Can anyone tell me the history of the price adjustment factor? I believe they call it CDI, but in essence the advertised base price of 188K is really significantly higher than 188K. When did this practice begin? Does everyone sign up to it? It is open ended, and it appears deceptive.
Here’s what the Cirrus contract says
“1.03 The Purchase Price shall be increased by an amount equal to the Purchase Price times the percentage increase, if any, in the Consumer Price Index for all Urban consumers, U.S. City Average (1967=100, “all items”) as promulgated by the United States Bureau of Labor Statistics, for the period beginning on the date of this Agreement and ending on the Actual Delivery Date (as later defined). This adjustment is of the total Purchase Price and not solely computed on the “balance due”. In the event that the Consumer Price Index for all Urban consumers, U.S. City Average, shall be no longer used or converted to some other standard reference base, the Seller shall make a good faith determination of a substitute index factor to adjust the Purchase Price. The selection of the substitute index will be in the sole discretion of the Seller and not subject to review or question by the Purchaser.”
I understand that Cirrus needs some protection against inflation, and those of us signing up for delivery two years from now should be willing to pay two years worth of inflation. But as the contract is written, Cirrus is entitled to go on increasing the price while they delay delivery (and some initial deliveries have been more than a year late). It would be more equitable for Cirrus to accept its share of the risk and stop the price increase on the Scheduled Delivery Date.
Can anyone tell me the history of the price adjustment factor? I believe they call it CDI, but in essence the advertised base price of 188K is really significantly higher than 188K. When did this practice begin? Does everyone sign up to it? It is open ended, and it appears deceptive.
I understand that Cirrus needs some protection against inflation, and those of us signing up for delivery two years from now should be willing to pay two years worth of inflation. But as the contract is written, Cirrus is entitled to go on increasing the price while they delay delivery (and some initial deliveries have been more than a year late). It would be more equitable for Cirrus to accept its share of the risk and stop the price increase on the Scheduled Delivery Date.
Early buyers have reported that they have done just that - the CPI adjustment runs from contract date through contracted delivery date. As a practical matter, if the contracted delivery date is exceeded by more than 90 days you can bail on the contract, so if they were to start charging beyond contracted delivery date you would have much leverage in the ensuing negotiation.
BTW, there is nothing even remotely deceptive about this. It is in the contract in black and white (ok, pink). It is also very common in the aviation industry, as well in many other cases where capital equipment is contracted for future production and delivery.
Thanks for the info. Still, putting it on the back (in the boilerplate) is different from the articles and advertising quoting a set base price. Also, most companys do not allow suppliers to include automatic escalators or CPI adjustments in their subcontracts (Govt frowns on that too) – so, you are paying for inflation that Cirrus won’t have to pay for in many cases. That adds up to a price increase. Gary’s idea that Cirrus should be willing to share some of the risk is interesting.
I understand that Cirrus needs some protection against inflation, and those of us signing up for delivery two years from now should be willing to pay two years worth of inflation. But as the contract is written, Cirrus is entitled to go on increasing the price while they delay delivery (and some initial deliveries have been more than a year late). It would be more equitable for Cirrus to accept its share of the risk and stop the price increase on the Scheduled Delivery Date.
Early buyers have reported that they have done just that - the CPI adjustment runs from contract date through contracted delivery date. As a practical matter, if the contracted delivery date is exceeded by more than 90 days you can bail on the contract, so if they were to start charging beyond contracted delivery date you would have much leverage in the ensuing negotiation.
BTW, there is nothing even remotely deceptive about this. It is in the contract in black and white (ok, pink). It is also very common in the aviation industry, as well in many other cases where capital equipment is contracted for future production and delivery.