American Motors Corporation (AMC) was an American automobile company formed by the 1954 merger of Nash-Kelvinator Corporation and Hudson Motor Car Company. At the time, it was the largest corporate merger in U.S. history.
George W. Mason was the architect of the merger to reap benefits from the strengths of the two firms to battle the much larger “Big Three” automakers (General Motors, Ford, and Chrysler). Within a year, George W. Romney, future governor of Michigan, took over, reorganizing the company and focusing AMC’s future on a new small car line. By the end of 1957 the original Nash and Hudson brands were completely phased out. The company struggled at first, but Rambler sales took off. A Rambler won the 1959 Mobil Economy Run and by 1960, was the third most popular brand of automobile in the United States, behind Ford and Chevrolet. After two model years (1963 and 1964) of only producing compact cars, AMC focused back to larger and more profitable cars like the Ambassador line from the perceived negative of the Rambler‘s economy car image. In the face of deteriorating financial and market positions, Roy D. Chapin, Jr., took charge to revitalize the company, and designer Richard A. Teague economized by developing several vehicles from common stampings. While prices and costs were cut, new and more sporty automobiles were introduced, and from 1968 AMC became known for the Javelin and AMX muscle cars.
AMC purchased Kaiser’s Jeep utility vehicle operations in 1970 to complement their existing passenger car business. Beginning in the early 1970s, they moved towards all-new compact car designs based on the Hornet, including the Hornet itself and the Gremlin. Other new models in the 1970s included the Matador and Pacer. In an effort to create a more efficient cost structure, in the 1979 model year, AMC eliminated the Matador line and then in the 1980 model year, eliminated the Pacer, focusing almost exclusively on their Hornet-based cars and the Jeep line. While the new lines of the late 1970s, such as the Spirit and Concord, were variations on the Hornet’s platform, the company continued with innovations on existing designs: the 4-wheel-drive AMC Eagle, introduced in 1979, was one of the first true crossovers.
From 1980, AMC partnered with France’s Renault to help finance their manufacturing operations, obtain much-needed capital, and source subcompact vehicles. By 1983 Renault had a controlling interest in AMC. In the 1983 model year, the AMC brand focused entirely on AWD autos; the company stopped producing two wheel drive cars. AMC facilities were used to produce Renault Alliance and Encore compact and subcompact cars. In 1985 Chrysler entered an agreement with AMC to produce Dodge Diplomats and Plymouth Furys as well as Dodge Omnis and Plymouth Horizons in AMC’s Kenosha, Wisconsin plant. At the time, AMC had excess manufacturing capacity thus contract manufacturing for Chrysler made sense. In 1987, after further new vehicle development that included the Medallion (a re-badged Renault 21) and Giorgietto Giugiaro’s Italdesign new full-size front-drive sedan that became the Eagle Premier, Renault sold its 47% ownership stake in AMC to Chrysler. Chrysler made a public offer to purchase all the remaining outstanding shares of AMC stock on the NYSE. Renault left the US market completely as a brand in 1987. The Renault Medallion was sold through the newly formed Jeep Eagle Division of Chrysler as an Eagle, not a Renault. AMC’s badge would be used on the Eagle Sports Wagon through the 1988 model year, then be eliminated entirely. The Jeep/Eagle division of Chrysler Corporation was formed from the AMC Jeep Renault dealer network. The Jeep and Eagle vehicles were marketed primarily by former AMC dealers. Ultimately, the Eagle Brand of car would be phased out like Chrysler’s DeSoto, Plymouth, and Imperial by 1998.
In January 1954, Nash-Kelvinator Corporation began acquisition of the Hudson Motor Car Company (in what was called a merger). The new corporation would be called American Motors Corporation. (An earlier corporation with the same name, co-founded by Louis Chevrolet, had existed in New Jersey from 1916 through 1922 before merging into the Bessemer–American Motors Corporation.)
The Nash-Kelvinator/Hudson deal was a straight stock transfer (three shares of Hudson listed at 11⅛, for two shares of AMC and one share of Nash-Kelvinator listed at 17⅜, for one share of AMC) and finalized in the spring of 1954, forming the fourth-biggest auto company in the U.S. with assets of US$355 million and more than $100 million in working capital. The new company retained Hudson CEO A.E. Barit as a consultant and he took a seat on the Board of Directors. Nash’s George W. Mason became President and CEO.
American Motors dealership sign
Mason, the architect of the merger, believed that the survival of the US’ remaining independent automakers depended on their joining in one multibrand company capable of challenging the “Big Three” – General Motors, Ford, and Chrysler – as an equal. The “frantic 1953–54 Ford/GM price war” had a devastating impact on the remaining “independent” automakers. The reasons for the merger between Nash and Hudson included helping cut costs and strengthen their sales organizations to meet the intense competition expected from autos’ Big Three.
One quick result from the merger was the doubling up with Nash on purchasing and production, allowing Hudson to cut prices an average of $155 on the Wasp line, up to $204 on the more expensive Hornet models. After the merger, AMC had its first profitable quarter during the second three months of 1955, earning $1,592,307, compared to a loss of $3,848,667 during the same period in the previous year. Mason also entered into informal discussions with James J. Nance of Packard to outline his strategic vision. Interim plans were made for AMC to buy Packard Ultramatic automatic transmissions and Packard V8 engines for certain AMC products.
