Autos: Over the Top in a Jeep

Like Spam, Betty Grable and the big-band sound, the Jeep is a memorable symbol of World War II. Its endurance today has nothing to do with nostalgia. The Jeep was first in the field of four-wheel drive, go-anywhere sports vehicles, and it now holds 35% of that rapidly growing market. Last year 60,000 Jeeps were sold, despite competition from Ford’s Bronco, General Motors’ Blazer and International Harvester’s Scout. Jeep owners have their own clubs, and they hold an annual 1,000-mile crosscountry race in Mexico. The race is going to get a new sponsor. Last week Kaiser Industries Corp. announced its intent to sell its Jeep division to American Motors.

The sale, which must be approved by both companies’ boards and by AMC’s shareholders, immediately raised the question of who was swallowing whom. American will pay about $86 million in cash, notes and stock for Kaiser Jeep Corp. The deal will make Kaiser Industries the largest single shareholder in AMC, with 22% ownership and two seats on the 14-man board. But there was no evidence that Kaiser intends to add the auto company to its empire of steel, cement, aluminum and chemical companies (total assets: $624 million). The suspicion in Detroit was that two old friends, Edgar Kaiser and American’s Chairman Roy Chapin Jr., have a secret signed agreement to assure that Kaiser will not take over control of AMC.

New Dealers. The combination of AMC and Jeep is so natural that both companies have considered it for seven years; they finally agreed when the price was right. The two companies are partners in a new auto plant in Iran; they are also affiliated in Argentina, where AMC uses Jeep engines, and in Mexico, where Jeep buys its engines from American. American will take over Kaiser’s auto plants in 34 countries, acquire a new line for its 2,400 dealers at home, and likely gain much-needed recruits among Jeep’s 1,600 dealers, some of whom will switch to AMC. American also inherits Jeep’s substantial Government business, which amounted to 62% of its sales of $477 million last year, and a $190 million Jeep contract to build Army trucks, which was announced by the Pentagon on the same day as the sale.

The Jeep deal was typical of American’s growth-minded aggressiveness since Chairman Chapin and President William V. Luneburg took over in 1967. At that time, AMC’s future seemed so shaky that its creditors, a consortium of 24 banks headed by Chase Manhattan, examined the books every ten days. The new chiefs sold AMC’s finance subsidiary and Kelvinator Appliance to pay some of the debts, trimmed costs by $20 million annually to cut the breakeven point from 343,000 to 250,000 cars a year, and last year turned a profit of $3,300,000 on sales of 260,000 cars. Chapin and Luneburg expect to reach $4,000,000 this year. The acquisition of Kaiser Jeep also makes American Motors a billion-dollar corporation once again, a status it has not enjoyed since 1964.