Going Further with Less: management at

American Motors Corporation (AMC)

1954 - 1987

Version: 3.01

Christopher Ziemnowicz, Ph.D.

Division of Business and Economics

Concord College

Athens, West Virginia, 24712

chrisz@concord.edu

304-384-5122

 

John E. Spillan, Ph.D.

Pennsylvania State University

DuBois Campus

DuBois, Pennsylvania 15801

jes40@psu.edu

814-375-4803

 

William ³Rick² Crandall, Ph.D.

Division of Business & Economics

Concord College

Athens, West Virginia, 24712

rickc@concord.edu

304-384-5244

 

            This paper examines an organization that was born as a direct result of a carefully crafted strategic vision merging two major independent automakers. The result was a company named American Motors (AMC). The discussion traces the management leadership and approaches that lead to AMC¹s rise, as well as its eventual demise. The turbulent history of this company may serve to provide current decision-makers with a new understanding of business strategy by examining prior experience. As the evidence indicates, other automakers subsequently experienced similar strategic challenges that AMC faced during its 33-year life. Furthermore, the legacies of AMC¹s successes and innovations continue to be apparent in the contemporary competitive landscape.

 


Going Further with Less: management at American Motors Corporation (AMC)

1954 - 1987

 

INTRODUCTION

            The automobile industry has experienced a century of fascinating history because of the vision of a handful of individuals. Their concepts translated a novel idea of a horseless carriage into a ubiquitous lifestyle device. The automobile industry was established by pioneering entrepreneurs to manufacture this new invention, however some existing companies shifted their focus from predecessor products to the new self-propelled vehicle. Examples include the Studebaker Corporation in South Bend, Indiana, the largest maker of horse drawn wagons[1], and the Jeffrey Company in Kenosha, Wisconsin, which abandoned the bicycle business ahead of its collapse and began making the Rambler automobile in 1901[2]. The Rambler, developed by Thomas L. Jeffrey, was the second mass-produced car in the United States -- after the Oldsmobile that was designed by Ransom Eli Olds. In the beginning, automobile manufacturing was competitive, but a relatively uncomplicated and growing business. There were hundreds of individual firms, many concentrating their resources on particular market segments. However, managers incorporated strategic and operations management techniques to organize larger enterprises to effectively compete and expand their markets. Over the years, the number of entrepreneurial firms declined due to increasing competition and intensifying capital requirements. The industry evolved to be comprised of three large firms that consolidated a variety of car lines, as well as a smaller manufactures whose survival depended mainly on single brands. These smaller firms were called ³independents². In 1929 the independents enjoyed twenty percent of the market compared to the 80% held by the ³Big Three² (Georgano, 1992). Most the independent manufacturers saw their last days during the Great Depression after which there were just a handful remaining.

            Economic conditions and market demands affected corporate strategies, thus, automobile makers had to be flexible in their operations and structures. Some independent producers were bought out or merged to establish stronger organizations. After World War II the independent automakers served niche markets, such as smaller cars. These were typically models not offered by the ³Big Three² makers: General Motors, Ford, and Chrysler. However, the competitive rivalry among the Big Three sharpened their managers to implement strategic techniques so effectively that they overwhelmed the independents. Furthermore, barriers for entry into the industry became so high and numerous that even during the best of market conditions, no serious contending auto manufactures were established. In 1952, the independents¹ market share dropped to thirteen percent (Georgano, 1992). This was a dramatic shift within the industry. Most of the independents were driven into a ³fire-fighting² strategy, as they had no other alternative if they wanted to survive. The success of each firm within the auto industry was dependent on its management style and practices. In other words, effective and efficient management systems had to be adopted to remain competitive.

 

WHY AMC?

            This paper analyzes an organization that was born as a direct result of a carefully crafted strategic vision merging two independent automakers. The outcome was a company named American Motors (AMC). This discussion traces the management leadership and their decision-making that lead to AMC¹s rise, as well as its eventual demise. A time-line of significant personnel and strategy changes illustrates management¹s decision-making. Examining the turbulent history encountered by AMC may provide current decision-makers with a new understanding of business strategy. As the evidence indicates, Chrysler Corporation -- the purchaser of AMC -- subsequently experienced similar strategic challenges that AMC faced during its 33-year life. Furthermore, the legacies of AMC¹s strategy successes and marketing innovations continue to be apparent in the current competitive landscape. For example, DaimlerChrysler -- the result of Daimler Benz taking over Chrysler -- adopted AMC management operating behavior when faced with challenges. Although AMC possessed promising markets and strategies, as well as proper management and organizational structures, it encountered substantial external threats. Reviewing AMC¹s bold and resourceful history of success and failure in a very competitive industry provides many insights.

 

BEFORE THE MERGER

            The end of World War II found the United States at a high level of prosperity. There was a tremendous pent-up demand for consumer goods -- particularly for automobiles and household appliances. To move from the military based economy back to the production of consumer goods required a massive investment in machinery, equipment, re-tooling, plant expansion, as well as a reorganization of personnel. American industry invested billions of dollars in this conversion. Accompanying this transformation were industrial mergers. An estimated 7,500 firms merged between V-J Day and 1956 (The Story, 1957). Some consolidations involved diversification or integration of businesses; others strengthened financial and physical assets to achieve competitive capacity. Many firms were compelled to join for pure survival in their markets.

            The arrival of peace, as well as thousands of GIs returning home, unleashed an unprecedented consumer-buying spree. Accompanying this was a spiral of inflation. Consumers had sizable hoards of savings that they were yearning to spend after the lean war years. Automobiles were a prime durable good on just about everyone¹s shopping list. The Big Three offered consumers vehicles for almost every market segment. This made choices relatively simple for the majority buyers. The independents, on the other hand, offered a limited range of products and were at a disadvantage. Their resources were very constrained. The independents were not able to join the Big Three in the constant battle of redesigning their products. They were also overlooked by potential buyers in the marketing and sales promotion ³war of the brands² among the Big Three. However, one independent auto executive, George Mason, believed there was an opportunity for the independents to prosper through a selective consolidation of resources.

 

Mason¹s vision

            Although the automobile market was growing, George Mason, the CEO and president of Nash-Kelvinator, was a hardheaded realist and held no illusions about the ultimate result of the publics¹ buying spree (The Story, 1957). He clearly foresaw that one day the seller¹s market must end. According to Mason -- when output caught up with demand -- the most important factor in the competitive race would be maintaining an advantageous relationship between the ever-increasing costs of manufacturing, engineering, and production to the total units produced (The Story, 1957). Although some independents showed good potential, Mason was rethinking the composition of the American auto industry[3].

