The Mouse That Varoomed

AVIS may have to work harder to get ahead, but American Motors practically has to work miracles. As No. 4 in an industry almost totally controlled by Detroit's Big Three, AMC must fight just to stay alive, and in recent years many auto men doubted that the company could make it. Lately, though, Motown's mouse has begun to varoom. Sales of AMC's 1972 autos hit an eight-year high of 303,000 units, up 20% from the previous year; October sales of the '73s were 10% ahead of the same period last year. Next week the company will report a profit of between $25 million and $30 million for the fiscal year that ended in September, also an eight-year high.* When the good-news numbers became known this fall, says AMC Marketing Vice President R. William McNealy Jr., "We poured champagne in the central office for the first time in about 20 years."

True, many of AMC's bubbles were rising on the happy fortunes of the auto industry in general. Thanks to the Nixon Administration's cancellation of the auto excise tax, the prices of '73 model U.S. cars are only slightly above what they were for '71 units. Total car sales this calendar year are expected to reach 10.8 million (including imports), up a bit from last year's very healthy showing. But American Motors is doing more than merely riding a high tide. In the '72 model year, AMC's share of the market inched ahead from 3.2% to 3.4%, largely because of the popularity of its smaller cars. Moreover, vows AMC Chairman Roy D. Chapin Jr., 57, the Yale-educated auto man who has been the company's front-seat driver for five years, "We're not satisfied with that." As if to underscore his determination, AMC this week announced that it will reopen fairly soon a plant in Kenosha, Wis., that has been shut down for nearly two years. It will produce about 200 cars per day.

Profitable Jeeps. Chapin and a small group of aides have almost totally reshaped AMC. They sold its financing and Kelvinator subsidiaries, neither of which showed promise of earning enough to justify the amount of capital tied up in it. Then Chapin bought the famous Jeep line from Kaiser Industries for $70 million. Jeep had been a money loser for Kaiser, but AMC made it profitable, steering it into the recreational-vehicle market, which Chapin figures has doubled in the past three years. New versions of the original four-wheel drive machine soon began appearing as pickups, campers and station wagons. Jeeps now account for 20% of AMC's $1.4 billion annual sales.

Chapin's corporate philosophy is that "there is always a place for someone who can do things a little bit differently." In developing AMC's compact Hornet in 1969, being a little different meant designing a car that would also serve as the basis for the company's entry in the subcompact sweepstakes. Instead of designing a whole new subcompact, as GM did with its Vega and Ford with the Pinto, American Motors spent a remarkably low $5,000,000 and simply cut down the Hornet. As a result, the company produces the only subcompact with a six-cylinder engine (the others have four cylinders). Its latest gimmick is to offer optional denim upholstery by Levi Strauss. Together, the Hornet and Gremlin ring up two-thirds of American Motors' car sales.

Another Chapin innovation was the "Buyer Protection Plan," which gives AMC owners a warranty covering every car part except tires. The company will fix any faulty part for free during the first year, and on '73 models offers a second year's coverage for $150. Both GM and Ford emulate that plan on their '73 cars, though neither offers protection that goes so far as AMC's. The AMC warranty won the praise of industry watchers as divergent as Presidential Consumer Adviser Virginia Knauer and Mac Gordon, outspoken editor of the dealer newsletter Motor News Analysis. Since AMC pays a much bigger part of new-car repair bills than before, the plan also helped solve the problem of dealer desertions, which at one point were running at a rate of several dozen per year.

For all its new success, AMC remains something of a protected ward in the auto industry. Leaders of other companies regard it as a shield, however small, against Government anti-trust action. Critics of the auto industry, who are eager to promote such action, charge that the big companies give AMC little competition for its lucrative contracts for Government vehicles (postal and military Jeeps, military trucks). AMC has been allowed on a temporary basis by the Justice Department to consult with GM on anti-pollution research as a means of saving money. Is the company merely having a couple of good years, or has it really turned the corner? "It's a long corner," answers Chapin, "but I think we've learned to move quickly and have developed a high survival factor."

*By comparison the company earned only $10.2 million last year and lost $56.2 million in 1970.

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