The rise & fall of American Motors Corporation

Government regulations ratcheting up the cost of developing a car and ever-changing market conditions are forcing auto-makers to form alliances with each other.

Former Fiat Chrysler Automobiles (FCA) CEO Sergio Marchionne predicted this would happen. In the first few months of 2019, France's PSA indicated it’s not ruling out buying Jaguar Land Rover from Tata and it hinted it might form a partnership with FCA. Volkswagen and Ford are renewing their ties by collaborating in several areas while Daimler sent half of its Smart brand to China to live with Geely. We expect to report on additional mergers, buy-outs and shake-ups before the calendar rolls over to 2020.

This trend is accelerating but it’s not new. Market forces have pushed automakers into each other’s arms before. In 1954, Nash and Hudson both knew they wouldn’t survive alone for very long. So, 65 years ago they merged into American Motors Corporation (AMC) to challenge Detroit’s Big Three. Their gamble was, at times, a successful one; AMC held a 7.5% share of the American new car market in its best year. However, misguided management that released the wrong products at the wrong time drove the company into the mandibles of bankruptcy. Follow along as we explore the rise and fall of AMC:

Taking on the giants (1954)

The American Motors Corporation (AMC) was formed in 1954 when Nash-Kelvinator merged with the Hudson Motor Company to leverage the benefits of economies of scale while creating a bigger automaker capable of taking on Ford, General Motors and Chrysler. Nash boss George Mason had relentlessly searched for a company to join forces with since the early 1950s. The deal he struck with Hudson created America’s fourth-largest automaker and stood out as the largest corporate merger in American history at the time.

George Romney became AMC’s chief executive when Mason died in 1954. Romney – whose son Mitt unsuccessfully ran for president in 2012 – abruptly decided to retire the Nash and Hudson brands in late 1957 to focus on the Rambler line of cars. His bet paid off – at least in the short term. PICTURE: 1951 Hudson Commodore 

Resurrecting the Rambler (1958)

The original Nash Rambler released in 1950 became the first successful American compact car. While many auto-makers argued that bigger was far better, families often purchased the Rambler as a second car to commute in or run errands with. The Rambler retired in 1955 but unexpectedly returned as the Rambler American in 1958.

Stylists redesigned the grille, opened the rear wheel arches and flipped the rear lights upside down to make it appear newer than it truly was but it was made with the same tooling used to manufacture its predecessor. The line-up included a two-door sedan and a two-door station wagon.

On the road less taken (late 1950s)

Navigating the AMC line-up in the late 1950s required a precise map. The company sold Rambler-badged cars like the Six, the Rebel and the Ambassador and a small, entry-level model named Metropolitan (pictured) that was made in England by Austin. Homogeneity was not its forte but it covered most segments of the American new car market while stretching further down than its rivals. And, unlike Detroit-based auto-makers, it resisted the urge to make frivolous visual updates annually and pass the costs to buyers.

This unusual approach paid dividends when the American economy slid into a recession in 1958. AMC was the only major American auto-maker that posted a sales increase that year; its rivals all lost volume.

Rambler foundations (1960s)

AMC’s monopoly on the compact car segment didn’t last long. Chevrolet released the rear-engined Corvair in 1959 while Ford and Plymouth fired back with the Falcon and the Valiant, respectively, the following year. Volkswagen’s Beetle was becoming worryingly popular, too. AMC responded by making the second-generation Rambler American released in 1961 a little bit smaller than its predecessor, an unusual move during the 1960s, and by adding more body variants to the line-up.

The American was often overshadowed by its rivals but it kept AMC relatively healthy during the early 1960s. It made 464,126 cars in 1963, an all-time record. PICTURE: 1963 Rambler American 

Rambler’s hesitant quest for horsepower (1965)

In the middle of the 1960s, American motorists had an unquenchable thirst for performance. Unlike its rivals, Rambler made cars that appealed to the brain, not the heart, and it resisted the urge to join the horsepower war. It nonetheless released a sporty-looking, Classic-based fastback model named Marlin (pictured) in 1965 to give buyers seeking something sportier than a family car a good reason to visit one of its showrooms. The Marlin was no Ford Mustang but it shifted Rambler's need-want balance in a more enthusiast-approved direction.

The Marlin competed against the Plymouth Barracuda; both were positioned a little bit higher up than the Mustang. Pricing started at $2638 in 1965 (about $21,100 in 2019 money) while Plymouth charged $2453 for a Barracuda that same year (approximately $19,700 in 2019). 

Trouble looms (1960s)

George Romney left AMC to become governor of Michigan in 1962. His replacement, Roy Abernethy, was equally disinterested in performance. 1964 ads for the Rambler line explained none of its models participated in any kind of factory-backed competition because “the only race Rambler cares about is the human race.”

Abernethy was convinced AMC needed to shed its bland economy car image in order to thrive and he believed the firm could at least stand on equal footing as Ford, General Motors and Chrysler if it gave buyers more right-sized alternatives. He funneled a tremendous amount of money into updating the company’s line-up with more features and better engines. He also began the process of phasing out the Rambler name in the United States and ushering in AMC as a brand, not just a corporate entity.