            Foreseeing future manufacturing and marketing conditions, Mason began to champion the benefits that could be accomplished by merging at least one other strong independent automobile manufacturer with his company. His grand strategy was to have the luxury manufacturer Packard on the top, followed by Hudson, Nash, and Studebaker automobiles, as well as Reo trucks -- to offer a complete and strong alliance (Mays, 1998). With increased capital, more physical assets, longer lines of credit, as well as concentrating production facilities -- his proposed organization could build more cars at a lower unit cost. The combined enterprise would pool research and development, share tooling, as well as use common parts. The new firm would effectively compete with any style or make the Big Three presented. Moreover, many of these cost benefits would carry over into Nash¹s Kelvinator major appliance division. This vision was grandiose, far reaching, and would be a dramatic shift in the industry. Mason started making overtures to several companies in 1946, but it was not until 1948 that Packard was sufficiently interested to listen to a proposition. However, nothing materialized because the post-war sellers¹ market was still robust. This was a blow, but not the end of his attempts to form a strong automobile company with sustainable competitive advantages.

            After the Korean War, the automobile industry entered a severe readjustment period. On the one hand, the output of the Big Three was boosted with the elimination of wartime controls. Their objective was to become vertically integrated to a large degree. On the other hand, the remaining six independent companies had to fight for their existence in the marketplace[4]. The Big Three formed an oligopoly and seized enormous market power. Furthermore, a price war between the Chevrolet and Ford brands destroyed profitability in the largest market segment (Mays, 1998). The independents did not have the diverse and abundant resources -- compared to the Big Three -- to ride out a succession of losses in their financial statements. Their hemorrhaging was so bad that consolidation seemed to be the only answer. By mid-1953, officials at the Hudson Motor Company contacted Mason to determine whether he was still interested in his unification idea. Hudson¹s President, Edward Barit saw that his firm was quickly losing money and decided that a merger would be the best course of action. This strategy appeared to be the only alternative as by 1954, all the remaining independent producers held on to just barely four percent of total domestic automobile sales[5].

 

THE HISTORY OF AMC

            Even before the actual merger, Mason had selected a new name for the consolidated enterprises[6]. He would call it American Motors. On January 14, 1954, Hudson¹s board of directors -- of which Barit was also chairman -- formally accepted a proposal made by Nash-Kelvinator. The stockholders of both companies overwhelmingly approved the merger plan. Thus on May 1, 1954 the nation gave birth to a new automaker, American Motors Company (Foster, 1993). This was the largest corporate consolidation to that point in U.S. history. Mason was named chairman of the board, president, chief executive officer, and general manager. His assistant, George Romney, was named vice president, while Barit became a director in the new company. This merger secured the future continuation of the innovative ³compact² car, as well as the opportunity to compete with the Big Three in the longer term. As Mason put it, American Motors was ³old in heritage, new in concept, combining the tested experience of long service with the vigor and fire of youth² (History, 1960).

 

Left to right:

Barit president of Hudson Motors,

Mason chairman of Nash-Kelvinator and

Romney president of Nash-Kelvinator in 1954.

 

Source:

http://php.iupui.edu/~harrold/nash/amc.html

 

            The merger of old-line companies -- as were Nash and Hudson -- involved tremendous problems. There were issues of consolidating personnel, plant facilities, and sales organizations. Moreover, it was critical to maintain production and build on the gains in marketing, such as advertising, distribution, and product designs. Mason had laid his plans so well that by October 1, 1954, or the beginning of the first full fiscal year for AMC; the consolidation was virtually complete (History, 1960). He also dramatically changed the strategy for the new firm. Mason foresaw problems in the industry and conceived the concept of a ³compact² car (Spina, 1965). The small car was positioned AMC with a differential advantage, as well as avoided a head-on clash with the popular ³standard² models produced by the Big Three.

            On October 8, 1954, the new organization received a tragic surprise. On the very day Mason was to fly to England and arrange further expansion of AMC¹s foreign operations, he died. Four days later, the board of directors elected as president and board chairman the man whom Mason had selected six years earlier and had been grooming for the job, George Romney.

 

Romney¹s dinosaur killer

            George Romney was an able leader and accepted the reins of the new company. He skillfully guided AMC during its inaugural transition period within a fiercely competitive marketplace. While Romney¹s vision of smaller cars was a potential differential advantage, the strategy was causing the firm to lose more than $2 million per month and it owed $69 million to banks and insurance companies. Moreover, several large stockholders were suggesting that the company be liquidated (Mahoney, 1968). Even the press was skeptical of the future of AMC. Many were predicting that the company would not succeed in its present form. Romney¹s adversaries within and outside the company spread their negative views about the fate of AMC. However, Romney never lost faith. To resolve some of AMC¹s financial problems he made three strategic divestitures. First he sold 61% interest in Ranco Inc., the world¹s largest maker of thermostatic controls for appliances and automobile heaters, for over $10 million. Next, he got rid of the Hudson body plant for over $2 million. Finally, he unloaded the El Segundo assembly plant in California to Hughes Aircraft for more than $3 million. While these divestitures generated cash for operations, AMC still reported a massive operating net loss of $19.7 million for 1956 (Mahoney, 1968).

            Romney¹s skillful leadership gave the company encouragement. By 1957, the strategic changes gave AMC a new direction and vision needed to compete with the Big Three. Although the final tally for the year was not complete, Romney decided to discontinue the Hudson and Nash brands. The board of directors reluctantly agreed to drop both the large-sized models that were the historical legacy of the new company. The firm rested its fortunes on the smaller Rambler line. Romney¹s vision focused solely on the compact car -- a fuel-efficient vehicle twenty years before there was a real need for them (Meyers, 1986). This follows Porter¹s generic model of a focused differentiated strategy. However, Barit was so upset with this strategy, that he resigned in protest and many pundits thought Romney was crazy (Brown, 1999).

            Despite stagnant sales for other auto brands, sales of the compact Ramblers indicated real promise. AMC undertook a ³dinosaur fighting² strategy. The firm¹s small size meant that it had to focus on the assembly and sales functions, rather than mimic the vertically integrated structures of the Big Three. AMC relied on outside vendors to achieve efficiencies from independent sourcing, as well as to take advantage of their specialization in parts such as electrical and fuel controls. AMC was practicing outsourcing before the strategy became popular. Marketing also combined two ideas to deliver a clear message to consumers. First, focusing on AMC¹s innovation and small corporate size in comparison to the Big Three. Second, AMC¹s compacts were shown attacking the popular and oversized models that made up the bulk of the market. Rambler sales enjoyed a 55% increase from 1954 to 1956. AMC¹s compact car had good resale value on the used car lots, the Rambler models gained honors in the Mobilgas Economy Runs, and AMC finally received wide acceptance from executives in the automobile industry[7].

