American Motors Corporation – A History
An Economy-Minded Company
American Motors Corporation (AMC) was an American automobile company formed on January 14, 1954 by the merger of the Nash-Kelvinator Corporation and the Hudson Motor Car Company. At the time, it was the largest corporate merger in U.S. history, valued at $198 million ($1.44 billion in 2006 dollars).
Declining sales and a fiercely competitive auto market in the United States forced AMC to seek a partner in the late 1970s, which led to a tie-up with France’s Renault in 1979. The arrangement lasted until March 2, 1987, when American Motors was purchased by the Chrysler Corporation, which discontinued the use of AMC and Renault brand names in the United States.
The Jeep line was continued, as well as some of the models under the Eagle marque.
The original American Motors Logo, used from 1954 until 1970
The second American Motors Logo, used from 1970 until 1987
Formation & Early History
In January 1954, Nash-Kelvinator Corporation acquired the Hudson Motor Car Company to form American Motors Corporation (AMC). The acquisition was called a “merger”, so as to allay fears that the Hudson line of automobiles would disappear. When the merger was completed in the spring of 1954, Hudson’s CEO, A. E. Barit moved to the title of “consultant”, but he was given a seat on the Board of Directors in the new company. Nash’s CEO, George W. Mason, was made President and CEO of the new organization.
Mason, who had been the architect of the merger, believed that the only chance of survival for America’s remaining independent automakers was for them to join forces in one large, multi-brand auto giant, able to challenge General Motors, Ford, and Chrysler (the “Big Three”) as an equal.
While the merger was taking place, Mason had entered into informal discussions with James J. Nance of the Packard Motor Car Company to outline his strategic vision. Nance saw value in the concept, and he OK’d a plan for AMC to buy Packard Ultramatic automatic transmissions and Packard V8 engines for certain AMC products.
Meanwhile, Packard acquired Studebaker as part of an earlier plan, and the resulting Studebaker-Packard Corporation (S-P) did cooperate with AMC by making the new 320 cubic inch Packard V8 engine and Packard’s Ultramatic automatic transmission available to AMC. Mason wanted these components for his upper level Nash Ambassador and Hudson Hornet models.
Tragically however, Mason passed away in 1954. His death placed George W. Romney at the helm of AMC. Unlike Mason, Romney was a penny pincher whose real dream was to turn AMC into a niche market player in the economy market, a segment that didn’t really exist at that time. As such, his vision was a 180 degree turn from that of Mason’s. It may be that Romney’s management sent AMC into such a small niche that they did successfully occupy, but one that never resulted in enough sales to garner the cash to survive.
One of Romney’s first official statements a week after Mason’s death, as reported in October 25, 1954 edition of Time Magazine, was to announce that there would be no merger talks with Studebaker-Packard “at this time or in the foreseeable future.” This announcement was rumored to have been made in response to S-P President James Nance’s refusal to consider any merger proposal in which he could not be in the top command position. Nance’s vision was just too far apart from Romney’s, so no deal was struck, and it was a true lost opportunity.
Romney did honor Mason’s commitment to buy S-P products; however, the understanding between Mason and Nance had been that S-P would endeavor to purchase parts from American Motors in return. S-P never lived up to its end of the gentleman’s agreement, mostly because Nance had been insulted by Romney’s method of handling the potential merger. Likely, the two had personalities and vision which were just too far apart.
Consequently, Romney felt that he had been duped into buying Packard engines and transmissions that were too expensive, perhaps even being priced as such by S-P to diminish his competitive advantage versus the Big Three and S-P. Thus, he ordered AMC engineers to begin development of the company’s own V8 engine. This decision sealed the chances of any reconciliation between the two. What could have produced a viable competitor to the Big Three became two smaller auto companies scrabbling for the edges of the US market.
Early History 1950s 1960s 1970s 1980s
Cars of the 50’s
Once the plan fell through to acquire Packard, Nash moved ahead with its own grand scheme – which began in 1955 with the real start of American Motors.
For the 1955 year, American Motors combined the Nash and the Hudson product lines under a common manufacturing strategy, while retaining both the Nash and Hudson established dealer networks. The fast-selling Rambler model was sold under both the Nash and Hudson labels in 1955 and 1956, eventually becoming a marque in its own right, and the mainstay of the company. Regardless of what they were called, these badge-only engineered Ramblers (along with similar Metropolitans) were identical, aside from hubcaps, nameplates, and a few other minor trim details.
