History of American Motors Corporation
History of American Motors Corporation, American Motors Corporation AMC was a small company that had to try to compete with the big Three corporations (Ford, Chrysler, and General Motors). They had a much smaller budget and less resources. Thus they were basically a smaller fish in the much bigger Lake.
AMC was result of a merger between Nash-Kelvinator Corporation and Hudson Motor Car Company on May 1st, 1954. This was the largest corporate merger the US had ever seen at that time, with the deal being worth close to $200 million dollars. The longer-term plan was to consolidate Nash, Hudson, Studebaker, and Packard brands into one single company. The major reasons for the merger was to combine resources to tackle the Big Three on the American market. By 1957, the Nash and Hudson brands became phase out and replaced by other brands called Rambler and Metropolitan.
Prosperity – 1957-1964
In 1957, Roy Abernethy was named to be the Vice President of sales for AMC. Under his guidance sales began to rise and Rambler was the third most popular vehicle in the US, only behind Ford and Chevy. Abernethy became the CEO in 1962 and changed focus from selling compact and economy cars to larger cars where AMC could make more profits, such as the Ambassador models. This worked, as sales went from 18,647 in 1964 to 71,000 by 1966.
Financial Struggles – 1964-1966
Unfortunately, developing vehicles like the Ambassador were a huge cost for AMC. The company’s working capital (difference between current assets and current liabilities) began to fall, negatively impacting liquidity and short-term financial health. As a result, sales began to fall (AMC reported a 1966 loss of $4.2M on sales of $479M. In 1967 they reported a loss of over $12.6 million.
After that rough period, the older executives like Abernethy resigned and younger ones moves in, cutting costs and prices and introducing more muscular vehicles (Javelin and AMX). In 1970, AMC bought out Jeep to add that to their existing line of cars, which was a significant move for their future. AMC moved back towards compact cars, releasing the Hornet platform (which included the Hornet, Gremlin, Spirit, and Concord).
They also released the Matador, Pacer, and the 4-wheel drive AMC Eagle. The first two had to be cut by the end of the 1970 due to financial difficulties and poor sales.
In the 1980, AMC partnered with the Renault brand from France to get more cash. Renault took a controlling interest (50% of outstanding shares). AMC produced Renault vehicles such as the Alliance and Encore, and AMC now focused solely on AWD cars.
Chrysler steps in
In 1985, AMC had extra manufacturing capacity and Chrysler stepped in, entering a contract to produce Dodge Diplomats and Omnis, and Plymouth Furys and Horizons in AMC’s factories.
Renault would sell their ownership in AMC to Chrysler, and Chrysler purchased the rest of the shares on the New York Stock Exchange. All in all, the deal was worth $1.5B USD, and AMC became the Jeep-Eagle Division of Chrysler, fully merged into Chrysler by March 29, 1990. This was a good time to purchase AMC for Chrysler since AMC financials had been drastically improving and they actually had positive profits.
Chrysler steps in
One of the major things that Chrysler and CEO Lee Iacocca really wanted from AMC was their ZJ Jeep Grand Cherokee. That ended up being a fantastic acquisition that is still making Chrysler a ton of money to this day. Chrysler also got a brand-new plant in Bramalea, Ontario, the AMC management talent, and the AMC dealer network out of the deal as well.