            Romney was a high profile corporate executive. He appeared in advertisements and talked about the Rambler models everywhere he went. He introduced so much excitement and enthusiasm about this new brand of car that it became contagious and translated into sales. Romney stated that the Big Three ³dinosaur² automobiles were his ³best salesmen². Nevertheless, the Big Three focused on applying every opportunity and design trick to make their cars appear modern. This was accomplished by steadily larger, sleeker, and more luxurious versions. These new models were difficult to maneuver in traffic and did not fit in traditional garages. Even though they were inefficient in fuel consumption -- as gasoline prices rose -- the Big Three aggressively promoted them in the marketplace. Consumers seemed to like ornate appearance, lavish use of chrome, ever-larger tail fins, and engines that are more powerful. Meanwhile, AMC¹s emphasis on lower prices and greater fuel economy gave the Rambler a cohesive position to compete against the Big Three. Moreover, the small car idea was no longer just a fad that would go away. As early as 1955 Romney predicted that by 1960, the compact car would be a top contender against the ordinary big cars built for the bulk of the market (Time, p. 86). AMC¹s strategy also helped it compete with the small car imports that had just begun to popular in the United States. As a result, the Rambler¹s attractiveness began to soar. The Big Three took notice as the economy car market segment began to grow. While the Rambler line was not having a major impact on sales by the Big Three, they responded by introducing their own versions of a small car (Time, p. 85).

            The popularity of the compact car spilled over into the 1960¹s. More than 422,000 Ramblers were sold in 1960. This represented 6.4% of the market, the highest market share level that AMC ever reached. During 1961, Rambler rose to the number three place in the industry based on total registrations for the calendar year[8]. Romney¹s financial strategy was for his firm to be completely debt-free. The company was building a solid working capital fund to accommodate potential emergencies. AMC was also generous in sharing its prosperity with its labor unions by bighearted contract conditions. Romney¹s business strategy was to focus the company on a well-developed plan that consisted of one brand name for a series of three automobiles. The two most important factors were the use of shared components in AMC products and a resistance to follow the annual restyling contests among the Big Three. AMC¹s strategy focused on cost controls and providing consumers a better value. Unfortunately, the unique small car strategy that Romney implemented did not last for long.

                             

                  George Mason                       George Romney                      Roy Abernethy

 

Abernethy¹s head-on collision

            The early 1960¹s found AMC becoming an organization no longer dominated by a charismatic leader. The image and identity that Romney had carefully crafted for AMC was substantial and pervasive. The company saw tremendous gains and even won top media honors by having the entire Rambler line selected as ³Cars of the Year² in 1963. However, as it became more competitive in the industry, AMC¹s corporate culture also changed. Top executives moved from an essentially entrepreneurial mode of operations to a more traditional hierarchical structure. Since it was the Rambler that generated success, AMC¹s lead designer, Ed Anderson, was eager to take a top spot in the company. Unfortunately, management egos were strong now that AMC was enjoying prosperity. The board of directors rejected Anderson¹s ambitions. He was told that if he did not like his current position he could go elsewhere. That he did. He ventured on to Chrysler where he tried to become a VP, but was also unsuccessful (www.mederle). The biggest change at AMC occurred when Romney resigned in 1962 to run for governor of Michigan. To replace Romney, the board selected the company¹s successful sales manager, Roy Abernethy. This was significant in that it was the first time that AMC separated the position of president from the chairperson of the board. Abernethy was hired in 1954 and devoted himself to building AMC¹s distribution network. Now a billion-dollar corporation -- twice its merger size -- Abernethy was confronted with a fresh need for the application of modern management techniques as the approaches that were satisfactory for a small company were no longer enough (Spina, 1965).

            The mid-60s were a turbulent time for AMC. Abernethy had a different vision than his predecessor. He wanted to move away from the comfortable niche the Rambler brand had developed. Abernethy wanted larger cars with more prestige and luxury, thus moving it to higher profit potential. Romney knew that such a focus was not appropriate for AMC, but Abernethy was determined to change the ³Rambler image². Abernethy was eager to make AMC models real contenders in the annual sales battles with the Big Three. His strategy was isomorphic -- not only to imitate the Big Three, but also to spend whatever it took to accomplish this goal (Foster, 1993). Abernethy was following Porter¹s broad differentiated strategy in his efforts to move away from a low-cost operation to serving wider market segments.

            Accompanying Abernethy was the new Chairman, Richard Cross. He was an accomplished attorney and a renaissance executive (Spina, 1965). He had handled Mason¹s personal business and previously worked for him at Nash Motor Company. Some have labeled Cross as only a ceremonial figurehead situated there only to keep a seat for Romney in case his bid for governor of Michigan failed (Foster, 1993). Nevertheless, Cross was concerned about the future of AMC and believed that the firm, having made a ³great breakthrough² once, could surely do it again (Spina, 1965). This was a classic blunder of attempting another ³home-run² strategy.

            The year 1965 began the turn away from what was once AMC¹s bread and butter. As sales of smaller cars faltered, Abernethy took this as a positive sign for his agenda. He moved AMC product strategy upscale. He pushed into new markets, for example developing convertibles in every series and making the Ambassador longer and much more luxurious, while at the same time down playing the foundation built on the smaller and plainer models. In the middle of 1965, a totally new model was added to the product line -- the Marlin. It was to compete with the new Ford Mustang. While the successful Mustang was based on Ford¹s economy car, the Falcon, AMC¹s Marlin was derived from a larger platform. Sadly, the Marlin did not meet market demands. One of Abernethy¹s quirks was to wear a hat when visiting the design studios so he could check to see if there was enough headroom (Meyers, 1986). The Marlin¹s fastback roof style was raised to accommodate his hat even in the back seat. This was not what young people -- for whom the Marlin was aimed -- wanted. They did not want a large and comfortable cruiser with luxurious features. The target market favored a small coupe that was simple and low priced.

            As time passed, Abernethy began to believe that the Rambler was substandard for his top models. He emphasized a new image, as he was a ³big car guy². His strategy no longer portrayed AMC as the ³Economy King² of the old, but initiated opulent luxury and the sporty appearance of the new. Unfortunately, his new models shared fewer parts among each other and were more expensive to build. Furthermore, Abernethy¹s image was not compatible with AMC¹s core customers. Sales were sliding and this led to the biggest detractor -- rumors in the press regarding the financial health of AMC. Accompanying the sales stump, the strategy of matching the competition with styling changes required tooling costs that AMC could not afford. Abernethy¹s scheme and sales ideas did not work. Moving the product line upscale confused core Rambler customers. The lack of sales combined with increased costs almost drove the company into bankruptcy.

            The problems facing AMC at this juncture were the result of incorrect assumptions. Abernethy presumed that customers needed more choices among those already available from the Big Three. History had already proven this strategy wrong. For example, the Kaiser-Fraiser Company tried unsuccessfully to challenge the Big Three market leaders in their existing product segments. Abernethy¹ blindness positioned AMC in a precarious situation requiring future managers to quickly perform a U-turn in strategic planning.