The pre-existing full-size Nash product line was continued and the Nash Statesman and Ambassador were handed over to Hudson, where they were heavily restyled to become the “new” Hudson Wasp and Hudson Hornet. The two makes, while sharing a common body shell, were quite distinct, perhaps even more than they should have been. They were at least as different from one another as Chevrolet and Pontiac, and in some ways more so.
Hudsons and Nashes each used their own engines as they had previously: the Hudson Hornet continued to offer the famous 308 cubic inch I6 that had been America’s stock car racing (NASCAR) champion during the early 1950s, while the Wasp now used the engine of the former Hudson Jet. The Nash Ambassador and Statesman continued with their own well-known Nash overhead valve and L-head sixes, respectively.
Surprisingly, Hudson and Nash cars used different front suspensions, and the braking systems were different. Each brand had their own distinct sheet metal; with the only panels that interchanged between the two brands were the trunk lids! Even such expensive to produce items as window glass were unique in many cases, with the highly curved and expensive rear window glass that was not interchangeable. Inside, the dash panels were completely different. (So much for the economies of a merger).
As noted in the introduction, the Packard V8 engines were available in the Hudson Hornet and Wasp, as well as their Nash counterparts – and since they were expensive to procure from S-P – this did little to keep costs down. Later, the AMC designed 250 V8 would be offered, which did reduce costs.
The big problem was that the merger diluted the Hudson brand in the eyes of the former buyers. Hudson fans disliked the soft handling and ride dialed in to their cars by Nash engineers who had little understanding of the performance image of Hudsons. The former Hudson buyers derisively nicknamed the new offerings “Hash” models. The body designs were newer and more in tune with buyer preferences, however, and the softer suspension did offer an improved ride and much better driver and passenger visibility.
Hudson performance did improve, as did fuel economy; due to the utilization of the lighter weight Nash unitized body and the more powerful Hudson engines. And at the top of the line, it didn’t hurt that Hudson finally had a modern OHV V8 with plenty of spunk, albeit a Packard one.
But the problem was, that unlike GM, Ford and Chrysler, AMC did not move either brand into a single price range, leaving buyers once again confused. Hudsons were the same as Nashes – albeit they offered some different 6 cylinder engines and trim. But the merger seemed to hurt both Hudson and Nash, with 1956 being a disastrous year. The Automotive Division sustained a sizable loss when sales dropped by almost a third, with only 104 thousand cars produced, total. Statesman and Ambassador only accounted for a little over 16 thousand cars, a drop of over 24 thousand. American Motors Corporation did produce its 2,000,000th car on March 27, 1956, however.
There was too much resistance to change in the management at Nash, and so the Hudson neither became the performance Ambassador, nor was it ever an upscale Rambler, nor did it replace the Statesman nor even move upscale from Ambassador. The Hudson brand was in limbo. And being in limbo, made it in sales limbo too. In the three years of production under AMC, Hudson sold only 77 thousand units, with only 3 thousand leaving showrooms in 1957. It makes one think that under Romney AMC merely purchased Hudson to remove the competition – not to spread the brand over a larger buying public.
The hammer fell in the 1958 model year, where the Nash and Hudson brand names were dropped in favor of the then popular Rambler name, and the dealership networks were combined. All Hudson components were removed from the manufacturing process and all body styles were now one. This move effectively relegated the Hudson brand to the automotive scrap heap. The prototype 1958 Nash Ambassador and Hudson Hornet were to be built on a stretched Rambler platform, but at the last minute the car was renamed to the “Ambassador by Rambler” and all references to Hudson were removed.
If AMC thought that it would pick up the lost Hudson sales via this move, they were sadly mistaken. A careful examination of the auto production statistics will note that in these years Pontiac began to extol itself as the mid-priced performance car. This began with the 1955 year, ironically the first year of its 287 V8 and the Hudson-AMC merger. By 1957 Pontiac was in full swing in NASCAR, Hudson’s old domain, sales were on the rise, and the Hudson was dead. Nash’s strategy merely killed the potential Hudson buyer and chased them to GM and Ford.
