GROUP 1.-CHANGES TO CHRYSLER VEHICLES TO MEET 1968 DEPARTMENT OF TRANSPORTATION STANDARDS

GROUP I-CHANGES TO CHRYSLER VEHICLES TO MEET 1968 DEPARTMENT OF TRANSPORTATION
STANDARDS-Continued

GROUP II.-SAFETY CHANGES MADE BY CHRYSLER OTHER THAN THOSE REQUIRED BY DOT

COMPLIANCE BY AMERICAN MOTORS CORP. AUTOMOBILES WITH THE AUTOMOBILE SAFETY STANDARDS ISSUED BY THE U.S. DEPARTMENT OF TRANSPORTATION, EFFECTIVE JANUARY 1, 1968

1. The American Motors Corporation 1968 Model Rebel Automobile sold to the General Services Administration first met the 1968 safety standards of the Department of Transportation with the first manufacturing on or after January 1, 1968.

2. No American Motors Corporation automobile model met all of the 1968 safety standards of the Department of Transportation until the first manufacturing on or after January 1, 1968.

3. American Motors Corporation first manufactured automobiles in compliance with specific Federal Motor Vehicle Safety Standards as set forth in the attached chart.

Chairman, Subcommittee on Executive Reorganization, Committee on Government Operations, U.S. Senate, Washington, D.C.

DEAR CHAIRMAN RIBICOFF: I am enclosing a copy of the final revised "Guidelines for Adjustment of New Automobile Prices for Changes in Quality of Product." These guidelines supersede those dated August 8, 1967, which were used to obtain data for adjusting prices of 1968 models. They have been revised further following the discussions which we held with you and representatives of the Senate Commerce Committee and other Federal agencies in July.

You will note that the revised guidelines reflect the agreement reached between the automobile manufacturers and the Subcommittee of the Committee on Government Operations to the effect that detailed data on costs of changes made to comply with Federal Safety Standards would be supplied by the manufacturers to the Bureau of Labor Statistics. In accordance with that agreement, the BLS expects to determine an average value figure for each of the changes made to comply with the safety standards for all makes and models of automobiles. These average value figures will be supplied to the Subcommittee, the Department of Transportation, and other Federal agencies, as well as being issued in a public report.

As you know, the Bureau of Labor Statistics is concerned with all quality changes in connection with compilation of the official price indexes, including those not related to safety standards. Total net values of all quality improvements and deteriorations in the 1969 models of automobiles will be determined and published.

Sincerely yours,

BEN BURDETSKY, Acting Commissioner. Revised August 29, 1968.

GUIDELINES FOR ADJUSTMENT OF NEW AUTOMOBILE PRICES FOR CHANGES IN

QUALITY OF PRODUCT

INTRODUCTION

This paper describes and defines the concepts and procedures followed by the U.S. Bureau of Labor Statistics in adjusting quoted prices of new automobiles for changes in quality in connection with compilation of the official price indexes. The purposes are (1) to specify the basic information needed to make the adjustments, (2) to indicate how these data will be used, and (3) to aid users of the price indexes in interpreting them. (Note: Special attention is being given to changes resulting from or related to the Federal Safety Standards.)

The basic concept of quality in an automobile is the same as that for any other product, i.e. utility to the user. It usually is thought of in terms of reliability, durability, convenience, safety, economy, speed, acceleration, carrying capacity, maneuverability, comfort, appearance, prestige, etc. Many of these character istics, in turn, are not susceptible to precise, direct measurement; but most of them are related to physical characteristics of the automobile which can be described specifically.

Therefore, the BLS specifies the quality of an automobile in terms of its physical characteristics, and examines significant changes in those characteristics with respect to their effects on quality. When examination shows that a significant quality change has taken place (either improvement or deterioration) the problem then becomes one of determining the value of the change, in order to adjust quoted prices accordingly.

If the feature involved in the change were available separately, then the market would establish its value. Unfortunately, this situation exists only with respect to optional equipment items, and not for the myriad structural and other changes which are incorporated into the automobile and become an integral part of it. One important basis for valuing the latter types of changes is cost marked up to selling price. Furthermore, the market price for an optional equipment item cannot be regarded as establishing its value; unless the item has been installed on a large proportion of automobiles in response to market demand. Where installation rates have been low, the same basis may also be used in part for valuing optional equipment items.