In 1954, Packard acquired Studebaker. The new Studebaker-Packard Corporation (S-P) made the new 320 cu in (5.2 L) Packard V8 engine and Packard’s Ultramatic automatic transmission available to AMC for its 1955 Nash Ambassador and Hudson Hornet models. When Mason died in 1954, George W. Romney succeeded him. Ironically, Romney had once been offered Nance’s job. In 1948, Romney received offers from Packard for the post of chief operating officer and from Nash for the number two position in the company. Although the Packard offer would have paid more, Romney decided to work under Mason because he thought Nash had a brighter future. S-P President James Nance refused to consider merging with AMC unless he could take the top position (Mason and Nance were former competitors as heads of the Kelvinator and Hotpoint, respectively), and a week after Mason’s death Romney announced, “there are no mergers under way either directly or indirectly.” Romney agreed with Mason’s commitment to buy S-P products. Mason and Nance had agreed that in return S-P would endeavor to purchase parts from American Motors, but S-P did not do so. As the Packard engines and transmissions were comparatively expensive, AMC began development of its own V8. AMC also spent US$40 million developing its Double Safe Single Unit monocoque, which debuted in the 1956 model year. In mid-1956, the 352 cu in (5.8 L) Packard V8 and TwinUltramatic transmission were phased out and replaced by AMC’s new V8 and by GM Hydra-Matic and Borg-Warner transmissions.
By 1964, Studebaker production in the United States had ended, and its Canadian operations ceased in 1966. The “Big Three”, plus the smaller AMC, Kaiser Jeep, International Harvester, Avanti, and Checker companies were the remaining North American auto manufacturers.
Product development in the 1950s
American Motors combined the Nash and Hudson product lines under a common manufacturing strategy in 1955, with the production of Nashes and Hudsons consolidated at Kenosha. The Detroit Hudson plant was converted to military contract production and eventually sold. The separate Nash and Hudson dealer networks were retained. The Hudsons were redesigned to bring them in harmony with Nash body styles.
The fast-selling Rambler model was sold as both a Nash and a Hudson in 1955 and 1956. These badge-engineered Ramblers, along with similar Metropolitans, were identical save for hubcaps, nameplates, and other minor trim details.
The pre-existing full-size Nash product line was continued and the Nash Statesman and Ambassador were restyled as the “new” Hudson Wasp and Hudson Hornet. Although the cars shared the same body shell, they were at least as different from one another as Chevrolet and Pontiac. Hudsons and Nashes each used their own engines as they had previously: the Hudson Hornet continued to offer the 308 cu in (5.0 L) I6 that had powered the (NASCAR) champion during the early 1950s; the Wasp now used the former engine of the Hudson Jet.
The Nash Ambassador and Statesman continued with overhead- valve and L-head sixes respectively. Hudson and Nash cars had different front suspensions. Trunk lids were interchangeable but other body panels, rear window glass, dash panels and braking systems were different. The Hudson Hornet and Wasp, and their Nash counterparts, had improved ride and visibility; also better fuel economy owing to the lighter unitized Nash body.
For the 1958 model year, the Nash and Hudson brands were dropped. Rambler became a marque in its own right and the mainstay of the company. The popular British-built Metrooolitan subcompact continued as a standalone brand until it was discontinued in 1961. The prototype 1958 Nash Ambassador / Hudson Hornet, built on a stretched Rambler platform, was renamed at the last minute as “Ambassador by Rambler”. To round out the model line AMC reintroduced the old 1955, 100 in (2,540 mm) wheelbase Nash Rambler as the new Rambler American with only a few modifications. This gave Rambler a compact lineup with 100 in (2,540 mm) American, 108 in (2,743 mm) Rambler Six and Rebel V8, as well as the 117 in (2,972 mm) Ambassador wheelbase vehicles.
Sales of Ramblers soared in the late 1950s in part because American Motors focus on the compact car and its marketing efforts. These included sponsoring the hugely popular Walt Disney anthology television series and as an exhibitor at the Disneyland theme park in Anaheim, California. George Romney himself pitched the Rambler product in the television commercials.
While the “Big Three” introduced ever-larger cars, AMC followed a “dinosaur-fighter” strategy. George W. Romney‘s leadership focused the company on the compact car, a fuel-efficient vehicle 20 years before there was a real need for them. This gave Romney a high profile in the media. Two core strategic factors came into play: (1) the use of shared components in AMC products and (2) a refusal to participate in the Big Three’s restyling race. This cost-control policy helped Rambler develop a reputation as solid economy cars. Company officials were confident in the changing market and in 1959 announced a $10 million (US$81,175,799 in 2016 dollars) expansion of its Kenosha complex (to increase annual straight-time capacity from 300,000 to 440,000 cars). A letter to shareholders in 1959 claimed that the introduction of new compact cars by AMC’s large domestic competitors (for the 1960 model year) “signals the end of big-car domination in the U.S.” and that AMC predicts small-car sales in the U.S. may reach 3 million units by 1963.
American Motors was also beginning to experiment in non-gasoline powered automobiles. On April 1, 1959, AMC and Sonotone Corporation announced a joint research effort to consider producing an electric car that was to be powered by a “self-charging” battery. Sonotone had the technology for making sintered plate nickel–cadmium batteries that can be recharged very rapidly and are lighter than a typical automobile lead–acid battery.
In 1959, AMC hired designer Richard A. Teague who had previously worked for General Motors, Packard, and Chrysler; after Edmund E. Anderson left the company in 1961, Teague was named principal designer and in 1964, Vice President.
Changing focus in the 1960
1964 Rambler American 440-H
In an effort to stay competitive, American Motors produced a wide range of products during the 1960s, and added innovations long before the “Big Three” introduced them.
For example, the Rambler Classic was equipped with a standard tandem master cylinder in 1962, six years before U.S. safety regulations required that safety feature.
