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60 a month by July 1954. Based on the contractor's current schedules, which requires 247 deliveries by December 1954, the two schedule changes constitute a stretchout of almost 9 months.

The foregoing developments along with other contributing causes generated costs which could not be anticipated, and while the contractor's accounting records are not kept in such a fashion as to yield the exact cost effect of such changes, it is estimated broadly that the price of the first 71 planes has increased approximately $20 million as a result of these factors.


The contractor was launched upon the F-84F program in December 1950 with virtually no engineering data on the new plane. There was no basis for antici. pating the heavy volume of changes that were to follow. For many months in the earlier phases of the program changes were, in effect, merely correction of preliminary or erroneous drawings as received from the prime design contractor and development of design as thinking changed. The greater part of such cost could not properly be handled as specific engineering changes. Starting roughly at the point when initial engineering data for the first F-84F plane was available, the obsolescence, vendors' claims, special tools and tool rework resulting from engineering changes, will cost about $7 million.

Another important cost effect of engineering changes, which is not perceivable on the books, although continuously flowing into the accounts comprising the cost of production is referred to more specifically herein under the caption "Material and labor."


At the time of compiling the original estimate of plane prices there was virtually no engineering data available to the contractor as a dependable basis for determining material costs. It was necessary, therefore, to apply an overall cost per pound of airframe. The actual material cost incurred for 71 planes demonstrates hat the formula was inadequate.

For the same reason the formula for direct labor, accepted in the aircraft industry where new planes are involved, was used. The contractor applied the “'80-percent curve” based on 3.2 hours per pound at plane No. 250 in developing the labor cost. In retrospect it becomes clear that this formula, too, was optimistic.

Delaying factors described hereinbefore and engineering changes have caused substantial increases in subcontractor prices for parts and assemblies.

The labor cost has been substantially increased by the numerous production interruptions stemming from the very heavy volume of engineering changes.

The contractor estimates that these factors account for approximately $14 million of the increased price for the first 71 planes. Special tools

The contractor's original estimate for special tools was made without the benefit of engineering data on the new plane to be built. However, the emphasis placed on compliance with delivery schedules demanded prompt starting of tool construction.

Under direction of the Air Force the contractor provided production tooling of a design and durability to accommodate a production rate of 236 airplanes per month for a minimum period of 2 years. During the long stage of development of the F-84F design the numerous changes and corrections to tool drawings and to these hard tools themselves proved very costly.

It is important to recognize that all tools bearing any relationship to master gages could not be completed by the contractor and coordinated to make an acceptable product until those master gages were on site. The delayed availability of master gages which continued throughout the program caused considerable interruption and rework, and increased the tooling cost.

Due to the foregoing factors, the tool-construction workload was greatly increased; and, to cope with this situation, the contractor took a number of steps which necessarily increased tool costs; among other things, tool designers and toolmakers were recruited so as to shorten the tool-building period; a training program for about 250 men to augment the tool building was undertaken; and outside tool shops were used.

As a result of these conditions, the contractor estimates that the cost of special tools will be increased approximately $8 million.

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I certify that the information contained herein for the period ending May 31, 1954, has been compiled from the records and books of the Buick-OldsmobilePontiac assembly division, General Motors Corp., in accordance with its regular accounting practices consistently applied ; and, to the best of my knowledge and belief, the cost and expense are correctly stated as shown.

Divisional Comptroller.

SCHEDULE A General Motors Corp. Buick-Oldsmobile-Pontiac assembly division-Proposed

retroactive prices

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General Motors Corp., Buick-Oldsmobile-Pontiac assembly division Analysis

of allied material content Allied defense supplies at cost value: Fisher Body

$54, 123, 439. 07 Delco appliance

197, 013. 44 Process development section

375, 097.04


54, 695, 549. 55 Except item 1.

Material at invoice price from redeterminable - allied suppliers :

Saginaw Steering Gear
Delco Products.

2, 205, 555. 76 2, 075, 000.00

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Total allied (to schedule A).

59,053, 393. 33 1 The prices of these 2 divisions have been redetermined by the Air Force.


General Motors Corp. Buick-Oldsmobile-Pontiac assembly division-Contract

change notifications closed in first segment







Except item b.

