Autos: American’s Troubles

While the U.S. auto industry speeds toward its first 8,000,000-car-sales year, the only U.S. automaker failing to share in the boom is the one that needs it the most: American Motors Corp. Sales of its Big Three competitors have risen 1% above last year’s level, but American Motors has so far sold 8,800 “fewer cars this year than last. Last week AMC announced a 17% drop in earnings for its first fiscal half at a time when the other car makers are setting new profit records. So many Ramblers remain unsold that cigar-chomping President Roy Abernethy, 57, next week will lay off 7,800 workers, probably will not recall them until new-model production begins in August.

Compact Crusade. American Motors’ troubles came only five months after the demise of Studebaker as a U.S. automaker, but the two cases have few similarities. With efficient plants, strong dealers, and no long-term debts, AMC is by no means another Studebaker. Despite difficulties, its sales hit $551,531,239 in the fiscal half, and are headed toward the second-best business year ever. But in the most critical measure of an automaker’s performance—the share of the market—AMC has slipped from 6.4% of all U.S. auto sales in 1960 to 4.5% last month.

Ironically, AMC’s present troubles are rooted in the philosophy of the man who rescued the company from the junk heap in the mid-1950s: George Romney. Romney steered AMC to prosperity by bringing out the compact Gambler and crusading against Detroit’s “gas-guzzling dinosaurs.” Believing that compacts would corner 50% of the U.S. auto market, he concentrated his company’s efforts exclusively in the compact field. Though Romney is now Governor of Michigan, AMC is still selling Romney-selected compacts because of the two-year lead time needed to produce new models. Meanwhile, the auto-buying public’s taste has strongly swung back to bigger, flashier and more luxurious cars. Compacts now account for only 18% of auto sales, and AMC is stranded without the right variety of cars for today’s prospering auto market.

Sensible Change. President Abernethy has done what he could to liven up AMC autos by adding plush touches to the interiors of his cars, bringing out an optional V-8 engine for the Ambassador and Classic, and introducing a limited-production Typhoon sports car that is powered by a spirited, brand-new six-cylinder engine. But Abernethy’s first real chance to reverse AMC’s decline comes this fall with the introduction of the first models for which he is responsible. The big change: the Ambassador has been redesigned and enlarged to compete with the Big Three’s intermediate-class cars, will be available in eight models ranging from a station wagon to a convertible. Abernethy has also given the Classic a face-lift and tooled up for a fastback sports car that will probably be called either the Marlin or Sceptre. The handsome American compact will continue almost unchanged. Abernethy has no intention of abandoning the image of making “sensible cars” that Romney created for the company, but, being a sensible type himself, he wants to have models in the bigger class where affluent Americans are now spending the bulk of their auto dollars.