Rambler also was an early pioneer in offering an automatic shift indicator sequence (P R N D2 D1 L, where if one selected “D2”, the car started in second gear, while “1” started in first gear) on its “Flash-O-Matic” transmission which is similar to today’s “PRNODSL”, made mandatory in 1968, which requires a neutral position between reverse and drive, while General Motors still offered a shift selector that had reverse immediately next to low gear (PNDSLR) well into the 1960s.
In 1964, the Classic was equipped with standard dual reclining front seats nearly a decade before the Big Three offered them as options. Bendix disc brakes were made optional on the Classic in 1965, while the Big Three didn’t offer them until 1969 on many models.
In the early part of the decade, sales were strong, thanks in no small part to the company’s history of building small cars, which came into vogue in 1961. In both 1960 and 1961, Ramblers ranked in third place among domestic automobile sales, up from third on the strength of small-car sales, even in the face of a lot of new competition. Romney’s strategic focus was very successful as reflected in the firm’s healthy profits year after year. The company became completely debt-free. The financial success allowed the company to reach an agreement on August 26, 1961 with the United Auto Workers for a profit sharing plan that was new in the automobile industry. Its new three-year labor contract also included generous annual improvement pay increases, as well as automatic cost-of-living raises. However, in 1962, Romney resigned to run for Governor of Michigan. His replacement was Roy Abernethy, AMC’s successful sales executive.
Abernethy believed that AMC’s reputation of building reliable economical cars could be translated into a new strategy that could follow AMC buyers as they traded up into larger, more expensive vehicles. AMC in reality had produced large cars throughout most of its history, The Rambler Ambassadors were every bit as large as a Full Sized Ford or Chevy. There was only an absence of Full Sized cars from the AMC lineup in 1963 and 1964 The first cars bearing his signature were the 1965 models. These were a longer Ambassador series and new convertibles for the larger models. During mid-year a fastback, called the Marlin, was added. It competed directly with cars like the Dodge Charger, AMC’s “family-sized” car emphasized personal-luxury. Abernethy also called for the de-emphasis of the Rambler brand. The 1966 Marlin and Ambassador lost their Rambler nameplates, and were badged as “American Motors” products. The new models shared fewer parts among each other and were more expensive to build.
The continuing quest “in the business world’s toughest race – the grinding contest against the Big Three automobile makers” also meant annual styling changes requiring large expenditures. American Motors’ management total confidence “that the new 1965 models would stem a bothersome decline” actually began falling behind in share of sales. Moreover, a new line of redesigned cars in the full and mid-sized markets was launched in the fall of 1966. The cars won acclaim for their fluid styling, and Abernethy’s ideas did work as Ambassador Sales increased significantly. The dated designs of the Rambler Americans, however, hurt its sales which offset gains from Ambassador sales. There were quality control problems with the introduction of the new full-sized cars, as well as persistent rumors of the company’s demise because of their precarious cash flow. Consumer Reports negative ratings for AMC’s Safety didn’t help either.
American Motors did not have their own electric car program as did the Big Three, and after some negotiation a contract was drawn in 1967 with Gulton Industries to develop a new battery based on lithium and a speed controller designed by Victor Wouk. A nickel-cadmium battery powered 1969 Rambler station wagon demonstrated the power systems that according to the scientist was a “wonderful car”. This was also the start of other “plug-in”-type experimental AMC vehicles developed with Gulton – the Amitron and the Electron.
Abernethy was ousted from AMC on January 9, 1967 and damage control fell to the new CEO, Roy D. Chapin Jr. (son of Hudson Motors founder Roy D. Chapin). Chapin quickly instituted changes to AMC’s offerings and tried to regain market share by focusing on younger demographic markets. Chapin’s first decision was to cut the price of the Rambler to within US$200 of the basic Volkswagen Beetle. Innovative marketing ideas included making air conditioning standard on all 1968 Ambassador models (available as a delete option). This made AMC the first U.S. automaker to make air conditioning standard equipment on a line of cars, preceding even luxury makes such as Lincoln, Imperial, and Cadillac.
The company introduced exciting entries for the decade’s muscle car boom, most notably the AMX, while the Javelin served as the company’s entrant into the sporty “pony car” market created by the Ford Mustang. Additional operating cash was derived in 1968 through the sale of Kelvinator Appliance, once one of the firm’s core operating units.
The Rambler brand was completely dropped after the 1969 model year in North America, although it continued to be used in several overseas markets as either a model or brand name, with the last use in Mexico in 1983. From 1970, AMC was the brand used for all American Motors passenger cars; and all vehicles from that date bore the AMC name and the new corporate logo. However, the names American Motors and AMC were used interchangeably in corporate literature well into the 1980s. The branding issue was further complicated when the company’s Eagle all-wheel drive passenger cars were marketed as the American Eagle in the 1980s.
Chapin expanded American Motors product line in 1970 through the purchase of the Kaiser-Jeep Corporation (formerly Willys-Overland) from Kaiser Industries. This added the iconic Jeep brand of light trucks and SUVs, as well as Kaiser-Jeep’s lucrative government contracts – notably the M151 MUTT line of military Jeeps and the DJ-Series postal Jeeps. AMC also expanded their international network. The military and special products business was reconstituted as American Motors General Products Division, later reorganized as AM General.
1970s product developments
Jeep Cherokee (SJ) Chief S
In 1970, AMC consolidated all passenger cars under one distinct brand identity and debuted the Hornet range of compact cars.
The Hornet and the later Gremlin shared platforms. The Gremlin, the first North American-built subcompact, sold more than 670,000 units from 1970–1978. The Hornet became AMC’s best-selling passenger car since the Rambler Classic, with more than 860,000 units sold by the time production ended in 1977.
