We have talking about this since CES on AVS. Here is the response on the new model pricing from Gallo.
http://www.avsforum.com/avs-vb/showthread.php?t=805768&page=28"The Ref 3/3.1 has always been a profit underperformer for Gallo especially compared to industry expected/accepted product margins. Everything in the 6 moons article explaining the 3/3.1 QC and cost challenges are valid. Since you seem to know something about manufacturing, the single most contributing factor to the price difference is due to a jump in our costs for finished product in Asia by in large, for the cast aluminum stalk, which to this day, has been a challenging assembly to manufacturer consistently, and is the single most expensive component on this product.
In the last 39 months, Gallo had accumulated and sent back to China, a container load of 3/3.1's that failed cosmetic QC here in the US. A large percentage was related to inconsistencies regarding this stalk. Our manufacturer acquires this piece finished and ready for assembly. The subcontractor of the piece has always frowned upon producing this part and in light of the batch we just sent back for credit, became the catalyst for what provoked a 46% (they were eating costs from the start also from what they claim) total price increase and was not open for negotiation. We have tried sourcing other suppliers for this part, even willing to retool (which is not an inexpensive proposition), but no one was willing to take it on.
If they would have quoted us higher from the get go, this issue would have never escalated to this. The subject assembly is cast as two vertical halves that are pinned together and then welded around the whole seem. After that, they are ground to make the unit appear as a single smooth continuous support structure, shortly after, the hand grinding is completed. It gets drilled and tapped at several locations, sent out for heat treatment to improve its structural rigidity, powder coated and then sent back to the factory which proceeds to the final assembly stage. Even after 5 years, the rejection rate for this particular part remains higher than usual.
So in a nutshell, the next production of Ref 3.1's would have had to be priced at over $4500pr for the same exact product that is currently selling for a little over $3000. The thought of discontinuing the product was very upsetting to us, So Anthony dug in to find an alternative which will become the new Ref 3.5. There are also materials added to the new version that raises the cost further up to the $6000. MSRP projection. This includes but not limited to, a Dynamicap by-pass capacitor as well as a base that will most likely be a machined Stainless steel 1" thick plate (very significant additional cost with a wider and deeper stance than the original base) and custom machined height adjust spikes.
The bezels between the mids and their spheres are machined stainless steel with a gasket applied to isolate vibration and keep everything sealed which will require a much more involved qc procedure for this new product especially to insure that all drivers are critically fastened and checked that every specified torque value is locked in and stabilized before each product leaves our Chatsworth Facility.
There are added stainless grills covering the mids plus other items (aluminum cone sub driver, an updated CDT tweeter which is the single most expensive driver in the whole product (combined) but I’m sure you get the point. If the major tooling wasn't already done for this product, we probably would just end this product series now, but we believe that there are significant improvements in performance offered by the 3.5, so we'll let you guys, our customers decide for themselves if it's a worthy successor to the 3.1. Anthony believes it will easily again redefine value at now this new price point, which some of the original Ref 3 reviewers already acknowledged at CES. If you have any questions that haven’t been covered here, please feel free to write.
This is the whole story and is very accurate. What has been suggested in the previous post is simply not AGA's corporate philosophy. We have never charged more than we need to for any of our products and the original Ref 3 is the perfect example. All our dealers pleaded to introduce the original loudspeaker at $3500. a pair and if that was the case, most people still would have considered them a great value, but AGA didn't do that and in this economy, especially now just wouldn't be prudent."