For 1958 AMC consolidated the large and mid-sized models under the Rambler and Ambassador nameplates, utilizing one single chassis, merely stretched for the larger car. This consolidation finally completed Romney’s 1955 concepts. The corporation continued the slow-selling, British-built Nash Metropolitan sub-compact, but it became its own standalone brand that continued on for a few more years, finally being dropped after 1962.
At the same time AMC tried something totally against all common practice, and never successfully duplicated from then until now – they reintroduced their 1955, 100-inch wheelbase Nash Rambler as the new “Rambler American” compact to fill the small car void left when Rambler moved to the 108″ wheelbase. This car used the 1955 sheet metal, and had only a few mechanical modifications. It was a genius move at the time, as the country was in a recession and it gave AMC a small car lineup that all other makershad oly on the drawing board at the time – to be introduced a year or two later.
AMC now spanned the sub-compact, compact, mid sized and full sized lines; with the 89-inch wheelbase Metropolitan, the 100-inch American, 108-inch Rambler Six and Rebel V8, and the 117-inch Ambassador.
Under the leadership of George W. Romney, Rambler automobiles were known as low-priced products among consumers, with sales boosted by the poor economy of the times. But when the economy improved, this “cheaper car” image would hamper sales increases in the high growth decade of the Sixties.
Thus, while the Big Three were introducing ever larger cars, AMC became a victim of its own success, and moved downstream to “capture the economy market”. Luckily, during this time AMC did establish two core strategic factors which saved it from an early extinction and were the only means that let it survive as a smaller company:
- The use of shared components in AMC products and;
- A resistance to follow the restyling race of the Big Three.
AMC Establishes Two, No Wait A Minute, Three Identities
American Motors produced a wide range of products during the 1960s as it sought to stabilize itself in the marketplace. In the early part of the decade, when smaller, more fuel efficient cars were sought by the public, and sales were strong. In 1960, the Rambler line ranked in third place among domestic automobile sales, with more than 435 thousand units sold. Romney’s focus on light weight, fuel economy and simplicity was very successful during this period, and was reflected in the firm’s healthy profits. In these years the company was completely debt-free.
In 1962, Romney resigned to run for Governor of Michigan. He was replaced by Roy Abernethy, who had been the head of sales during AMC’s successful sales period. A new Canadian assembly plant was opened in Brampton, Ontario, Canada to build Americans and Classics. The 2,000,000 Rambler to be built since 1902 was produced on February 1, 1962 in Kenosha, Wisconsin. In June of the same year a strike by the supplier halted availability of aluminum 6 cylinder engines for 1962. The next season, four suppliers and four different versions of such engines were seen.
Unlike Romney, Abernethy believed that AMC could use its reputation of building reliable economical cars to morph into a new strategy that would follow AMC buyers as they traded up into larger, more expense vehicles; sales that had so far escaped AMC. The Company was flush with cash and feeling good. This may have been a false sense of security, but Roy was confident that AMC could run with the big dogs.
Before Abernethy had his say, the 1963 Rambler and Ambassador bowed. This restyle was a dramatic departure from the previous stodgy mid-fifties designs and was clean and crisp – looking lithe, compact and racy, all at the same time. The Rambler Classic won the famous Motor Trend Car of the Year Award. Roy should have paid attention, but the styling die had already been cast.
The 1965 model cars were the first iteration of this new concept. The result was a longer wheelbase Ambassador series and the addition of convertibles for the mid and larger size model lines. Mid-year in 1965, AMC introduced a fastback personal luxury car called the Rambler Marlin. It arrived just as Ford unveiled its new pony-car, the Mustang, which stole any heavy publicity that this striking model might have created for the Company.
The Marlin and the new Ambassadors, including the convertible, were supposed to emphasize personal luxury. As part of this strategy, Abernethy also called for the de-emphasis of the “Rambler” brand name. As such, in 1966 the Marlin and Ambassador lost their Rambler nameplates, and were badged as “American Motors” products. Further, the new models were unlike previous offerings and shared fewer parts among each other and were more expensive to build. Abernathy also began a quest to match the “Big Three” with annual styling changes – which required large expenditures of cash on a bet that sales would rise.