 

Chapin¹s niche focus

            By the end of 1966, finances were so tight that there were questions if the company would be able to survive the end of the model run. The board of directors appointed Robert Evans -- the largest stockholder -- as Chairman. He was just as inexperienced in the automobile business as was his predecessor, but Evans was determined to develop a new life for the company even under crisis conditions. Roy Chapin, Jr. was given the task of engineering and completing the turnaround. Automobiles were in his blood as he was a son of one of the founders of Hudson Motor Company. Chapin was also experienced in managing various parts of AMC as Executive VP and General Manager.

            Chapin was a real automobile man. His first job was as an engineer for Hudson. He promptly learned to deal with adversity. For example, as a test driver, Chapin simply used Detroit¹s east side streets since Hudson did not have a closed track (Higgins, 2001). As Chapin took over AMC, the firm had a market share of less than three percent. He had to reinstill public faith in the company¹s performance -- its survival power -- by reversing a downtrend in sales and transforming red ink into black (Livingston, 1967). Chapin noticed that imported cars were increasing in market share. He saw that in 1962, the Rambler sold for $251 more than the Volkswagen. By 1967 the spread had widened to $434 -- which was then a significant amount of money. During this time, sales of the Volkswagen doubled, while Rambler¹s had been cut almost in half. Chapin¹s first decision as CEO was to cut the price of the Rambler American to within $200 of the basic Volkswagen. This strategic move that ignited customer enthusiasm, stimulated showroom traffic, and dealer morale soared. The Big Three did not respond to this strategy, thus giving AMC a big price differential over the competing domestic models. Chapin then reached out for non-average car buyers. For example, by segmenting station wagon buyers geographically and offering special models featuring different motifs and themes. The Big Three could not afford to individualize cars given their high volume. Chapin¹s strategy was to ³hit¹em with a difference² (Livingston, 1967).

            In early January 1967, AMC¹s board made another reorganization. Chapin was elevated to chairman of the board and CEO, William Luneburg became president and COO, Evans stayed on as a director, while Abernethy was forced to retire. Luneburg had been deeply involved in auto planning and manufacture since 1949. Immediately after World War II, Luneburg took a job with Ford as a financial analyst. He delved into variable manufacturing budgets, cost controls, and optimum cost levels. He was promoted to manager of Ford¹s large Dearborn assembly plant where he acquired a broad knowledge of planning and manufacturing. His experience included an ability to know where the company was financially -- not only next week, but years into the future -- as well as knowing how to collect marketing and production information (Spina, 1965). Luneburg moved to AMC and quickly became the boss of the firm¹s ³black boxes² and brooded over the use of mathematics to manufacture automobiles (Spina, 1965).

            AMC¹s was facing a cash flow crisis. AMC sold one of its non-automotive subsidiaries, Redisco, the finance arm of Kelvinator appliances. This was a distressing decision as Kelvinator was integral to the initial merger strategy. Additionally, AMC received an order for almost 4,000 right-hand drive automobiles from the Unites States Postal Service. The divestiture as well as the big Postal vehicle order helped increase the cash flow and stabilize the firm¹s position. Another decision to enhance cash focused on a reduction of the workforce. By 1967 AMC employed 23,704 people, which was 11,000 less than in 1963 (www.mederle). During 1967, AMC achieved significant reductions in the areas of administrative and commercial expense, manufacturing costs, as well as merchandising allowances. Controls were tightened on inventories. Production rates were closely monitored to achieve balance between production and sales. This included production shutdowns for 26 working days to allow for the launch of the 1968 models with the lowest carryover total of prior models since 1959[9]. These are all decisions to move the company to an overall low-cost leadership position.

            Although its new products were planned under the Abernethy regime, 1968 became the turnaround year for AMC. After extensive market research of Ford Mustang owners, the sleek Javelin was introduced. This youth oriented car was a surprising success, with management anticipating sales of 35,000 vehicles. Instead, 65,000 were sold in the introductory year. This compact sporty car -- built using many existing components -- assisted in improving the image and public opinion of AMC. In 1968, AMC began to make a profit. While this was a good year, AMC still needed more cash. A key element in planning was the decision to focus all of AMC¹s financial and organizational resources on the automobile business. To acquire $10.8 million for automobile sector investments, AMC sold the entire Kelvinator appliance subsidiary at approximately $45 million, or less than its book value. Management made this decision because to do otherwise would have required major cash infusion to help maintain the appliance subsidiary¹s own competitive position. The appliance division sustained an after tax operating loss of $1.5 million during the portion of the fiscal year it was owned by AMC, which dragged down final net earnings. However, the sale enabled the company to recover $19.2 million of previously paid federal income taxes[10].

            The Kelvinator divestiture left AMC a downsized company solely manufacturing automobiles. More significant was AMC¹s progress to achieve a low-cost strategy. Cost reduction programs were on target, allowing a reduction in the break-even point. Moreover, the company recognized the need to strengthen and expand its dealer organization to fill strategic open points throughout the country and concentrate on developing quality dealerships with high volume potential[11]. AMC developed innovative product designs for the future. As Chapin put it ³we are no longer a seat-of-the-pants company² (Livingston, 1967). He also recognized that -- compared to the Big Three -- AMC was different. It could be nimble to capture niche markets at low cost. Moreover, it did not depend on a standard line of models to achieve mass volume sales -- as did the Big Three. In contrast, Chapin capitalized on AMC¹s small size as a competitive weapon. During 1968 the company improved its financial position and gained the resources to be flexible in an industry dominated by the Big Three. Even with all this progress, it still had a lot of work to do.

            A more conservative corporate and product strategy was needed. Even the approach to product design had to be modified. Managers acknowledged that AMC may not be able to follow the latest in trends, but it should have models that would stay in style for many years (Foster, 1993). AMC began to introduce a variety of new ideas that emphasized consumer value. For example, all Ambassadors had air conditioning -- an industry first. The Hornet and the Gremlin were not only built on the same platform sharing basic components thereby lowering tooling costs, but they also sold successfully. This helped strengthen AMC¹s value image. Moreover, the concept of timeless design worked well. This was exemplified by the Hornet platform. It was introduced during 1969 and continued to be built under a variety of models through 1987. The company was also effective in developing special niche models. The best known were the pure muscle machines equipped with AMC¹s powerful V-8 engines and finished in very flashy and patriotic red, white, and blue colors. This concept was very cost effective using existing tooling and parts. In summary, small profits were finally generated from automobile operations -- not just the sale of assets. However, the firm encountered problems with labor union relations. For example, the introduction of the successful 1970 models was interrupted by a major strike.

