American Motors pulls onto firmer ground
Is American Motors finally out of the ditch and on its way to success and fortune in the auto business? It may be premature to say either yer or no. The company has come a long way , however, and writers who cover the industry these days are less inclined to use the popular adjectives "struggling and hard pressed" for AMC. Instead, these are used more for stories about Chrysler.
In fact, 25-year-old American Motors Corporation, which came out of the merger between Nash and Hudson Motor Car Company, had its best year in a long time last year. In fiscal '79 it recorded a net profit of $83.9 million, up from $36.7 million the year before.
Further, the company has wiped out a bunch of restrictive loans that dogged it all throught the decade.
J. Paul Tippett, president of the resurgent company, was in town the other day, hailing the good news about AMC and saying: "We have no short-term debt, we now have a new $150 million, seven-year credit pact with a group of 13 banks, headed up by the First National Bank of Boston.
"I think the new bank credit line is a big step ahead of where we were and a vote of confidence in the company," he said. In fact, it seems to be in its best position since the days of George Romney two decades ago.
What caused the dramatic reversal in the company's position and just how solid is it?
Mr. Tippett, who headed up Singer's sewing-machine operation before coming to AMC last year, but who earlier had spent some 15 years with Ford, says the company is moving on solid ground.
"We're more competitive today than we've been in the last five to eight years ," he declares. "Our dealers have rear-wheel-drive cars, which we believe to be the most durable small car built. We also have the four-wheel- drive Eagle, which no one else has. And we have the front-wheel-drive Renault Le Car."
Next fall AMC-Renault dealers will begin selling the two-year-old Renault R- 18 compact in both the sedan and wagon. "I think we'll end up having the best fuel economy in that car of any compact car sold in the United States," Mr. Tippett asserts.
Then, too, the company also has the Jeep, which, until the gas-pump lines last year, was selling in record numbers all over the country.
The american Motors policy is one of difference: It aims to sell cars that are different from anything else around, such as the phasedout Pacer or the new Eagle. Also, it is the only US carmaker to offer a five- year, no-rust-through warrantly. To make sure its cars don't fall apart from rust, AMC applies the Ziebart process at the factory, which no other manufacturer does.
Further, the company has a wide-ranging tie-UP with one of the largest vehicle builders in Europe, state-owned Regie Nationale des Usines Renault of France. Because of its insufficient resources, AMC needed a strong partner to survive in the 1980s. While weak in the US, Renault is very strong and has a good reputation in other parts of the world.
As part of the deal, Renault will acquire a 22.5 percent equity position in American Motors over the next four years for $150 million, of which AMC already has $60 million. The money will be used for retooling and bringing out a jointly developed new car in 1983 to be built in, among other places in the world, the huge assembly plant in Kenosha, Wis.
"The new car is right on target," Mr. Tippett says.
The fortunate tie-up with Renault is seen by many as company's best move since its purchase of Jeep from Kaiser Industries a decade ago, also considered one of the company's best decisions.
No one, except chairman Roy D. Chapin Jr., foresaw the coming explosion in the fourwheel-drive market in the early 1970s when he bought Jeep. The off-road vehiclemaker, operating in Toledo Ohio had a lot of problems at the time. Only Mr chapin, who retired a couple of years ago, believed that it could be saved. The current chairman, Gerald C. Meyers, objected to the purchase, which was called "Chapin's folly" at the Time. But the booming Jeep market over the last few years kept AMC on the move as its car sales dragged.
Mr. Tippett admits there are still some problems and that the company isn't entirely on the yellow-brick road to success. Yet its chances for success today are far improved over a year or two ago. For one thing, it has a strong executive team, which it has been building over the last several years.
"One of our biggest handicaps," MR. Tippett says, "is the lack of our own retail financing outlet which General Motors, ford, and Chrysler all have." However, American Motors and Renault are planning to set up a joint financing subsidiary to provide not only retail credit to the car buyer but also wholesale financing to its dealers. "The retail side will take a while to set up, because we need branch offices all over the country," he adds. "I wish we had it not, but we don't."
Meanwhile, American Motors is the only Us auto manufacturer to end up 1979 with more retail dealers -- up about 100 -- than it had at the end of 1978.
About 800 dealers now sell both the AMC- built products as well as the Renault Le Car. By the end of the year the figure should be up to 1,500 or 1, 600. "That will give us the biggest import dealership total in the country," Mr. Tippett notes.