Document ZBKwjN3a2EB6BpmxdQqzv7gv8

/&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 B. Iwarsson Page 2 1. Substitute the impression stamp on the edge which calls for the batch code and New York State code with the same information printed on. 2. Eliminate fully painting the edge opposite identification stripe and other markings. 3. Substitute impression stamp on the I.D. of the Fruehauf part number, the FMSI part number, and the ANC or CAM designa tion and replacement of it with printed information done ax the same time we mark the edge. Each of the above reduces our costs by about $.043. If all were accepted, our profitability of the two largest 0E block numbers (74% of the total account) will be increased from 19.6% to 25.5%. The above counter proposal has been made and we will pursue Fruehauf for their acceptance. ADIndelicato LHBoyd RLWard REFenner OBR 04840