The new mid-sized AMC Matador replaced the Rebel in 1971, using an advertising campaign that asked, “What’s a Matador?” In 1972, AMC won the tender for Los Angeles Police Department cruisers, and Matadors were used by the department from 1972 to 1975, replacing the Plymouth Satellite. American Motors supplied Mark VII Limited owner Jack Webb with two Matadors for use in his popular television series Adam-12, increasing the cars’ public profile.
In 1973, AMC signed a licensing agreement with Curtiss-Wright to build Wankel engines for cars and Jeeps.
Starting in 1974, the Matador sedan and station wagon were mildly refreshed, with new boxier front ends. The Matador two-door hardtop, known as the “flying brick” due to its poor aerodynamics in NASCAR competition, was replaced at great cost with a sleek, smoothly shaped, and radically styled two-door coupe. The model received praise for its design, including “Best Styled Car of 1974” by Car and Driver magazine, customer satisfaction, and sold almost 100,000 coupes over a five-year period. The Matador Coupe shared few components with the Matador sedan and station wagon other than suspension, drive train, some trim, and interior parts.
The Ambassador was redesigned and stretched 7 inches (178 mm) to become the biggest ever, just as the 1973 Arab Oil Embargo sparked gasoline rationing across the nation. The additional length was due to a new front end design and stronger energy absorbing bumpers required of all automobiles sold in the U.S. Sales of all large cars fell due to economic problems and rising gasoline prices. The full-sized Ambassador was discontinued as AMC’s flagship line after the 1974 model year. Nash and AMC made Ambassadors from 1927 to 1974, the longest use of the same model name for any AMC product and, at the time, the longest continuously used nameplate in the industry.
In 1974, AMC’s AM General subsidiary began building urban transit buses in cooperation with Flyer Industries of Winnipeg, Manitoba. The Metropolitan coach had sold 5,212 units when production ceased in 1978.
The AMC Pacer, an innovative all-new model introduced in March 1975 and billed as “the first wide small car”, was a subcompact designed to provide the comfort of a full-sized car. Its pre-production development coincided with two changes in U.S. Federal passenger auto laws: first, the reduction in permissible emissions for passenger auto engines, which the Pacer would have met with the Wankel-type engine it was designed for, as the Wankel’s compact dimensions allowed space for extensive emission control equipment in the engine bay; second, a tightening of U.S. passenger auto safety laws, which accounted for the Pacer’s designed-in safety features, e.g. internal door beams. These, together with the wide body and large glass area, added considerable weight.
With the advent of the Arab Oil Embargo of 1973, General Motors aborted the Wankel rotary engine around which the Pacer had been designed, as its fuel consumption exceeded that of conventional engines with similar power. Therefore, AMC’s existing 258 and 232 cu in (4.2 and 3.8 L) AMC Straight-6 engines were used in the Pacer instead. Fuel economy was better than a rotary, but still relatively poor in light of the new focus on energy efficiency. Also, as the Pacer shared few components other than drivetrain with other AMC cars, it was expensive to make and the cost increased when sales fell steeply after the first two years.
Development and production costs for the Pacer and Matador Coupe drained capital which might otherwise have been invested in updating the more popular Hornet and Gremlin lines, so that toward the end of the 1970s the company faced the growing energy crisis with aged products that were uncompetitive in hotly contested markets. However, “AMC used cars, as far back as 1967, had the advantage of good warranty coverage … so most owners were conscious of low-cost car maintenance … AMC units [became] some of the very best buys on the used car market” by 1975.
The 1977 Gremlin had redesigned headlights, grille, rear hatch and fascia. For economy in the fuel crisis, AMC offered the car with a more fuel-efficient Volkswagen-designed Audi 4-cylinder engine 2.0 L (122 cu in). The engine was expensive for AMC to build and the Gremlin retained the less costly but also less economical 232 cu in (3.8 L) as standard equipment.
The AMX nameplate was revived in 1977. It was a sporty appearance package on the Hornet hatchback featuring upgrades, as well as the 258 cu in (4.2 L) inline six as standard with a choice of three-speed automatic or four-speed manual transmissions. The 304 cu in (5.0 L) V8 engine was optional with the automatic transmission.
As all Matadors now received standard equipment that was formerly optional (e.g. power steering, automatic transmission), the “Brougham” package was dropped. Optional on the Matador coupe was a landau vinyl roof with opera windows, and top-line Barcelonas offered new two-tone paint.
For 1978, the Hornet platform was redesigned with an adaptation of the new Gremlin front-end design and renamed AMC Concord. AMC targeted it at the emerging “premium compact” market segment, paying particular attention to ride and handling, standard equipment, trim, and interior luxury.
Gremlins borrowed the Concord instrument panel, as well as a Hornet AMX-inspired GT sports appearance package and a new striping treatment for X models.
The AMC Pacer hood was modified to clear a V8 engine, and a Sports package replaced the former X package. With falling sales of Matador Coupes, sedans and wagons, their 304 cu in (5.0 L) V8 engine was dropped, leaving only the 258 cu in (4.2 L) Inline-6 (standard on coupes and sedans) and the 360 cu in (5.9 L) V8 (optional on coupes and sedans, standard on wagons). The two-tone Barcelona luxury package was offered on Matador sedans, and two-tone red paint introduced as an additional Barcelona option. Matador production ceased at the end of the model year with total sales of 10,576 units. The Matador was no longer attractive as automakers struggled to overcome economic woes including continuing fuel price increases and double digit domestic inflation.
In 1979, the Spirit sedan replaced the Gremlin. A new fastback version of the car, the Spirit Liftback, proved successful.
In December, Pacer production ceased after a small run of 1980 models was built to use up parts stock.
