When I called Musiciansfriend to get my price adjustment they said $699 was below their cost, a manager had to approve the price match.
Looking at other posts and judging by what I know to have been true in the past I would bet the dealer cost on the JTV89 is around $850, and I would bet it costs L6 around half of that per guitar all in (R&D, manufacture, advertising, shipping from SE Asia etc.)
If L6 decided to end production of the non trem 89 and blow out the remaining stock they most likely made a deal to reduce the dealer price to L6 cost or thereabouts for Sweetwater on the remaining stock.
So Sweetwater still makes a profit, L6 moves the remaining stock at cost - you are right, L6 is probably are not losing any money on the deal, more likely breaking even on the remaining stock and freeing up resources for something more profitable. Surely no one would have expected them to sell these guitars at cost fromn the beginning? That would not be a great business plan...
True, someday my brand new JTV will die, but til then I will have a really cool tool to use. Hmmm, come to think of it, my old Variax transplants are still working fine, one was made from an original Variax (pre-500 designation) that was made in I believe 2003 and the other was built from a V300 that as I recall was from 2006, so they have already lasted me a pretty long time and if they fail I can easily pick up a used Variax for parts for the foreseeable future - I would bet that in 5-10 years used JTVs to use as parts donors for repair will be fairly cheap as well.
Sweetwater gives a free 2 year warranty on the Variax, also a longer warranty can be purchased for an additional charge.
I had problems with the saddles on my Variax 300, changed to a Graphtech Ghost bridge when I did the transplant and have not had a problem since. The model knob problem you had is something pretty rare I think, but that part can easily be replaced here :http://www.fullcompass.com/brand/LN6/Replacement-Service-Parts.html. I think the model knob cannot take a lot of abuse, and sweat and corrosion is what usually kills the piezos.