As a benchmark for this new strategy, a new line of redesigned cars for the full size and mid-size markets were launched in the fall of 1966. The cars won acclaim for their fluid styling, and they certainly were competitive with the Big Three from that standpoint. Unfortunately, Abernathy’s ideas did not work well enough, as the cars did not convert sufficient new buyers, and they put off the the firm’s economy-minded core of customers. Sales of the new mid-sized Rebel and full sized Ambassador models dropped after the introduction of the new cars. There were also quality control problems, because of such drastic changes in body parts and the complexity of assembly. Worse, the dipping sales fueled persistent rumors of the company’s demise because of its suddenly precarious cash flow.
The sales disaster of 1967 led to Abernethy’s ouster from AMC. Damage control fell to a new CEO, Roy D. Chapin, Jr., who was the son of Hudson Motors founder Roy D. Chapin. He immediately instituted changes to AMC’s offerings and tried to regain market share at the low price end of the market. Chapin’s first decision was to cut the price of the Rambler to within $200 of the Volkswagen Beetle.
He brought out some innovative marketing ideas that included making air conditioning standard on all 1968 Ambassador models. This made AMC the first U.S. automaker to make air conditioning standard equipment on its cars, beating all other makers; including luxury lines like Lincoln, Imperial, and even Cadillac. The company also introduced exciting, well-designed and styled entries for the decade’s muscle car market; most notably the AMX and Javelin. AMX catered to the sports car market; while the Javelin was the company’s entrant into the pony car market.
Additionally, operating cash was acquired through the sale of Kelvinator Appliance, which had been one of the firm’s core operating units just a few years earlier.
In a further effort to distance itself from the “cheap” concept in its cars, the Rambler brand name was completely dropped after the 1969 model year. It was used, however in several overseas markets as either a model or brand name all the way until 1983.
Chapin expanded American Motors product line in 1970, through the purchase of the Kaiser-Jeep Corporation. 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 USPS Jeeps. AMC also expanded its international network. The military and special products business was reconstituted as American Motors General Products Division, later reorganized as “AM General”.
From 1970 onward, “AMC” would be the brand name used for all American Motors passenger cars; and all vehicles from that date bore the AMC name and a new corporate logo. However, the names “American Motors” and “AMC” were used interchangeably in corporate literature well into the 1980s.
1954 NASH -Ad Ambassador Sedan 1
1957 AMC -Ad Full Line 1
1955 AMC -Ad Rambler Lineup 1
American Motors had been an innovator in using the same platform for a variety of models, as could be seen in the Rambler, Rambler Classic and Ambassadors of the 60s. The Company revived that concept with the Hornet and the first all American-built subcompact – the AMC Gremlin. The Gremlin shared a shortened version of the Hornet chassis. It was introduced on April 1, 1970. The Gremlin was also a good seller, with more than 670,000 sold from introduction until 1978.
The successful product launches of the Hornet and Gremlin gave AMC the courage to add other new products. In 1971 they released the new mid-sized AMC Matador, which replaced the AMC Rebel. The Matador was a safe exterior redesign of the Rebel, which now looked even more like their competition in the Big Three. AMC ran an innovative ad campaign that played on the lack of name recognition by using a pitch built around the question “What’s a Matador?”
In 1974, AMC decided to evolve the Matador into two distinct vehicles – conventionally recognizable boxy sedans and station wagons, and a radically styled coupe called the Matador Coupe. In 1975, the Matador sedan and wagon replaced the Ambassador as AMC’s flagship model. This decision was based upon the concept that the Ambassador name was just too conservative for the current market; and so ended the AMC premium nameplate. Starting with Nash, AMC had made the Ambassador from 1927 through 1974 – 47 years. This was the longest run of a model name use for any Nash/AMC product.
The radically styled Matador Coupe never lived up to sales expectations. Worse, its unique design meant it shared few components other than the suspension, drive train, and little trim and interior parts with the regular line sedans. Since most of the tooling for the regular sedans and wagons was an extension of the 1967 Rambler Rebel and had long been paid for, the Matador Coupe was a drain on the small company’s finances. Given that, and that by 1978, sales of large-sized cars were falling in line with rising gasoline prices, and all Matador models were discontinued and AMC focused on smaller, economy cars.
In 1974, AMC’s subsidiary, AM General, began building buses for urban transit systems, in cooperation with Flyer Industries of Winnipeg, Canada. The AM General coach, named “Metropolitan”, saw sales reach 5,212 units, but it never was the winner AMC expected, so production was halted in 1978.
