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It was discovered that they could make the parts but could not assemble bodies in sufficient quantities.  A second assembly line was started in South Bend in December 1962.  

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11 hours ago, studegary said:

It was discovered that they could make the parts but could not assemble bodies in sufficient quantities.  A second assembly line was started in South Bend in December 1962.  

Again, this was a big part of the problem, however, not the main issue!

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1 hour ago, studegary said:

MFG was busy making Corvette parts for the new 1963 models that were big sellers, particularly the coupe (split window).  This tied in with my previous reply.

This is true....but not the real answer here.

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23 hours ago, Gunslinger said:

I'm guessing either paint issues as their contract with Studebaker specified complete and painted bodies or maybe a strike.

Gunslinger nailed it!......Apparently there was a strike at MFG during those months which REALLY upset the folks at Studebaker......especially when it was leaked that although Avanti body production had stopped, Chevrolet Corvette bodies were still being assembled and shipped!

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