Concords received a new front end treatment, and in their final season, hatchbacks became available in DL trim. On May 1, 1979, AMC marked the 25th anniversary of the Nash-Hudson merger with “Silver Anniversary” editions of the AMC Concord and Jeep CJ in two-tone silver (Jeeps then accounted for around 50 percent of the company’s sales and most of their profits); and introduced LeCar, a U.S. version of the small, fuel-efficient Renault 5, in dealer showrooms.
Concord and Spirit models were dropped after 1983.
Financial developments, Renault partnership
Late 1970s to early 1980s
In February 1977, Time magazine reported that although AMC had lost $73.8 million in the previous two fiscal years, U.S. banks had agreed to a year’s extension for a $72.5 million credit that had expired in January; that Stockholders had received no dividends since 1974; and that Pacer sales did not match expectations. However, Time noted record Jeep sales and a backlog of orders for AM General’s buses.
Also in 1977, Gerald C. Meyers was appointed chairman and chief executive.
On March 31, 1978, AMC and Renault announced a sweeping agreement for the joint manufacture and distribution of cars and trucks that would achieve benefits for both. A month later, AMC announced that it would halt the production of standard urban transit buses after about 4,300 were sold by its AM General subsidiary during three years. In May 1978, the U.S. Environmental Protection Agency ordered the recall of all AMC’s 1976 cars (except those conforming to California emissions regulations) – some 270,000 vehicles— plus 40,000 1975 and 1976 Jeeps and mini trucks, for correction of a fault in the pollution control system. Total cost was estimated at up to $3 million—more than AMC had earned the previous quarter.
American Motors lost an estimated $65 million on its conventional (non-Jeep) cars for the fiscal year ended September 30, 1978, but strong Jeep sales helped the company to an overall $36.7 million profit on sales of $2.6 billion. However, AMC faced costly engineering work to bring their Jeeps into compliance with a federal directive for all 4-wheel-drive vehicles to average 15 mpg-US (16 L/100 km; 18 mpg-imp) by 1981.
A year later, with its share of the American market at 1.83%, the company struck a deal with Renault, the nationally owned French automaker. AMC would receive a $150 million cash injection, $50 million in credits, and also the rights to start building the Renault 5 in 1982. (A deal for Renault products to be sold through the AMC-Jeep dealer network had already been made in 1979.) In return, Renault acquired a 22.5% interest in AMC. This was not the first time the two companies had worked together. Lacking its own prestige model line in the early 1960s, Renault assembled CKD kits and marketed Rambler cars in France.
In 1979, AMC announced a record $83.9 million profit on sales of $3.1 billion (US$10,107,336,084 in 2016 dollars) for the fiscal year ending in September—this despite an economic downturn, soaring energy prices, rising American unemployment, automobile plants shutting down, and an American market trend towards imported cars. In October, the company’s car sales surged 37%, while they sank 21% for the industry as a whole.
However, a drop in Jeep sales caused by the declining economy and soaring energy prices began to constrict AMC’s cash flow. At the same time, pressure increased on the company’s non-Jeep product lines. The face-lifts and rebranding of AMC’s once-innovative and successful cars were not enough in a competitive landscape that had changed dramatically. No longer was the threat limited to the Big Three automakers (General Motors, Ford, and Chrysler). The Japanese manufacturers (Honda, Toyota, Nissan) used streamlined production methods such as outsourcing and Just In Time (JIT) supply-chain management. They had new, highly efficient assembly plants in the United States. And now they targeted the heart of AMC’s passenger product line: small cars.
While Americans turned to the new imports in increasing numbers, AMC continued its struggle at the inefficient and aging Kenosha, Wisconsin facilities—the oldest continuously operating automobile plant in the world, where components and unfinished bodies still had to be transported across the city.
In early 1980, the banks refused AMC further credit. Lacking both capital and resources for the new, truly modern products it needed to offer, the company turned to Renault for a $90 million loan (US$258,477,383 in 2016 dollars). By September that year, AMC’s U.S. market share had fallen to 1.7%, and in November sales dropped 19.1%. AMC warned stockholders that the company could be bankrupted if they did not approve a plan for Renault to acquire as much as 59% of the company. On December 16, 1980, AMC shareholders “overwhelmingly approved making the French Government-owned Renault” their company’s principal owner.
In January 1982 the company’s former president W. Paul Tippett Jr. replaced Gerald C. Meyers as CEO, and Jose Dedeurwaerder, a Renault executive, became president. Dedeurwaerder brought a broad perspective at this critical time: as an engineer and international business executive with 23 years at Renault, he is credited with streamlining many of AMC’s arcane management techniques. He also instituted important improvements in plant layouts, as well as in cost and quality control.
Renault, having increased their stake in the company several times to keep it solvent, eventually owned 49% in 1983. This development effectively ended AMC’s run as a truly American car company.
New ownership and new management heralded a new product venture for AMC: a line of modern front-wheel drive cars, designed by Renault, to be produced at Kenosha.
1980s product developments
In August 1979, for the 1980 model year, AMC introduced four-wheel drive versions of the Spirit and Concord, calling the collective line the AMC Eagle. Eagles rapidly became one of the company’s best-known products and is considered one of the first “crossover SUVs“. Eagles used the 2-wheel drive body shells mounted on an all-new platform developed by American Motors in the late 1970s. Featuring an innovative full-time four-wheel drive system, it sold best in snow-prone areas. Sales started strongly but declined over time. While the two-wheel drive Spirit and Concord were both discontinued after 1983 as the company concentrated on its new Renault Alliance, the Eagle survived for five years longer, albeit only in station wagon form, into the 1988 model year. This meant the four-wheel drive Eagle was the lone representative of the AMC brand from 1984–1988. All the company’s remaining output was branded Renault or Jeep. The last AMC Eagle was built on December 14, 1987.
