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Carmaker courtship in Kenosha

By Michael J. ZambaSpecial to The Christian Science Monitor / August 7, 1987



Kenosha, Wis.

Every day, 360 cars roll off the American Motors Corporation assembly line in this small town. Spot welders and painters work along with others who attach tires, drop in engines, and add the chrome molding. This process has gone on for decades in this town, which has produced such cars as the Nash and the Gremlin. There is a very noticeable difference with today's cars. Instead of affixing the AMC logo and its product names on these cars, the vehicles bear the names of Fifth Avenue and Dodge Diplomat - all Chrysler Corporation automobiles.

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Under a program started late last year, the mostly idle AMC plant in Kenosha was contracted to crank out Chrysler products that were in high demand. Chrysler liked the arrangement so much that in May it formally offered to buy out the United States' fourth-largest, and oftentimes floundering, automaker, a proposal that was approved by American Motors shareholders Aug. 5.

That vote is expected to have a direct and long-lasting impact on Kenosha. This town of about 100,000 people, situated on Lake Michigan between Milwaukee and Chicago, has been known as a ``motor'' town for decades. AMC's old, sprawling plants in downtown Kenosha are not the only places to work, but they have been the foundation of this community.

They have also been the source of the town's troubles. The nation's automotive distress of the 1970s and '80s put the brakes on Kenosha's advancement. The oil crunch and then the flood of foreign car imports were added blows.

While other carmakers managed to turn their misfortunes around, attempts to help AMC did not seem entirely successful. A deal in April 1979 for Renault to buy part of the company was a morale boost for Kenosha - the 1984 Alliance was named ``Car of the Year'' by Motor Trend magazine - but provided little more than that.

``AMC was struggling, and many people didn't think it would make it through this year,'' says Arvid Jouppi, a Detroit-based analyst with Keane Securities Inc.

Chrysler's production arrangement has been a definite boost to Kenosha. The assembly plant, for example, will need $500 million for modernization, for everything from new machinery to a redesign of the production lines, Mr. Jouppi says. ``AMC and Renault would have had trouble raising [the cash because they are] already $1 billion in debt,'' he says.

Many of the Kenosha plant's laid-off employees are already returning to work. In May 1986, only 3,600 people were reporting to the plant. A year later, that increased to 5,200 to meet demand for Chrysler's M-body cars, which include the Dodge Diplomat and Fifth Avenue.

In a matter of months, Kenosha's unemployment rate has been sliced in half, dropping to 7 percent. ``They're happy to have a job,'' says Ed Steagall, president of United Automobile Workers Local 72. ``Many have lost their homes and their savings'' since being laid off.

Another 1,100 UAW members are still idled, but they are expected to be called back this fall when Kenosha starts production of Chrysler's L-body cars, including the Dodge Omni and the Plymouth Horizon. Whether or not the buyout plan goes through, production of these cars is still expected to proceed.

Although pleased that its members are back at work, the union local is cautious on the Chrysler plan. It is concerned how the $64 million Employee Investment Plan, which was created to help AMC finance new product lines, will be dealt with. Chrysler's proxy statement makes no mention of this, Mr. Steagall says.

Contractually, union members will continue with their current agreement, he says. The contract expires next year, and it will be one of the first key tests of the new relationship.

Discussions with workers show good feelings toward the current production agreement and the purchase plan - with most eager to return to the assembly lines. Yet there is some hesitation.

``When Renault came along [in 1979], everyone expected miracles,'' says one union member who is to be recalled late this summer. ``The miracles didn't happen. I don't want to get my hopes up on Chrysler too soon.''