A. Criteria for quality change adjustments

1. The quality changes for which adjustments will be made include those structural and engineering changes which affect safety, reliability, performance, durability, economy, carrying capacity, maneuverability, and/or comfort and convenience, including, but not limited to:

a. Changes that affect the safety of occupants of the car, and/or the safety or healthfulness of the outside environment, whether required by Federal Safety Standards or not;

b. Engineering changes that affect the possibility or probability of mechanical failure with respect to such features as braking and steering systems;

c. Changes in mechanical features that effect the overall operation or efficiency of the automobile, or the ability of a component to perform its function, such as, acceleration, steering control, stability, horsepower of the engine, transmission, compression ratio, carburetor;

d. Changes in design or materials which affect the length of service, need for repairs, or strength of the item, such as improved oil filter, self adjusting brakes, weight or quality of materials used in relation to their function;

e. Changes that affect comfort or convenience such as redesigned seat belts, foam rubber seat cushions, trunk light, folding center arm-rest, etc.

2. Changes for which adjustments will not be made are:

a. Style, or changes in appearance designed solely to make the product seem new or different, such as trim and conformation, design of radiator grill, etc., unless previously offered as options and purchased by a large proportion of customers.

b. Physical changes in separate components or parts that are new in design or constructed of different material, such as simplification of component, substitution of plastic for metal in the instrument panel, unless it is apparent that there has been a change in the ability of the component to perform its function, or unless the changes are necessitated by a significant change in another component. B. Pricing and adjustment procedures

1. Selection of series.-New series selected for pricing at the beginning of each model year are those most nearly equivalent to series priced in the preceding year. Four conditions govern the choice of a specific series. First, it must be produced by the same manufacturer. Second, it must have the same body type. Third, it must be in the same size class (i.e., compact, intermediate, or standard). Fourth, principal features (e.g., location of engine) must be comparable.

The third condition, which treats the three sizes as three different items, occasionally presents a problem of identity when a modification in size, (overall length) shifts the automobile into another size class. When this happens, wheelbase length rather than overall length is used as a criterion for determining size comparability. The past history of size changes for models previously selected for comparisons is also considered when selecting the replacement model.

In some instances, the new model most nearly comparable with the previously priced model does not represent the current volume seller in a particular series. When this occurs, the new volume seller may be introduced later in the model year after the changeover to current year models is completed.

2. Data to be supplied by automobile manufacturers.-Whenever significant changes in physical characteristics of automobiles are made (usually at beginning of model year) they should be reported, including those which involve lower quality, as well as those which cover product improvement. There are times when lower quality may offset all or part of the cost of some quality increases. Frequently, a significant change in a major component is accompanied by design changes in other components which partially offset the cost of the major change. In order to provide the information needed to evaluate quality changes, the manufacturers are asked to report, in detail, the following changes in physical characteristics:

a. Changes resulting from or related to each of the Federal Safety Standards, listed separately;

b. Other significant changes, including changes from optional-at-extracost to standard equipment, and vice versa, except those involving style or trim (see A. 2. a., above).

3. Grouping related changes.-Related changes should be grouped in reports of changed characteristics. Related changes and/or additional parts required to accommodate the principal change in a component assembly are considered part of the overall quality change when the improvement can be had only in combination. This procedure provides a better basis for deciding when changes in one component are offset by changes in another. Redesigned parts necessitated by the principal change in particular component may result in savings that offset part of the cost of the principal change.

4. Valuation of changes.-When a change involves installation of some entirely new feature as standard equipment, its valuation will be based on its estimated value as defined in 5. a., below. When it replaces or modifies something that was standard equipment on previous cars in the same or comparable series, it will be based on the difference in estimated value between the new feature and the old one. When it involves making standard a feature that previously was optionalat-extra-cost, its valuation will be based on a combination of option price and estimated value in accordance with the proportion of cars in which it previously was factory-installed as optional equipment.