                            

                   Richard Cross                          Robert Evans                           Roy Chapin

 

Power to Four Wheels

            For some time Kaiser Corporation wanted to leave the vehicle business and sought a buyer for its Jeep division. Gerald Meyers, then AMC¹s VP for manufacturing headed the team sent to evaluate Kaiser¹s Jeep factories. Although first opposed by top management, AMC made a major decision in February 1970 to purchase Kaiser¹s money-loosing Jeep operations for $70 million. As if AMC did not have enough problems, Chapin made the most controversial strategic move in the industry at the time. Although he was sharply criticized for making the purchase, Chapin believed that Jeep utility vehicles would be a great complement to AMC¹s passenger car business. His analysis and insights about the future proved to be accurate. The Jeep line of utility vehicles soon became a strategic advantage, as it gave AMC a product line in a market not threatened by the Big Three competition[12]. Chapin believed that the demand for four-wheel drive vehicles was going to mushroom. He also wanted to expand AMC into international and government markets. Furthermore, Chapin¹s strategy was to achieve organizational synergies. This meant the use of AMC components in Jeep vehicles to achieve volume efficiencies, as well as capitalizing on Jeep¹s experience and contacts in new markets.

            AMC continued its philosophy of timeless design rather than continual styling changes. Its competitive strategy also began to focus on quality. AMC introduced ³The Buyer Protection Plan² in 1972. This strategy was implemented at a time when many consumers were dissatisfied with the quality of domestic automobiles (Detroit News, 1971). The market was turning to Japanese and European products that were perceived to have higher quality. AMC¹s plan attempted to leapfrog the competition. This was not just a marketing gimmick, but a management philosophy (Angelo, 1971). AMC¹s industry innovations included providing services such as the first toll-free hotline to an automobile manufacturer, an ironclad guarantee to fix whatever goes wrong that is not the customer¹s fault, and offering a loaner car program that reinforced AMC¹s conviction that if there must be an inconvenience in owning an AMC, then the company will accept responsibility for providing a solution (Detroit News, 1971). Underlying this plan was a more important corporate strategic realignment. Making the ³guaranteed car² concept possible was the insistence on stringent quality controls not only within their own plants, but also among their many suppliers. Furthermore, to make quality control effective, AMC had a steady but not publicized drop in the number of model changes -- and these were primarily engineering improvements -- as well as a reduction in the number of models themselves (Angelo, 1971).

            Chapin had correctly predicted market shifts for the coming years and recognized a new focus on product differentiation. Chapin described the strategy by using the term ³Philosophy of Difference² to help guide AMC¹s managers. He redesigned the organization into new market focused business units and acquired businesses to reduce the cyclical nature of the auto industry. Examples include operations to vertically integrate in select functions such as Coleman Products to produce wire harnesses and Holmes Foundry to cast engine blocks. These moves reflected strategic diversification choices to actualize the company¹s theme of ³doing things differently and distinctively² (AMC, 1973). Chapin shifted the company to straddle both the product differentiation and the low-cost focus strategies.

            Even though AMC continued to emphasize on basic automobiles with good price/value relationships and innovative features, the Jeep business needed a major overhaul. After the modernization and integration was completed, AMC made Jeep models a competitive offering. Moreover, the synergistic savings advantage allowed AMC to make money for its perennial cash short operations. The firm¹s low-cost strategy meant creative spin-offs from existing platforms and using shared components among its models. However, Chapin announced that capital expenditures would increase to $100 million for both 1974 and 1975. This expenditure -- ostensibly to maintain AMC¹s competitive position -- far exceeded any new product spending in its history (AMC, 1973).

            While the improved Jeep models were a hit in the marketplace, AMC introduced the 1974 midsize Matador Coupe -- an entry into a very popular segment at that time. The new model was successful in garnering publicity, but its radical styling and availability only as a two-door did not help achieve expected sales. Furthermore, this model did not completely follow the carefully nurtured plan of shared components and manufacturing efficiencies. The coupe was never able to pay back its development costs (www.mederle). The Ambassador, for years a cleverly stretched midsize platform, saw its last incarnation due to decreasing demand for big cars. The auto industry was being urged to shift to smaller cars by two factors[13]. First was the public outcry and fears of further oil embargoes and shortages. Second, the Energy Conservation Act imposed fuel efficiency standards. Additional operational challenges hit AMC. These included problems launching transit busses at AM General. This subsidiary was attempting to expand from military vehicles to the growing municipal demand for public transportation. Moreover, an expensive strike at its large Kenosha assembly plant in Wisconsin crippled AMC¹s core passenger vehicle production.

            By 1975, AMC returned to its original philosophy of compact cars. It introduced the Pacer -- a small car with groundbreaking design features. This model exemplified AMC¹s philosophy of difference. Initially, it sold so well that production could not cope with the demand. The Pacer improved the outlook for the company. However, the new Matador was less popular compared to AMC¹s small models that were now in production for over six years. Chapin needed to reenergize the company and reduce its outlays. He instituted new strict cost controls and spending was cut.

            By 1976, AMC was experiencing substantial financial losses. Its domestic passenger automobile operations revealed the greatest weakness compared to the successes at Jeep and other divisions such as Wheel-Horse Tractors -- a lawn and garden equipment manufacturer. Moreover, AMC was confronted with massive business environment shifts that included high fuel prices and expanding Japanese imports. AMC had not prepared for the increasing demand for a new generation of fuel-efficient vehicles. It did not have its own four-cylinder motor; thus, it was forced to purchase the engine designs from Audi in Germany. AMC was also burdened with an aging product line, a shortage of cash to finance model changes, and growing competition in the small car market. Previously its Pacer, Hornet, and Gremlin dominated this market segment, strong competition from other carmakers, especially Chrysler, now jeopardized AMC¹s fortunes[14].

            AMC made subtle changes to extend the product life cycle of its existing models, but this was not very successful. One positive consolation was the continuing success of Jeep sales that helped AMC from failing miserably. Even in the prosperous years beginning from 1975, AMC¹s automobile units of sales continued to decline. In 1977, Luneburg retired as president and was replaced by Gerald Meyers. He brought new strategic ideas. Meyers believed he could restructure the company to take advantage of its strengths, minimize its weaknesses, and build a new profitable company that would be less susceptible to the cyclical nature of the industry. In 1977 AMC sought outside support to have a new car in the sub-compact segment. An agreement with Renault allowed AMC to market the French company¹s sub-compact model through its domestic dealers. Initially the cars were imported, but the agreement provided for eventual manufacture in Kenosha. This relationship was the probable future course of the automobile business: namely, that the industry would develop in time from a collection of national industries into a small number of supranational organizations[15].

