The New Pacesetter

American Motors Corp. setting the pace for the auto industry? The idea would have seemed ridiculous during the long years when AMC was the only one of the four U.S. automakers losing money and struggling to stay in business. But in a market shrunk by the twin forces of inflation and the energy crisis, AMC's stress on low-priced, gas-saving small cars has suddenly made it the only company that is still prospering. Some examples of its leadership:

> Total auto sales so far this year are down 21% from early 1973, and sales of some big cars have been cut in half. Sales of AMC's five makes--Gremlin, Hornet, Javelin, Ambassador and Matador--are up 16% from a year ago, boosting the company's share of the U.S. auto market to 6.7%, from 3.8% in 1973.

> Inventories of unsold cars are so high throughout the industry that General Motors' Oldsmobile and Pontiac divisions could stop making new cars and still keep their dealers supplied until summer at present sales rates. AMC is down to a 17-day supply of Gremlins, and dealers are pleading for more.

> Profits in the last quarter of 1973 fell 22% at General Motors, 76% at Ford and 12% at Chrysler, from year-earlier figures. American Motors' profits rose 22%, and the company recently declared its first dividend (of 10-c- a share semiannually) in nine years.

> The Big Three have laid off 85,000 workers, or 12% of their auto-plant labor force; Flint, Mich., a General Motors town, is reeling from a 20% unemployment rate. AMC has hired 2,300 new workers in the past year for its Kenosha, Wis., plants, where all its passenger cars are assembled, boosting employment there to 11,800 and cutting the jobless rate in the town to a mere 3.9%.

Oddly, the sudden prosperity has caused little jubilation among American Motors executives. They are preoccupied by an unfamiliar problem; how to produce as many cars as the public wants. "Steel is tight, chemicals are tight, fabricated parts are extremely tight," complains William V. Luneburg, AMC's blunt-spoken president, who sometimes badgers suppliers personally for quick deliveries. "When you have the opportunity in your grasp and you cannot make it materialize, it is a bit frustrating." Still, he concedes, "the wheel of fortune is turning right at the moment."

Strategy. That AMC has positioned itself to be there is largely the work of Luneburg and Chairman Roy D. Chapin Jr., who took over when AMC hit its nadir in 1967 (loss that year: $76 million). They adopted a strategy of doing everything a bit differently from the Big Three. The most important decision was to concentrate on small cars, rather than offer a wide range of autos. "You capitalize on your strengths," explains Luneburg. "We are not shooting with a shotgun. We are shooting with a rifle."

Right on target too. Today, 70% of AMC's production is in the compact Hornet and the subcompact Gremlin. The little cars have turned out to be a particular hit with younger buyers. In 1967 the average age of an AMC car buyer was 62; today it is 35.

AMC has revamped almost everything else about its operation too. Since 1967 it has cut the number of its dealers from 2,465 to 1,926, dropping the weak dealers who sold few cars. In 1971 it introduced its Buyer Protection Plan, under which, for the first 12,000 miles or twelve months, AMC picks up all repair bills for defects that can be traced to the company. The plan is expensive, but AMC executives are counting on it to build brand loyalty among buyers.

The plan is backed by an elaborate employee-relation campaign to inspire workers to put the cars together properly. Signs in a Kenosha plant exhort workers to "build it as though you're going to buy it." An AMC-sponsored program on a local radio station reports the latest company news before each shift change; during shifts the announcer roams the plant in an electric cart called a "gab cab," picking up tidbits. When the plant recently shut down because of a machinery failure, the program prevented rumors from circulating by broadcasting interviews with workers about what went wrong and reports on the repair job as it progressed.

AMC still faces some problems in consolidating its new strength. In particular, it must add parts-manufacturing capacity. No plant now has enough capacity to do the full job of making six-cylinder engine blocks--so the blocks are cast in Canada, trucked to Kenosha for preliminary processing, trucked to Toluca, Mexico, for further processing, and then trucked back to Kenosha for finishing. It is an expensive way to make engines. But for the moment, the public is buying all the cars that those engines can be put into.

This file is automatically generated by a robot program, so viewer discretion is required.