In 1975 AMC introduced the “Pacer” line. This was a huge gamble and an innovative entry into the economy market that AMC seemed to know best. However, the design and development of the Pacer had coincided with radical changes in U.S. auto emissions and safety laws. AMC had intended to meet the mandated reductions in allowed passenger auto engine emissions (CAFE) by the use of the controversial Wankel rotary engine whose exterior compactness would have allowed AMC dedicate more space for the passengers..
But this project also coincided with the increase in U.S. passenger auto safety laws, requiring a stronger exterior. Originally designed to be lighter, the engineering required to meet the new laws, when combined with the extensive window glass provided for good vision, the Pacer now weighed as much as a small full size car. Worse, the small, powerful Wankel never arrived. Overweight and underpowered, instead of being revolutionary, the Pacer was a step backward.
As a marketing ploy, the Pacer was billed as “the first wide small car”. And now that the General Motors-built Wankel rotary engine was no longer available, the Company re-engineered the car to accept their existing 232 cubic inch and 258 cubic inch AMC 6 cylinder engines. The Pacer was also an all-new design, and it shared few components with its siblings. So when sales took a steep fall after its first two years of production, manufacturing cost per vehicle went out of sight. AMC made two attempts to broaden the Pacer’s appeal; adding an unusual looking station wagon, and the front end fascia was re-styled with a raised-center hood in order to be able to install AMC’s rather compact V-8.
The failure of the Pacer and the Matador Coupe are major reasons for AMC’s ultimate demise, because their development and production costs drained much needed capital that was necessary to update and modernize the popular Hornet and Gremlin lines, but now was unavailable. Thus, toward the end of the 70s, AMC found itself with aged products that were unable to compete in a very hotly contested economy market that was flourishing in the midst of the growing energy crisis. Further, the low cash balances reduced marketing efforts.
A new front end design for the Gremlin was introduced in 1977, along with a revamped the rear hatch and fascia. Further, and a more fuel efficient US-licensed and manufactured 122 cubic inch 4 cylinder Audi engine was introduced. In the midst of a gas crisis, AMC dealer were clamoring for a fuel-thrifty model for dealers to sell. But the cost of the Audi engine was high, so AMC left the cheaper-to-build 232 as standard equipment to keep the base price down. This was another mistake.
Another major change in the company’s lineup for 1977 was the reemergence of the AMX nameplate. Unfortunately, it was little more than a sports appearance package offered on the Hornet Hatchback. And it came standard with AMC’s 258 (later called the “4.2 Litre”) 6 mated to either a 4-speed manual transmission or 3-speed automatic. The AMC 304 cubic inch V8 was optional, but only available with the automatic transmission. The AMX did spark needed public interest in the Company. In that same year, the Pacer wagon was introduced, and all Matadors were changed to offer a host of standard equipment that was formerly optional, which removed the need for the high-end Brougham package. The Matador coupe only received paint and trim upgrades.
The Hornet platform was redesigned in 1978 and renamed the “AMC Concord”. The front end was borrowed from the newly redesigned Gremlin. The car did look very different and fresh compared to the aging Hornet. AMC aimed the Concord at the emerging “premium compact” market, and paid special attention to ride and handling. They also included a long list of standard equipment and a luxurious interior.
In 1978 Gremlins got the new instrument panel from the Concord, as well as a AMX-inspired “GT” sports appearance package. The sales of the Matador Coupe, sedan and wagon were steadily declining, and a strange decision was made to eliminate the economical 304 V8 from the option list. This left only the 258 I6 and the 360 cubic inch V8 as the only available engines. The changes were not enough to keep interest in the vehicle, so AMC trimmed the Matador from the lineup at the end of the model year after a final run of 10,576 units.
In 1979, the “Spirit” sedan replaced the Gremlin. An ingenious redesign of the rear panels created a fastback version of the car, which AMC dubbed the “Spirit Liftback”. The Liftback quickly proved to be a successful extension for the 10-year old chassis which had been based upon a design going back to the early 60’s. The Pacer was unchanged, and rapidly-declining sales indicated the end was near. The last Pacer would be produced at the end 1979.