Later Alliance model with AMC badging in place of Renault
The Renault Alliance was the first joint product of the AMC-Renault partnership. Introduced in 1983, the Alliance was a front-wheel drive Renault 9 compact restyled for the American market by Richard Teague and produced by AMC at Kenosha. The car was initially badged as a Renault, and some cars carried both Renault and AMC badges, however most 1986 and all 1987 models had only AMC branding; it was available as a sedan with two or four doors, a hatchback (introduced in 1984 and badged as Encore), a two-door convertible and, for the final 1987 model year, a higher-performance version of the 2-door sedan and convertible sold as the GTA.
The new model, introduced at a time of increased interest in small cars, won several awards including Motor Trend Car of the Year. Motor Trend declared: “The Alliance may well be the best-assembled first-year car we’ve ever seen. Way to go Renault!” The Alliance was listed as number one on Car and Driver‘s list of Ten Best cars for 1983, The positive reception and sales of 200,000 Alliances by 1984 was hindered by the availability of only two body styles. The Alliance was a European-designed car and not fully suited to U.S. market demands. The distribution network was also not well supported, which led to lower quality delivered by dealerships with “disastrous consequences” for the image of the automobiles, as well as high warranty costs. Alliance production ended in June 1987.
More beneficial to AMC’s future was the introduction of an all-new line of compact Jeep Cherokee and Wagoneer models in the autumn of 1983 for the 1984 model year. The popularity of these downsized Jeeps pioneered a new market segment for what later became defined as the sport utility vehicle (SUV). They initially used the AMC 150 C.I.D. (2.5L) OHV four-cylinder engine with a carburetor, and a General Motors-built 2.8 L (171 cu in) carbureted V6 was optional. In 1986, throttle-body injection replaced the carburetor on the 2.5 L I4 engines. A Renault 2.1 L (128 cu in) Turbo-Diesel I4 diesel was also offered. Starting with the 1987 models, a 4.0 L (244 cu in) I6 engine, derived from the older 258 cu in (4.23 L) I6 with a new head design and an electronic fuel injection system, replaced the outsourced V6. American Motors’ “new” engine was designed with help from Renault and incorporated Renault-Bendix (Renix) parts for fuel and ignition management. The 4.0 developed an outstanding reputation for reliability and toughness. Retained by Chrysler after the buyout, the design continued to be improved and refined until its discontinuation at the end of the 2006 model year. The 4.0 engine saw extensive application in XJ Cherokees and Wagoneers, Grand Cherokees, and Wranglers, and many of those engines saw (or are seeing) extremely long lives, quite a few exceeding 300,000 mi (480,000 km). The XJ Cherokee itself was built by Chrysler until the end of the 2001 model year in the U.S. and until 2005 in China.
Three other designs continued to be used after the Chrysler buyout: the Grand Wagoneer full-size luxury SUV, the full-sized J-series pickups, built on the same chassis as the earlier SJ model Wagoneers and Cherokees that dated from 1963 with the AMC 360 cu in (5.9 L) V8, and the Jeep Comanche (MJ) compact pickup, which debuted in 1986. Unlike most sport-utility vehicles which are based on adapted pickup truck designs, the Cherokee XJ SUV came first and the Comanche was designed as a later pickup truck version.
Production of the full-sized pickups ceased after 1987. The Grand Wagoneer and 360 V8 engine were dropped after 1991 (the last American-made vehicle whose engine used a carburetor for fuel delivery), and the Comanche bowed after 1992.
1985 and the final buyout
Marketplace and management changes
There were significant changes in 1985 as the market moved away from AMC’s small models. With fuel relatively cheap again, buyers turned to larger more powerful automobiles and AMC was unprepared for this development. Even the venerable Jeep CJ-5 was dropped after a 60 Minutes TV news magazine exposé of rollover tendencies under extreme conditions. AMC also confronted an angry work force. Labor was taking revenge, and reports circulated about sabotage of vehicles on the assembly lines because of the failure to receive promised wage increases. There were rumors that the aging Kenosha plant was to be shut down. At the same time, Chrysler was having trouble meeting demand for its M-body rear-drive models (Dodge Diplomat, Plymouth Gran Fury and Chrysler Fifth Avenue). Because they were assembled using the old “gate and buck system” and the tooling could be easily moved, Chrysler could supply the components and control the quality, while AMC assembled the car. Therefore, Lee Iacocca and Joe Cappy reached an agreement to use some of AMC’s idle plant capacity in Kenosha.
These problems came in the midst of a transfer of power at AMC from Paul Tippet to a French executive, Pierre Semerena. The new management responded with tactical moves by selling the lawn care Wheel Horse Products Division and signing an agreement to build Jeeps in the People’s Republic of China. The Pentagon had problems with AM General, a significant defense contractor, being managed by a partially French-government-owned firm. The U.S. government would not allow a foreign government to own a significant portion of an important defense supplier. As a result, the profitable AM General Division was sold. Another milestone was the departure of Dick Teague: AMC’s design vice president for 26 years, he was responsible for many Jeep and AMC designs including the Rambler American, Javelin, Hornet, Gremlin, Pacer, and Matador coupe.