            In 1978, two products dominated the year. The new Concord was a winning redesign of an existing platform. AMC correctly anticipated the desire of customers expecting more luxury in small cars. Secondly, the demand for the Jeep models was so intense that production could not build them fast enough. The rush to speed up production meant that quality problems emerged. As a result, passenger car production was consolidated at the old Kenosha plant and all its other factories made Jeep vehicles. Nevertheless, the year was one of progress on a strategy to make AMC a well-managed, growing, and profitable global firm.

 

Meyer¹s international connection

            At the end of 1978, Chapin retired and Gerald Meyers became the CEO. Meyers had served AMC in varying executive positions. He brought into his administration W. Paul Tippett -- a Singer Company executive who had previously worked for Ford in their successful European operations. The team made a fundamental change to AMC¹s strategic plan. It was now designed to make AMC a member of the aggressive group of worldwide auto companies that would survive in the years ahead. As a result, AMC entered into more intense negotiations with French state-owned Renault. Both firms were looking at the global market as a means to increase opportunities and expand sales into the future.

            AMC began 1979 with enthusiasm and excitement and made several important decisions. First, the new Spirit models -- a different edition based on the Gremlin -- were introduced and were an effective product life extension. Once again, AMC concentrated its marketing efforts on small cars. Second, the large-sized Matador line was dropped because it was an aging platform. Motor vehicle firms are slow to change, as there is a reluctance to give up revenue generating models whose tooling costs have long been recouped. The Jeep line was kept the same. Unfortunately, the second world oil crisis hit AMC hard. Jeep models sat idle in dealer¹s lots. The effect of the economic slump initiated by gasoline crisis turned into the multi-year Reagan recession. Once more AMC was in a tight position. To relieve some of its pressures, AMC negotiated an accord with Renault to sell Jeeps through its dealers in Europe and South America. This agreement also called for more Renault models to be sold through U.S. and Canadian AMC dealerships.

            On the planning horizon, additional joint ventures were anticipated in the development of future automobiles. However, the most important arrangement was that Renault bought five percent of AMC stock along with subordinated notes and debentures convertible into AMC stock. The deal was worth $150 million in cash in hand for AMC. The agreement would eventually give 22% ownership of AMC to Renault by the year¹s end. The deal also required a Renault executive to sit on AMC¹s board of directors. The fiscal 1979 report indicated a good position by showing that AMC had made its second best profitable year in history. However, this achievement was due to a timing quirk. Since 1954, AMC normally used the model year for its reporting period cycle. Actual calendar year results would have shown significant losses due to the combination of high interest rates and low sales encountered in the last quarter of 1979. The impact was severe enough to place the company once again in a perilous position.

            The first year of the 80¹s found AMC selling passenger models built using just one platform -- as the Pacer models were dropped. More ominously, for the first time Jeep -- which had become the backbone of AMC¹s success -- began to show decreasing sales as the economic downturn continued. The company was now using some of the Jeep vehicle production space to manufacture cars. The bright spot on AMC¹s horizon was the introduction of the Eagle line. This was the world¹s first complete line of all-wheel drive passenger models. They were called ³sport-utility² or ³cross-over² vehicles. The new Eagles represented the skillful merger of Jeep technology with an existing and proven AMC platform. This was the optimum embodiment of AMC¹s synergistic philosophy to merge the old with the new. However, the economic recession of the early 80¹s continued to depress the auto industry. The Big Three were able to sustain losses, but AMC¹s $155 million of red ink was staggering. It forced management into crisis mode and AMC had to scramble just to keep stockholders. The company would have almost certainly have gone under except for its new relationship with Renault[16].

            In a significant realignment of functions, Myers announced that future responsibility for manufacturing AMC cars would fall on Renault, while AMC¹s engineers would focus on Jeep and Eagle vehicles. As the domestic economy severely affected AMC¹s financial position, top management was left with two options: either get out of the auto business or sell more of the company to Renault. By the end of 1981, Renault owned 46% of AMC¹s common stock and even more of other types of securities.

                                

                William Luneburg                      Gerald Meyers                       W. Paul Tippet

 

American hope

            On January 1982, Myers left AMC. Paul Tippett assumed the CEO¹s job. Jose Dedeurwaerder, a Renault executive, became the new president. The changes in top management came at a time when the domestic economy was sinking, forcing AMC into the worse of times. It even had to persuade its dealers just to stay open. Dedeurwaerder brought AMC a broad perspective at a critical time. As an engineer and an international business executive with 23-years at Renault, he is credited with streamlining many of AMC¹s arcane management techniques. Dedeurwaerder also instituted important improvements in plant layouts, as well as cost and quality control[17]. Additional hope for the company came in the form of a future joint venture car. Short-term fixes included the following: strengthening the Buyer Protection Plan, adding Ziebart rust protection, increasing consumer value, as well as using galvanized steel as a standard component in AMC automobiles. At the same time, the competitive landscape had dramatically changed. No longer was the threat limited to the Big Three. It was now the Japanese demonstrating how to produce automobiles. The Japanese competitors not only targeted the heart of AMC¹s passenger product line of small cars, but they relied on outsourcing for their efficient brand new assembly plants located in the United States. On the other hand, AMC struggled with the inefficient and aging Kenosha facilities. This was the oldest consciously operating automobile plant in the world and required moving components and unfinished bodies across the city of Kenosha. Dedeurwaerder saw the need to replace the AMC¹s obsolete Kenosha manufacturing facilities with a new assembly plant. This was appalling to the labor unions.

            The French-American joint venture strategy bore its first fruit in the form of a completely new vehicle for 1983. Called the Alliance, it was a front-wheel drive compact designed in France and adapted to American standards. The Alliance won ³Car of the Year² awards and its introduction coincided with an increased interest in small cars. More significant for the future of AMC was the introduction of a completely new line of compact Jeep Cherokee models. They quickly became popular and established a new market segment, as well as defined what a modern SUV should be.

            Events in 1985 overtook the company. The mass market moved away from AMC¹s small models. Consumers had money again and fuel was relatively cheap. As a result, car buyers wanted big and fast automobiles for which AMC was not prepared. Even the venerable Jeep CJ-5 was dropped after a ³60-minute² TV newsmagazine expose of rollover tendencies under extreme conditions. AMC also confronted an angry work force. Labor was taking revenge and even sabotaging 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. At the same time, Chrysler could not meet the high demand for its large ³M series² models and turned to AMC to use some of Kenosha¹s idle plant capacity. To compound the problems, AMC¹s domestic competitors were developing autos aimed at the Alliance models.

            These problems came in the midst of a transfer of power at AMC from 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 Republic of China. The Pentagon had problems with AM General. AMC¹s military equipment division was actually now managed by a French government owned firm. As a result, AM General was sold. Another milestone was the departure of Dick Teague, an automobile designer at AMC for 26 years. He was responsible for some of AMC¹s timelessly beautiful and advanced vehicles, as well as for some of its biggest disappointments.

