this represents more than 10% of the present salary of the employee, the additional amount (over the 10%) will be granted on May 1. Of the exempt roll, 2 ˝% will be eligible for an increase. Of the 870 people on the exempt roll, 323 will receive increases February 4 and about 25 will get an additional increase on May 1. Each major operation head will be contacted by Personnel to tell them where each one of their employees stands in relation to the new program. Mr. Gallagher is sending out two letters: one to the department head and one to the individual employee. The cost of this program is $207,163, and this program, along with the non-exempt program, will cost a little over one-half million dollars.

LEGAL

1. Air Pollution Cases – Detroit

These cases are being filed at an average of 10 per month. We are presently contesting two of them which we expect to win.

2. Corporate Advertising Claims and Responsibilities

Mr. Challinor received a letter from a man who rolled an Avanti and reported that the roll bar broke on one side. The owner referred to the Avanti advertising regarding the safest car and said he would have been safer in a metal car, but he is not threatening suit at this time. Engineering is working on tying the roof to the roll bar with steel and bringing it all the way down to the frame. Mr. Feuer said that under the present status of the law, the manufacturer, in advertising, can be held to have warranted to the ultimate customer. If manufacturing advertises directly to the customer, the advertising claims can be a basis of suit on a breach of warranty count. If we are going to advertise the Avanti as the safest car, we may be called into court some day to prove it.

3. Dealer Termination Suits

M-B terminated Fine Motors on December 31, 1960 with lack of performance as the basis. This was during the period of allocation, and the dealer said he sold all he could get. The case was settled for $16,000 each.

M-B terminated the dealer at Santa Rosa, California, when he changed his location. The dealer said the new location was better than the old one and that we had just used the change of location as an excuse – we really wanted to sign another dealer. This case was settled for $500 (although up to June, 1962, we have paid $5,000 to defend ourselves).

FINANCIAL

Mr. Rickus had nothing to report.

INTERNATIONAL

1. The Longshoremen Strike

The longshoremen strike is over, and Export plans to make up in February for the volume we lost in January.

2. G.I. Sales in Europe

Mr. Thomas reported that a selling organization is being appointed this week to handle G.I. sales in almost all of Europe.

3. South Africa

We have orders for 120 two-door Marshalls from South Africa: 48 in February, and 72 in March.

4. Verdi – Turkey

Mr. Verdi had several meetings with defense department officials in Washington, and we expect him to visit South Bend this week.

APPLIED RESEARCH

1. M44

There has been no meeting set up for further negotiation. Probably nothing more will be done until the auditors leave.

2. M602 CKD

Word was received out of Detroit that they have instructions to proceed with International Harvester to make 2,200 of the 3,700 CKD, and Detroit is negotiating with them. At the present time, we are working up an unsolicited proposal for Detroit and Washington on CKD for the M602 to see what we can do about changing the situation. We expect to get it out by the first of the week – it is a rework of the feasibility study.

3. M113

Nothing further on this.

4. 25K Loader

The cost proposal is due Thursday. We have most of the cost information tabulated and will be ready for the final determination on price this afternoon or tomorrow.

5. Turtle

The Army’s requirement should get to Washington this week. From there it will go to AMC, and from there to Detroit Mobility Command before it is consummated – still expecting about 25 of these for field test purposes.

6. New 2˝-Ton Truck

We have a request for a proposal for a new 2˝-ton truck, and the proposal has to be in by March 8. The truck is apparently intended to be a successor to the XM410, the M34, and the M35. This is a study program and does not require any prototype. We don’t have to come up with a design of a truck but, rather, with 10 or 12 approaches for the design of a truck. One thing they stress in the RFP is that it should be an economical truck to produce. We expect to put in a proposal.

PUBLIC RELATIONS

Mr. Whitmer had nothing to report.

1-31-63

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