Autos: Life Without Father

Mahogany Row, the third-floor executive corridor at American Motors Corp. in Detroit, has been unwontedly quiet since George Romney left the president’s office last February to run for Governor of Michigan. “It just isn’t the same,” sighs one AMC executive, “without George pumping up and down the halls and roaring in and out of the offices.” For the first time since 1954, when Romney roared in to save little American Motors from the junk heap, the company last week introduced its new cars without him. They showed that more than the decibel count had changed on Mahogany Row.

While Detroit’s Big Three hymned the bumper-to-bumper newness of their 1963 cars, AMC went out of its way to quash rumors that its line had been drastically restyled. In fact, AMC’s new models had been—for AMC—extensively changed. The company’s American has new, flowing lines that make it look longer and lower than its boxy predecessor (though it is an unchanged 173 in. long). AMC’s Ambassador and Classic models have also been given modern lines that retain only vestigial traces of their traditional, safe-for-auntie appearance. The company has even yielded to pizazz: the new models can be had with all the bucket seats, consoles and five-speed stick shifts that a buyer could crave.

Up from Squaresville. The company’s 1963 line marks a brave attempt to change young minds. What Romney did for the Rambler was to build a loyal following to whom its unchanging, old-fashioned looks seemed a comfortable complement to economy and leonine performance. But he and others at AMC began to worry that this philosophy appealed almost exclusively to the 40-and-over age group, and that most younger buyers thought the Rambler was from Squaresville.

Romney, who is technically on leave of absence, has been succeeded by a duumvirate consisting of Chairman Richard E. Cross, 52, an urbane, hardheaded lawyer who is chief executive officer and makes the long-term decisions; and President Roy Abernethy, 56, an ebullient onetime salesman, who directs day-to-day operations. Neither boss does much roaring around Mahogany Row, which has seen other changes as well. When Ford and General Motors announced last week that they were doubling their warranties (to 24 months or 24,000 miles), Romney would have snapped up the gauntlet in ten seconds. Said Cross: “Let’s sleep on it.” In fact, it took AMC executives four nights to decide to follow suit.

Down from the Peak. Cross and Abernethy will have far knottier problems to sleep on. One reason why AMC was able to bounce back from a perilous 2% of the market to its present 7% was that it had adequate production facilities. But to achieve its goal of producing 700,000 cars in 1964, AMC must expand its plants, which are already uneconomic for even the 485,000 cars it is producing this year. AMC may be handicapped by its dependence on outside suppliers for many components, since it is thus less able to control costs than its rivals.

AMC has other problems. While the rest of the industry is enjoying near record earnings, AMC’s profits have dipped from a 1959 peak of $60 million, nearly 7% of its sales, to an estimated 3.5% return for the business year ended this week. AMC is the only U.S. automaker so far this year to raise prices on a significant number of new models; its Classics and Ambassadors will be tagged $30 to $40 higher.

On to 50%. Chairman Cross attributes AMC’s decline in profits chiefly to rising labor costs. There are other factors, notably a high-priced drive to build sales, and costly retooling for the ’63s.

In the future, the retailing problem may grow. For if it succeeds in wooing younger drivers, who generally crave frequent, thoroughgoing model changes, AMC may be forced to choose between its new public and its resistance to extensive restyling. AMC hopes to stick with its basic ’63 styling for at least three years. Says Cross: “We haven’t opened Pandora’s box.” Nor has the company any hankering to stray outside the compact field. “The most rapidly expanding part of the auto market today is the compact segment,” says President Abernethy. “It currently accounts for 38% of the market, and we expect it to go up to 50% before long.” AMC’s 1963 sales goal: 620,000, up 28% over 1962.

If success means that AMC must raise money for a new plant, the company is in excellent shape to do so. Last month it paid off an $80 million loan, became the only U.S. automaker free of long-term debt. Says Cross: “If we have any problems, they are the kind you like to have —problems growing out of success.”