Document 2NQkQmer14oRbz63waG0pk6w6

/&s&/^/Cs^r'c> Date. September 11, 1980 Subject Abex Profitability a From" 0. 0. Lukas To" B. Iwarsson Our investigation of the above determined the following: 1. On the Statement of Earnings of Year to Date through July, our margin on 0E blocks was 11.3%. This business amounted to $507,898 and made up 74% of our total sales to Fruehauf for that time period. 2. On the Profitability Report, the whole account showed a margin through June of 28.7% on $938,545 with no part number with less than a 19.2% margin. 3. Reasons given for the discrepancies were a. The Statement of Earnings considers average cost for the last 6 months. The Profitability report considers average cost for the last 12 months. b. The Statement of Earnings includes the effect of actual scrap rates. The Profitability report uses a lower planned rate. For example, diowing how it affects profitability, if a particular block had a 13.2% margin utilizing a 15% scrap rate, the margin would increase to 19.5% with a 7% scrap rate. 4. Discussions with Boyd, Indelicato, Merkel and Batbazette revealed that we had a 19.7% scrap rate in August 1979 and although it was reduced, it was still a double digit rate from then until April of 1980. May, June and J-uly of 1980 were 9.04%, 8.2% and 7.7% respectively. The conclusion was that we will hold the scrap rate to 10 -- perhaps in the vicinity of 8. Based upon the above -- and Fruehauf1s threatened resourcing all of their business to Carlisle -- we decided to present a counter proposal to Freuhauf in lieu of our June price increase. The counter proposal was ABEX-203 12"' r SCF-ABEX-2395 S-CC-230 OBR 04839