                          

                    Dick Teague                      Jose Dedeurwaerder                    Joseph Cappy

 

Cappy¹s last stand

            As 1986 came, no major changes were made to the car models. A new compact pickup joined the ranks of Jeep models. However, there was once again a change in leadership. Dedeurwaerder left and Joseph Cappy became the new CEO. AMC was now assembling Chrysler to models that were still selling, but were to be phased out. This demonstrated that fierce competition in the auto market required strategies that would have been previously unthinkable. AMC was grabbing every option. A revolutionary financing plan was initiated to move cars off dealer¹s lots -- zero percent interest cost.

            Meanwhile, AMC¹s major stockholder -- Renault -- had their own problems and was down to just three alternatives regarding its American holdings: (1) Renault could declare AMC officially bankrupt thereby loose 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, Renault¹s chairman, George Besse, continued to champion the French firm¹s future in the American market. Furthermore, the newly built factory in Canada was fully on line, a thoroughly modern AMC engine and transmission was introduced, Jeep vehicles were riding an unprecedented surge in demand, and AMC was on the road to a profitable recovery.

            Nevertheless, external events took a dismal cast for AMC. Apparently a target because of his high standing among French capitalists, Besse was assassinated on November 17, 1986. This tragedy allowed other Renault executives to push the parent company to sell AMC. As a result -- by March of 1987 -- Chrysler -- flush with money -- announced the buy out of AMC for $1.1 billion. AMC became the Jeep/Eagle division of Chrysler. The strategy of Chrysler CEO, Lee Iacocca, was to capture the Jeep brand. He also recognized AMC¹s recently modernized factories for increased production capacity. AMC¹s persevering dealer organization was an additional benefit to Chrysler. Moreover, Chrysler incorporated AMC organization and management talent. Many of the new leading Chrysler engineers and executives rose from AMC ranks. Chrysler profited from the resources it gained with the acquisition of AMC.

 

A CONTINUING LEGACY

            AMC was forced to constantly innovate for 33 years until Chrysler extinguished it in a merger. Moreover, 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.

            One contribution was AMC¹s ability to formulate business strategies that were most often evaluated by industry critics as ³strokes of brilliance² (Higgins, 2001). According to Chapin, 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  (Higgins, 2001). An essential strategy practiced by AMC was to rely on outside vendors to supply components in which they had differential advantages. This policy had finally been accepted in the industry after each of the Big Three experienced the failure of attempting to be self-sufficient. An example of AMC¹s agility was the ability of management to squeeze money out of reluctant bankers even in the face of bankruptcy. These strategies worked to help save the company from destruction and after each obstacle, give it the wherewithal to keep it operating a few more years. Ironically, AMC was never stronger than just before its demise (Higgins, 2001).

            Studying the history of this company provides insight into some of these decision-making problems American Motors faced and illustrates that strategic planning is not a linear function. While conducting a business strategy that was focused on chronic trouble-shooting -- AMC¹s managers were also able to correctly anticipate many of the most important trends in the automotive industry. For example, it preached fuel efficiency long before auto buyers demanded it. Also, AMC sought out partnerships in manufacturing and sales worldwide, decades before any of the international consolidations among automobile makers took place. AMC was first in seeking refuge with a foreign automaker, Renault, to keep operating. The small company was able to introduce numerous innovations. Even one of AMC¹s 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. AMC¹s four-wheel drive vehicles established the foundation for today¹s SUV market and the ³classic² Jeep models continue to be the benchmark in this field. Not only was AMC successful in strategic management for 33 years given the daunting competitive environment it was also effective in other areas such as marketing. For example, Chapin drew on his experiences as a hunter and fisherman. He marketed the Jeep brand successfully to people like himself that the brand developed a cult appeal that remains to this day (Fracassa, 2001).

            According to Robert Lutz, former President of Chrysler, the AMC acquisition was a big and risky undertaking (Lutz, 1998). The purchase was part of Chrysler¹s strategic ³retreat-cum-diversification² plan that he states did not have the right focus. Initially the purchase was to obtain the world-renowned Jeep brand. However, Lutz discovered that the decision to incorporate AMC was a gold mine for Chrysler (Lutz 1998, p. 16). Chrysler¹s management was attempting to find a model to improve structure and operations -- ³something that would help get our minds unstuck and thinking beyond the old paradigms that we were so familiar with² (Lutz, p. 31). In this transformation, ³Chrysler¹s acquisition of AMC was one of the all-time great moments in corporate serendipity² according to Lutz ³that most definitely played a key role in demonstrating how to accomplish change² (Lutz, p. 31).

            According to Lutz (1993) while AMC had its share of problems -- it was far from being a bunch of ³brain-dead losers². He describes the ³troops² at AMC as more like Wake Island marines: ³with almost no resources, and fighting a vastly superior enemy, they were able to roll out an impressive succession of new products² (Lutz, p. 33). 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, AMC¹s lead engineer, Francois Castaing, was made head of all engineering at Chrysler. In an unthinkable strategic move, Castaing completely dismantled the entrenched Chrysler groups. In their place AMC¹s ³platform teams² were implemented. These were close-knit cross-functional groups responsible for the whole vehicle, as contrasted with Chrysler¹s highly functional structure. In this capacity, Castaing¹s strategy was to eliminate the corporate administrative overhead bureaucracy. This move shifted corporate culture and agitated veteran executives who believed that Chrysler¹s reputation as ³the engineering company² was being destroyed. Yet, according to the popular press, by the 1980¹s Chrysler¹s reputation was totally shot, and by Lutz¹s view only dramatic action was going to change that (Lutz, p. 33). In summary, Chrysler¹s purchase of AMC laid the critical foundation to help re-establish a strategy for its revival in the 1990s.

            The following table shows the strategy focus taken by the firm during its history superimposed on Porter¹s generic corporate strategic matrix.

 

Porter¹s Strategy Matrix and Management at American Motors Corporation

 

 

 

TYPE OF ADVANTAGE SOUGHT

 

 

Lower Cost

 

Differentiation

 

 

 

 

 

 

Broad Range

of Buyers

 

Overall Low-Cost

Leadership

Strategy

 

 

1967

Broad

Differentiation

Strategy

 

 

 

 

Abernethy

 

TARGET

MARKET

 

 

 

Best-Cost

Provider

 

 

 

 

Chapin

Romney

 

Buyer

Segment

or Niche

 

Focused

Low-Cost

Strategy

 

Focused

Differentiation

Strategy

 

 

 

Meyers/Tippet

 

 

 

            The following table outlines the timeline of the key managers and their strategic focus for the company.

Key Managers and Strategy Focus at American Motors Corporation

 

 

Chairman

President

 

Strategy Focus

 

Nash Co.

George Mason

George Mason

 

Unification of independents

 

Hudson Co.