Problems at Renault and the assassination
American Motors’ major stockholder, Renault, itself was experiencing financial troubles of its own in France. The investment in AMC (including construction of a new Canadian assembly plant in Brampton, Ontario) forced cuts at home, resulting in the closure of several French plants and mass layoffs. Renault was down to just three alternatives regarding its American holdings: (1) They could declare AMC officially bankrupt thereby lose its investment; (2) They could come up with more money, but Renault management perceived AMC as a bottomless pit; or (3) AMC could be put up for sale and the French could get back part of their investment. Against these detractions, Renault’s chairman, Georges Besse, continued to champion the French firm’s future in the North American market; pointing to the company’s completion of the newest and most-advanced automotive assembly plant in North America, then known as Bramalea Assembly, as well as the recent introduction of the thoroughly modern, fuel-injected 4.0 L and 2.5 L engines. In addition, Jeep vehicles were riding an unprecedented surge in demand. It seemed to Besse and others that AMC was on course for profitability.
However, on November 17, 1986, Georges Besse, who had a high profile among French capitalists, was assassinated by Action Directe, a clandestine militant extremist group variously described as communist, anarchist and Maoist, which professed strong sympathies for the proletariat and the aspirations of the Third World. The murder was carried out by members of Action Directe’s Pierre Overney Commando (named after a Maoist militant killed by a Renault factory guard). The group stated that the murder was in retaliation for Besse having sacked tens of thousands of workers – 34,000 from the French aluminum producer PUK-Péchiney and 25,000 from Renault.
Chrysler purchase AMC Stock
Under pressure from Renault executives following Besse’s death, Renault’s new president, Raymond Levy set out to repair employee relations and divest the company of its investment in American Motors. Renault owned 46.1% of AMC’s outstanding shares of stock.
The earlier agreement between Chrysler and AMC in 1985, under which AMC would produce M-body chassis rear-drive large cars for two years from 1986–88, fed the rumor that Chrysler was about to buy AMC. According to the head of manufacturing for Chrysler at the time, Stephan Sharf, the existing relationship with AMC producing a car for a competitor facilitated the negotiations.
The Jeep Grand Cherokee
was the driving force behind Chrysler’s buyout of AMC; Lee Iacocca wanted the design. Chrysler completed development and released it to the public in late 1992, and continues to use the nameplate today.
On March 9, 1987, Chrysler agreed to buy Renault’s share in AMC, plus all the remaining shares, for about US$1.5 billion (US$3,124,340,949 in 2016 dollars). AMC became the Jeep-Eagle division of Chrysler. It was the Jeep brand that Chrysler CEO Lee Iacocca really wanted – in particular the ZJ Grand Cherokee, then under development by Jeep engineers, which ultimately proved highly profitable for Chrysler (the nameplate remains in production today). However, the buyout included other attractive deal sweeteners for Chrysler. Among them was the world-class, brand-new manufacturing plant in Bramalea, Ontario, which offered Iacocca an unprecedented opportunity to increase his company’s production capacity at a fire-sale price. AMC had designed and built the plant in anticipation of building the Renault 25 based Eagle Premier. Additional profitable acquisitions were the AMC dealer network (the addition of which strengthened Chrysler’s retail distribution – many AMC dealers switched to selling Chrysler products); and AMC’s underrated organization and management talent – which Chrysler quickly assimilated (numerous leading Chrysler engineers and executives were ex-AMC). AMC was fully merged as of March 29, 1990.
The sale came at a time when the automotive press was enthusiastic about the proposed 1988 lineup of Renault, Eagle and Jeep vehicles, and reports that the financial outlook for the tiny automaker were improving. AMC quarterly results for all of 1987 were positive, Chrysler purchased AMC at a time the company appeared to be in very good financial position with its new product line.
The sale marked Renault‘s withdrawal from the North American market (excluding Mexico) in the 1988 model year. However, the French company has since returned to that market with its subsequent purchase of a US$5.4 billion controlling stake in Nissan in March 1999. In contrast to the AMC/Renault partnership, Carlos Ghosn, CEO and President of Renault of France and Nissan of Japan, is guiding the Renault-Nissan alliance away from national identities.
American Motors was forced to constantly innovate for 33 years until Chrysler absorbed it in 1987. The lessons learned from this experience were integrated into the company that bought AMC. The organization, strategies, as well as several key executives allowed Chrysler to gain an edge on the competition. Even today, the lessons gained from the AMC experience continue to provide benefits to other firms in the industry. There are a number of legacies from AMC’s business strategies.
AMC had an ability to formulate strategies that were often evaluated by industry critics as “strokes of brilliance”. According to Roy D. Chapin Jr., AMC realized they were up against the giants of the industry, so to compete successfully they had to be able to move quickly and with ingenuity. An essential strategy practiced by AMC was to rely on outside vendors to supply components in which they had differential advantages. This approach was finally accepted within the U.S. auto industry, but only after each of the Big Three experienced the failure of attempting to be self-sufficient.
The smallest domestic automaker did not have “the massive R&D budgets of General Motors, Ford, and foreign competitors … [thus] AMC placed R&D emphasis on bolstering the product life cycle of its prime products (particularly Jeeps).” In 1985, AMC originated product lifecycle management (PLM) as a strategic business approach according to Sidney Hill, Jr., executive editor for Manufacturing Business Technology, in an effort to better compete against its much larger rivals by ramping up its product development process.
Another example of AMC’s agility was the ability of management to squeeze money out of reluctant bankers, even in the face of bankruptcy. These core abilities helped save the company from collapse and after each obstacle, give it the wherewithal to keep it operating. Ironically, AMC was never stronger than just before its demise.