On May 1, 1979, AMC celebrated the 25th anniversary of the Nash-Hudson merger by releasing “Silver Anniversary” editions of the AMC Concord and Jeep CJ in two-tone silver. At this point Jeeps were making almost 50% of the company’s sales and most of its profits; and a new small, fuel-efficient car from Renault; the Renault 5 – courtesy of a new deal struck between the two companies – began to appear in dealer showrooms. It was sold in the U.S. as “LeCar”.
The End – Caught Between the Big Three and Foreign Investors
AMC had finally run out the play. A drop in Jeep sales caused by a rapidly declining economy and soaring energy prices tightened AMC’s cash flow. And at the same time, pressure was increasing on the company’s non-Jeep product lines that were now hopelessly out-of-date. The previous face-lifts and rebranding of AMC’s once-innovative and successful cars were not enough. The landscape had changed dramatically and AMC was way, way behind.
The threat was not merely limited to the Big Three automakers, but now the Japanese, who were using streamlined production methods, were closing in. They had new, highly efficient assembly plants – now constructed in the US. And the Japanese were much lighter on their feet when it came to responding to consumers. They were building small cars – the heart of AMC’s passenger product line.
As Americans turned to the new imports in increasing numbers, AMC was stuck in the inefficient and aging Kenosha, Wisconsin facilities that were the oldest continuously operating automobile plant in the world. To make its vehicles, AMC had to use processes from the beginning of the 20th Century – where components and unfinished bodies still had to be transported across the city in order to be assembled.
The recession and tightening lending of the early 1980 pressed AMC to the point that their 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. By September, AMC’s U.S. market share had fallen to a little more than 1.5%, and in November, when new car sales usually boomed, AMC’s sales dropped 19.1%! The sinking economy was exacerbating AMC’s problems, to the extent that many of its dealers had to be persuaded to stay open.
AMC warned that the company would be bankrupt if Renault did not act on a plan to acquire as much as 59% of the company. In January of 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: he was an engineer and international business executive with over 20 years at Renault. His appointment had a positive impact on a Company that seemed lost. He was credited with streamlining many of AMC’s arcane management techniques and instituting important improvements in plant layouts. He was a bear on improving cost and quality control.
By 1983, Renault, having increased their stake in the company several times to keep it solvent, now owned 49%of AMC. At this point, it could be argued that this ended the image of AMC 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.
The Renault/AMC Alliance
First product of the AMC-Renault alliance was the 1983 Renault Alliance, a front-wheel drive Renault 9 compact restyled for the American market by AMC’s Richard Teague and produced at the Kenosha plant. Marketed as a Renault, with AMC branding confined to decals on the rear windows. It was available as a sedan with two or four doors, a two-door convertible and, later as a hatchback that was introduced in 1984 and badged as the Renault Encore. For the last model year (1987), a higher-performance version of the 2-door sedan and convertible was sold as a Renault GTA.
The new model, introduced at a time of increased interest in small cars, won several awards including the Motor Trend Car of the Year Award. The magazine said: “The Alliance may well be the best-assembled first-year car we’ve ever seen. Way to go Renault!” (note no reference to AMC). But in a 1986 Consumer Reports survey of five-year owners, the 1983 Alliance scored worst in the ratings for its driveline components. Sales, which had begun well, made a steady decline. Alliance production ended in June 1987.
AMC Eagle – All That’s Left
By the beginning of the 1984 model year, only a single model line – the four-wheel drive Eagle – represented the AMC brand. All the company’s other products were branded Renault or Jeep.
Introduced in 1980, the Eagle was one of the company’s best-known products. It is considered one of the first “crossover SUVs”. It used a Concord body shell mounted on an all-new platform that had been developed by American Motors in the late 1970s. Featuring an innovative full-time four-wheel drive system, it sold best in snow-prone areas. Again, sales started strong, but then declined, mostly because the car’s styling dated back to the 1970 Hornet. It did allow the Eagle brand to survive, but only in station wagon form, until 1987 as a 1988 model. The last Eagle was built on December 14, 1987.
Jeep
Most beneficial for any chance of AMC’s survival was an all-new line of compact Jeep Cherokee and Wagoneer models introduced in 1983. These downsized Jeeps pioneered a new market for what later became the sport utility vehicle (SUV) segment.