56 1
58 1
61 1
63 1
61 1

Except items 3, 6, 7, 11, 12, 13, and 15.
Except items 1, 3, 5, 7, and 10.
Except items 2, 5, and 10.
Except items 1, 2, 6, and 7.
Except items 1, 5, and 6.
Except items 1, 3, 5, 6, and 7.
Except items 1, 2, 3, 5, 6, 8, 9, 10, 11,

and 12.

1. 21 31 4... 5. 6.. 7. 8. 9. 10. 11. 12. 13. 14. 15. 16 17. 18. 19 20.. 21. 22. 23. 24. 25. 26. 27 28. 32 34. 35. 361 37 38. 40. 41. 42. 43. 44. 46. 47 48. 49 50 51.

Except items 1, 2, 4, 5, 10, 11, 14, and 15.


Except items 5 and 6.
Except items 1, 2, 3, 6, 8, and 11.

Except items 1E and 2.

Except items 1 and 2.

Except items 1, 2, 3, 4, and 9.
Except items 1, 3, and 5.

Except items 1 and 5.

i Canceled.


General Motors Corp. Buick-Oldsmobile-Pontiac assembly division-Proposed

forward prices of F-84F airplanes

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General Motors Corp. Buick-oldsmobile-Pontiac assembly division-Analysis

of allied material content

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Allied commercial suppliers at invoice price:

Packard Electric.
Buick Motor.
Allison division, aeroproducts operations..

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17 2, 795

6 2, 120

2, 882

2, 196

Total allied (to schedule B).

113, 831

75, 616

1 The prices of these 2 divisions have been redetermined by the Air Force through Sept. 30, 1954.






Exhibit 1, "Estimated Material Costs," included herewith, shows in detail the estimated cost of direct material included in the prices quoted for the second and third segments of planes. The detail set forth in this exhibit shows a list of parts individually priced, representing approximately 87 percent of the total material value per plane.

The unit price indicated for the allied divisions are firm, with the exception of Fisher Body division, Delco appliance division, and Process development section. The contribution of these divisions is included at cost.

The unit prices shown for material purchased from outside suppliers are firm and are supported by purchase orders.

Miscellaneous materials approximating 13 percent of the total material value have been included at the costs experienced for the last airplanes in the first segment.

DIRECT LABOR (EXHIBIT 2) Included herewith are direct labor charts showing actual and estimated direct labor performance by shops, together with a summary showing the total plant performance. The solid line on each chart shows actual average hours for units produced through May 31, 1954, and the broken line represents the estimated hours to complete the remaining units under contract.

The estimated labor hours for each shop were developed by giving consideration to the cumulative actual trend line and known conditions which would affect future performance. Readings taken from the shop charts were summarized and plotted on the total plant chart.

It will be noted from the total plant chart that an increase in hours per plane occurred after plane No. 48. This increase can be attributed to the acquisition of the aft fuselage as on-site work. The trend from this point forward indicates approximately a 74-percent curve which compares favorably with the 74-percent trend experienced to this point.

To compute the direct labor for forward pricing, the estimated hours required to complete the remaining planes under contract were priced at $2.01 per hour and added to the direct labor in process as of May 31, 1954. The rate of $2.01 per hour was based on the experienced rate of $1.96 per hour increased by the $0.05 per hour annual improvement factor granted May 29, 1954, in accordance with the union agreement. Burden

The burden cost per plane included in the proposed forward prices is the result of estimating expenditures to complete the planes under contract plus the burden in process as of May 31, 1954.

The estimate to complete was based upon the experience gained in recent months adjusted to compensate for influencing factors anticipated in the forward program. The rate of burden expenditure will increase slightly after the fall of 1954, at which time it is anticipated that such expenditures will begin to decline.

The following incurred burden rates by quarters were arrived at by using the burden dollars developed on the basis outlined above:

Percent 1st quarter 1954, actual.

285. 46 2d quarter 1954, actual.

250. 16 3d quarter 1954, forecast.

188. 55 4th quarter 1954, forecast.

155. 96 1st quarter 1955, forecast.

179. 05 2d quarter 1955, forecast_

233. 52 The change in trend to an increasing burden rate in the last two quarters is the direct effect of the contract build out.

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