AMC’s managers anticipated important trends in the automotive industry. It preached fuel efficiency in the 1950s, long before most auto buyers demanded it. Led by AMC’s Rambler and several European cars, the small car innovation reduced the Big Three’s market share from 93% in 1957 to 82% in 1959. The company inherited foreign manufacturing and sales partnerships from Nash and continued developing business relations, decades before most of the international consolidations among automobile makers took place. AMC was the first U.S. automaker to establish ownership agreement with a foreign automaker, Renault. Although small in size, AMC was able to introduce numerous industry innovations. Starting in 1957, AMC was the only U.S. manufacturer to totally immerse all automobile bodies in primer paint for protection against rust, until competitors adopted the practice in 1964. Even one of AMC’s most expensive new product investments (the Pacer) established many features that were later adopted by the auto industry worldwide. These included aerodynamic body design, space-efficient interiors, aircraft style doors, and a large greenhouse for visibility. AMC was also effective in other areas such as marketing by introducing low rate financing. AMC’s four-wheel drive vehicles established the foundation for the modern SUV market segments, and “classic” Jeep models continue to be the benchmark in this field. Roy D. Chapin drew on his experiences as a hunter and fisherman and marketed the Jeep brand successfully to people with like interests. The brand developed a cult appeal that continues.
The purchase of AMC was instrumental in reviving Chrysler. According to Robert Lutz, former President of Chrysler, the AMC acquisition was a big and risky undertaking. The purchase was part of Chrysler’s strategic “retreat-cum-diversification” plan that he states did not have the right focus. Initially the goal was to obtain the world-renowned Jeep brand. However, Lutz discovered that the decision to buy AMC turned out to be a gold mine for Chrysler. At that time, Chrysler’s management was attempting to find a model to improve structure and operations, “something that would help get our minds unstuck and thinking beyond the old paradigms that we were so familiar with“. In this transformation, “Chrysler’s acquisition of AMC was one of the all-time great moments in corporate serendipity” according to Lutz “that most definitely played a key role in demonstrating how to accomplish change“.
According to Lutz (1993), while AMC had its share of problems, it was far from being a bunch of “brain-dead losers”. He describes the “troops” at AMC as more like the Wake Island Marines in battle, “with almost no resources, and fighting a vastly superior enemy, they were able to roll out an impressive succession of new products”. After first reacting with anger to the purchase, Chrysler managers soon anticipated the benefits. To further solidify the organizational competencies held by AMC, Lee Iacocca agreed to retain former AMC units, such as engineering, completely intact. In addition, AMC’s lead engineer, François Castaing, was made head of all engineering at Chrysler. In an unthinkable strategic move, Castaing completely dismantled the entrenched Chrysler groups. In their place AMC’s “platform team” was implemented. These were close-knit cross-functional groups responsible for the whole vehicle, as contrasted with Chrysler’s highly functional structure. In this capacity, Castaing’s strategy was to eliminate the corporate administrative overhead bureaucracy. This move shifted corporate culture and agitated veteran executives who believed that Chrysler’s reputation as “the engineering company” was being destroyed. Yet, according to the popular press, by the 1980s Chrysler’s reputation was totally shot, and in Lutz’s view only dramatic action was going to change that. In summary, Chrysler’s purchase of AMC laid the critical foundation to help re-establish a strategy for its revival in the 1990s.
Top managers at Chrysler after the AMC buyout appeared to have made errors similar to those by AMC. For example, Chrysler invested heavily in new untested models while not keeping up its profitable high-volume lines.
After the DaimlerChrysler merger, the combined company also encountered the problem of having too many platforms. It also failed to achieve synergies by sharing components and from Chrysler’s paperless design and supplier capabilities. Mercedes-Benz managers were protective of their designs and components and “advanced R&D was clearly put under German direction.” This policy increased production costs. They could have observed the experience of the Nash and Hudson merger designed to achieve manufacturing efficiencies and savings from component sharing. The first product combining Chrysler and Mercedes technology and engineering with a Mercedes name was in 2006, eight years after DaimlerChrysler AG was created.
The AMC influence also continued at General Motors. GM recruited a new executive team to turn itself from near bankruptcy in the early 2000s. Among the new strategists at GM was Lutz who brought an understanding of the importance of passion in the product design. Lutz implemented a new thinking at GM that incorporated the systems and structures that originated from AMC’s lean and focused operations.
Renault implemented the lessons it learned from its investment in AMC. The French firm took a parallel approach as it did with its initial ownership of AMC and applied it to resurrect the money-losing Nissan automaker in Japan.
In 2009, in a deal brokered by the Obama administration, Italian automaker Fiat initiated a white knight takeover of Chrysler to save the struggling automaker from liquidation. The deal was immediately compared to the AMC-Renault deal; Some commentators noted the irony in that Chrysler now faced the same fate that AMC faced 30 years earlier, while others expressed skepticism of whether the Italian firm could save Chrysler, given how the Renault deal failed. However, there have been key differences between the two; Fiat CEO Sergio Marchionne became CEO of Chrysler as part of the deal and immediately began globally integrating Fiat and Chrysler’s assets and product lines; The Fiat-Chrysler merger doesn’t face the political opposition the AMC-Renault deal did since Fiat is entirely private and independent and the US Government supported the merger; Most importantly, while AMC proved to be a continuous money-loser for Renault, Chrysler returned to profitability fairly quickly and has since become an important source of revenue and profits for Fiat, which has been struggling to maintain volume and profitability amid the European debt crisis. The two firms would later fully marge to create Fiat Chrysler Automobiles in 2014.
Legacy of products
Chrysler revived the “Spirit” name dropped by AMC after 1983 for use on one of its A platform cars, (the Dodge Spirit) from 1989–1995. The planned Renault Medallion was sold as the Eagle Medallion in 1988 and 1989. A Renault/AMC concept, the Summit, was produced by Mitsubishi Motors beginning in 1989. The planned all-new 1988 Renault Premier, a joint development effort between American Motors and Re