Edward Barit

Edward Barit

 

Survival of firm

 

 

Time Line

 

 

 

 

 

1-14-1954

 

 

 

The big merger

 

1954

George Mason

George Mason

Barit, director

Romney, VP

Cross, Esq. for Mason¹s personal business

AMC is part of the ³Big Four²

1954 ­ 1962

George Romney

George Romney

Abernethy, VP of Sales

The ³Compact² car

 

1962 ­ 1965

Richard Cross

Roy Abernethy

 

Models to compete with the ³Big Three²

1966

Robert Evans

Roy Abernethy

Luneburg VP of Finance

Chapin, VP & G M

Regaining breathing room, but nothing works

1967 ­ 1977

Roy Chapin, Jr.

William Luneburg

Evans, director

Meyers, VP

Turnaround and survival

1977

Roy Chapin, Jr.

Gerald Meyers

 

Restructuring and movement towards global strategy

1978 ­ 1981

Gerald Meyers

W. Paul Tippett

 

Four-wheel drive

 

1982 ­ 1984

W. Paul Tippett

Jose Dedeurwaerder

 

The French connection

1985

Pierre Semerena

Jose Dedeurwaerder

Cappy, VP & CEO

Beginning of end

 

1986

Jose Dedeurwaerder

Joseph Cappy

 

Anything goes survival plan

1987

Joseph Cappy

 

 

Acceptance of Chrysler¹s purchase

March 1987

 

 

 

The end of the last independent

 

 

CONCLUSION

            Had Mason¹s grand vision come to full fruition, today¹s automobile industry would be vastly different. The merger of Hudson and Nash had a better fortune compared to the other independents. They preferred to go alone and did not last very long. AMC however was able to navigate the treacherous competition through an efficient organization focused on select target markets.  Probably the biggest flaw in AMC¹s planning was that it could compete directly with the Big Three in the mass market. Throughout the history of AMC, high tooling costs for innovative products would haunt each administration. Although the company was able to establish several groundbreaking market segments, it did not take many errors for AMC to run into major problems. Moreover, AMC did not seem to learn its decisions. Soon after it would achieve positive financial results, it would venture into different untested models -- such as the Matador coupe and the Pacer -- that created needless costs, as well as questionable consumer acceptance in the mass market. The economy, gasoline prices, and many other external factors in the business environment also created major challenges, as AMC did not have deep resource reserves or operating flexibility of its competitors.

            Perhaps most interesting is that top managers at Chrysler after the AMC buyout appear to have made similar errors. For example, Chrysler invested heavily in new untested models while not keeping up its ³bread and butter² lines. More recently, DaimlerChrysler has run into the same problem of having too many platforms. After the buyout of Chrysler, Mercedes Benz managers were protective of their designs and components. This created needless costs. They could have observed the experience of Nash and Hudson merger to help achieve manufacturing efficiencies and savings from component sharing.

            In the most recent examples of corporate strategy, the lessons learned from AMC continue to be implemented. The AMC beat goes on at General Motors. AM General is now part of GM and their existing and new models are based upon AMC designs. Furthermore, after having been the laughingstock of the industry for decades, General Motors has recruited a new executive team to turn itself from its near bankruptcy. Among the new strategists at GM is Lutz who brings with him an understanding of the importance of passion in the product design. According to Taylor (2002), Lutz has implemented a new thinking at GM that incorporates the systems and structures that originated from AMC¹s lean and focused operations. Renault has recently implemented the lessons learned from AMC. The French firm took a parallel approach as with AMC and applied it to resurrect money-loosing Nissan in Japan.

 

 

 

REFERENCES

 

American Motors 1954-1987 ­ http://www.mederle.de/amc/amcgeng.html

American Motors Corporation Annual Reports, 1956 - 1984.

Angelo, F. (1971) The guaranteed car: a milestone. Detroit Free Press, Wednesday, August 11, 1971, p. 7-A.

Brown, A. (1999). Hudson Motor Car Co. - to a different Drummer, part 8. Cars & Parts, pp. 56-59.

Foster, P. (1993). American Motors, the last independent. Krouse: Iola, Wisconsin.

Fracassa, H. (2001) Roy D. Chapin Jr., ex-AMC chairman gambled to save Jeep. The Detroit News, Tuesday, August 7, 2001

Georgano, N. (1992). The American automobile, a centenary, Smithmark: NY.

Higgins, J.V. (2001) Roy Chapin Jr. mastered how to survive in auto industry, The Detroit News. 8/12/2001. http://detnews.com/2001/autos/0108/14/c01-266885.htm

History of American Motors, Pioneer of the compact car pioneer in electric appliances. Detroit Public Library, Automotive History Collection, 11-14-60.

http://php.iupui.edu/~harrold/nash/amc.html

Livingston, J.A. (1967) Chapin, Romney AMC paths same - but different. Detroit News. 7/7/1967.

Lutz, R. (1998). Guts. Wiley: New York.

Mahoney, T. (1960). The story of George Romney builder, salesman, crusader, (New York: Harper & Brothers).

Mays, J. (1998). When AMC¹s George Romney reined in the dinosaurs. Old Cars, October, 15, p. 6.

Meyers, G.C. (1986) When it hits the fan: Managing the nine crises of business. (Boston: Houghton Mifflin).

Moving Forward: a transportation legacy, Kenosha County Historical Society, Kenosha, Wisconsin, 1998.

Spina, T. (1965) Today it¹s management men. Ward¹s Quarterly, Vol. 1, Nr. 2, 64+

Taylor III, A. (2002) Finally GM is looking good. Fortune, Vol. 145, Nr. 7 April 1. pp. 69-74.

The Changing Car Market, Phase II  - Prepared by American Motors Corporation, September 19, 1963.

The Detroit News. (1971) AMC to offer Œbuyer protection plan¹. Tuesday, August 10, 1971. p. 7-C.

The Story of American Motors, Public Relations Department, AMC Press Release, Detroit, Michigan 1957.

Time (1959) Small cars: foreign invasion & domestic challenge, v. 73, April 6, 1959, pp. 84-89.

 

 

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[1] John Bell Rae, The American Automobile Industry (Boston, MA, 1984), 25.

[2] Ibid, 18.

[3] Mays (1998)

[4] Georgano (1992) ???

[5] Georgano (1992) 180

[6] Mays (1998)

[7] Mahoney (1968)

[8] AMC Annual Report, 1961, 3.

[9] AMC Annual Report, 1967, 2.

[10] AMC Annual Report, 1968, 3.

[11] Ibid.

[12] Rae, 147.

[13] Rae, 149.

[14] Thomas Derdak, editor, International Directory of Company History, Volume 1 (PUBLISHER) 1988, 137.

[15] Rae, 150.

[16] Rae, 156.

[17] Derdak, 136.