These vehicles initially used the AMC 2.5 L (153 cu in) OHV four-cylinder engine with a carburetor, with an optional General Motors-built 2.8 L (171 cu in) carbureted V6. In 1986, throttle-body injection replaced the carburetor on the 2.5 L. 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 I6, but introduced with a new cylinder head design and electronic fuel injection, replaced the outsourced GM V6. This engine was designed with help from Renault and incorporated Renault-Bendix (Renix) parts for fuel and ignition management.
One older design was continued: the Grand Wagoneer full-size luxury SUV and the related J-Series pickups, built on the same chassis as the earlier SJ model Wagoneers and Cherokees – a chassis and sheet metal that dated from 1963. It used the AMC 360 CID V8. Production of the J-Series pickups ceased after 1987. The Grand Wagoneer and its engine would soldier on into the Chrysler era and was finally dropped after 1991.
1985 and Moving Toward the Final Buyout
1985 was a turning point for the Company as the market moved away from AMC’s small models – fully embracing the Japanese imports. With fuel relatively cheap again, the remaining buyers turned to the larger more powerful automobiles offered by Ford, Chrysler and GM – and AMC was unprepared for this development, with the Matador gone for almost 10 years. In the midst of this change, the venerable Jeep CJ-5 was dropped after a 60 Minutes TV news exposé of its rollover tendencies under extreme conditions.
At this time, AMC was also confronted by an angry work force, which was falling behind the other US auto workers in wages and benefits – cuts enforced by Renault. 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 about to be shut down.
Fortuitously, Chrysler was having trouble meeting demand for its M-body rear-drive models (Dodge Diplomat, Plymouth Gran Fury and Chrysler Fifth Avenue). And as they were assembled using a system that made it easy to move the tooling. A deal was made; Chrysler would supply the components and control the quality, while AMC would assemble the car. As such, Lee Iacocca and Joseph Cappy reached an agreement to use AMC’s idle plant capacity in Kenosha.
The declining sales problems came in the midst of a transfer of power at AMC from Paul Tippet to a French executive, Pierre Semerena. The French-based management responded with tactical moves by selling the lawn care division and signing an agreement to build Jeeps in the People’s Republic of China.
But at the same time, the US Military voiced a problem with AM General, who was a significant defense contractor, being managed by a French firm. They explained that they could not allow a foreign government to own a significant portion of this important defense supplier. As such, the profitable AM General Division was sold.
Another milestone was the departure of Dick Teague who was AMC’s design vice president for 26 years. He had been responsible for many Jeep and AMC designs including the Gremlin, Pacer, Matador Coupe, Rambler American, AMC Javelin and AMX Hornet.
Problems at Renault
Renault was experiencing financial troubles of its own in France. The investment in AMC, which included the construction of the Canadian assembly plant in Brampton, forced cuts at home, resulting in the closure of several French plants and mass layoffs. Renault had three choices: they could declare AMC officially bankrupt thereby lose its investment; they could come up with more money; or AMC could be put up for sale and the French could attempt to get back something on 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 at the time at Bramalea — as well as the recent introduction of the thoroughly modern, fuel-injected 4.0-liter and 2.5-liter 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.
Assassination of Georges Besse
But on November 17, 1986, Georges Besse was assassinated by “Action Directe”, a clandestine militant extremist group. The murder was carried out by members of Action Directe’s Pierre Overney Commando, who 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. With Besse’s death, any champions in Renault were silenced.
Sale to Chrysler
Under pressure from Renault executives following Besse’s death, Renault’s new president set out to repair employee relations and divest the company of its investment in American Motors. The earlier arrangement between Chrysler and AMC, under which AMC produced M-body rear-drive cars for two years, fed the rumor that Chrysler was about to buy AMC.
In March 1987, Chrysler agreed to buy Renault’s share in AMC, plus all the remaining shares, for $1.1 billion. AMC became the Jeep-Eagle division of Chrysler. It was the Jeep brand that Chrysler CEO Lee Iacocca really wanted — in particular the new Grand Cherokee, then under development. Additional benefits included AMC’s recently modernized factories; the AMC dealer network, which would strengthen Chrysler’s retail distribution; and last, AMC’s then underrated organization and its management talent, which Chrysler quickly assimilated.
Ironically, the sale came at a time when the automotive press was very enthusiastic about the proposed 1988 lineup of Renault and Jeep vehicles, some even speculating AMC/Renault finally had the products to turn the company around. The sale marked Renault’s withdrawal from the North American market.
