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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

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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.


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.


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:

1st quarter 1954, actual.
2d quarter 1954, actual.
3d quarter 1954, forecast.
4th quarter 1954, forecast_
1st quarter 1955, forecast_.
2d quarter 1955, forecast_.


285. 46

250. 16





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


Overtime. The overtime premium reflected in our forward pricing was deemed necessary in that experience has proven that unusual situations arise affecting workload to an extent that overtime hours must be worked in order to overcome these temporary production difficulties. These difficulties have been extensive during the first segment. However, it is expected that problems of this nature will be reduced in the forward program. Accordingly, there has been included in forward prices overtime premiums amounting to 2.9 percent of the total labor cost in the second segment and 2 percent in the third segment.

Night shift premiums

Night shift premium included in forward prices has been computed in accordance with General Motors' policy which provides for a 5 percent and 7% percent 'wage premium for second- and third-shift work, respectively.

Cost of living allowance

Cost of living allowance included in our proposed prices was computed at current rates of $0.06 per hour for all hourly rated employees and $30 per quarter for salary employees.


This item of cost is generally comprised of the following elements:

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The estimated cost for forward pricing was based on the experience gained in recent months for each of the above elements.


Change order No. 26 provides that costs incident to the repair and modification of GFAE shall become, subsequent to May 17, 1954, an allowable item of cost under the supply contract. Therefore, included in forward prices is an amount to provide for the contractor anticipated costs resulting from such repair and modification. This amount is based upon the assumption that work of this nature to be authorized in the forward program will somewhat parallel that of the first segment.


There are two major items that make up this credit to total plane cost: (1) Cash discount, and (2) revenue from the sale of scrap. The forward estimate was based on current experience.


The general and administrative item in the cost proposal includes expenses generated by the executive group of the plant as well as expenses of the central offices (General Motors and BOP) allocated to this activity. Other expenses such as State income taxes, loss on excess and obsolete material and loss on commitment cancellations are also grouped in this category in accordance with General Motors' policy. Since expenses of this nature are generally very stable, the estimated amounts for forward pricing were projected from the incurred costs experienced in recent months.

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

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

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