Le Bailout

Renault comes to rescue AMC

If Washington is willing to prop up Chrysler, will Paris help salvage American Motors? Apparently so. Last week AMC and France's state-owned Regie Nationale des Usines Renault, Europe's fourth largest car company, unveiled a labyrinthine financial deal that amounts to a Big Money bailout of the weakest and smallest of the major U.S. automakers. The survival scheme, which the firms have been negotiating since July, would inject $500 million in cash into AMC. Also, the deal could wind up providing Renault, which already holds 5% of AMC's stock as a result of a 1979 financing plan, with 55% of the company's shares. Said AMC President W. Paul Tippett Jr.: "Renault would not have made this commitment unless they had confidence in the future of American Motors."

Officials of both companies insisted last week that AMC management will remain in American hands. But Renault will now be able to name five of the 16 members of the company's board of directors. Renault is eager to use AMC's 1.65% market share as a base for further expansion into the U.S. market.

For AMC, the financial boost comes not a moment too soon. The company's macho-looking line of four-wheel-drive Jeeps, which convey a sort of L.L. Bean sexiness to suburbanites, helped lift AMC's profits to a record $84 million last year. But sales of the fuel-thirsty vehicles have fallen 41% this year. During the first nine months of the current fiscal year, AMC lost $74.4 million.

With its new money, AMC will now be better positioned to complete plans to introduce a new car or Jeep model every six months from now through 1985, thereby offering customers twice the variety that the Big Three automakers have traditionally provided. For the present at least, the firm that might more accurately be called Franco-American Motors has been saved by le bailout.

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