Abernethy had a bold vision for the brand but it was out of line with reality and AMC began losing money under his leadership. He stopped down from his position in early 1967 and was replaced by Roy Chapin Jr., whose father Roy Chapin Sr. co-founded Hudson. PICTURE: Rambler American 440

Chasing performance (late 1960s)

Chapin needed to fix AMC’s immediate problems before turning his attention to long-term issues. He embedded the Rambler American in the middle ground that separated American compact cars like the Chevrolet Corvair from imported economy cars such as the Volkswagen Beetle. He argued AMC could beat domestic rivals on pricing because it didn’t update its cars annually and believed it could lure motorists out of Volkswagens by offering a more modern, more spacious and more comfortable product.

While his team worked around the clock to fix one end of the AMC spectrum, he expanded the other end by chasing performance on the road, on the track and on the auto show circuit. AMC was finally ready to jump into the muscle car segment. PICTURE: 1968 AMX GT concept

The Javelin (1967)

The slow-selling Rambler-turned-AMC Marlin retired and was replaced by a true alternative to the Ford Mustang named Javelin during the 1968 model year. It arrived as a sporty-looking coupe available with racing stripes, bucket seats and a performance-tuned suspension; reading about those features in AMC brochure in 1966 would have been completely unthinkable.

Factory-backed Javelins later competed in the Trans-Am racing series and nearly beat the Mustangs entered by the Ford team. AMC was late to the party but it partially made up for its untimeliness by releasing an excellent pony car.

The AMX (1968)

An evolution of the Javelin named AMX (American Motors Experimental) arrived later in the 1968 model year with a shorter wheelbase, a two-seater interior and a 225hp V8 engine. Buyers with a need for speed could pay extra for a 315hp V8. AMC knew the AMX would never become a volume model but it wisely realized the coupe would boost its image, especially after it set 106 world speed records on the Goodyear test track in Texas.

The strategy worked; AMC finished 1968 in profit after posting a huge $75.8 million loss in 1967 ($573 million in 2019 money).

The Gremlin (1970)

During its early years, AMC thrived by making cars that were smaller and more affordable than models offered by Ford, Chrysler and General Motors. It rekindled ties with its compact car roots when it released the Gremlin in 1970. It was marketed as a home-grown alternative to the Volkswagen Beetle and it arrived in showrooms nearly half a year before the Chevrolet Vega and the Ford Pinto.

Still as cash-strapped as ever, AMC didn’t have the means to design a new model from scratch so the Gremlin was related to the Hornet but its silhouette vaguely drew inspiration from the AMX GT concept shown in 1968. Designer Richard Teague later admitted he sketched the Gremlin on an air sickness bag during a Northwest Orient flight. Its love-it-or-hate-it look gathered the attention of car buyers, for better or worse, but its popularity waned when the Vega and the Pinto became available.

AMC made 94,808 examples of the Gremlin in 1972. Chevrolet sold 394,592 units of the Vega that year while the Ford Pinto found 480,405 buyers.

Jeep acquisition (1970)

AMC dipped a toe in the off-roader pool when it made the aluminum-bodied M422 (also known as the Mighty Mite) for the US Marine Corps between 1959 and 1962. It missed a golden opportunity to take on the Jeep CJ and the International-Harvester Scout by designing a civilian version of the Mighty Mite. By the late 1960s, the leisure-oriented off-roader segment was in full bloom but AMC sat and twirled its thumbs on the sidelines. Instead of developing a car from scratch, it purchased Jeep from Kaiser in 1970.

The terms of the deal weren't made public at the time but Jeep was not in great shape when it joined AMC and Kaiser was desperately looking for a way out of the automotive industry. Kaiser executives were as happy to get rid of Jeep as AMC executives were to buy it.

Under AMC, Jeep continued making 4x4s like the Wagoneer and the CJ. The company's general products division (which developed and manufactured military trucks and vehicles under contract) was split into a separate entity named AM General. The rear-wheel drive DJ widely used by the United States Postal Service (USPS) was one of AM General's best-known products. PICTURE: 1977 Jeep CJ-5 

The Pacer (1975)

The Gremlin couldn't boost AMC's market share on its own so the firm attempted to re-invent the small car. It released the Pacer in 1975 and hailed it as the first wide small car in the world. It was more spacious than its relatively compact dimensions suggested and its passenger-side door was nearly 4in wider than the driver-side door to facilitate the task of accessing the rear bench. Its rounded design helped improve fuel economy while its large windows improved visibility for all passengers.

In short, the Pacer was unlike any other car sold in the United States. It could have been even more cutting-edge, too. AMC planned to power it with the Wankel-type rotary engine Chevrolet was developing for the Vega but it resorted to a straight-six when General Motors canceled the project.

While the Pacer sold well early in its career, sales dropped as buyer interest in small cars waned. AMC made 117,244 examples during the 1976 model year. It added a station wagon to the line-up in 1977 yet sales dropped to 58,264 units and slid further to 21,231 in 1978. The Pacer left the AMC portfolio after the 1980 model year.

Cozying up with Volkswagen (1977)

For most of the 1970s, the Gremlin remained the only American car in its class not offered with a four-cylinder engine. AMC’s straight-six came standard while a V8 was offered at an extra cost. The model received a thorough redesign in 1977 that brought a much shorter front end and an available 2.0-liter four-cylinder engine sourced from Volkswagen. AMC paid about $60 million (approximately $266 million in 2019) for the engine’s design and the tooling required to build it.

AMC assembled the 2.0-liter in the United States using parts purchased from Volkswagen. It hoped to eventually manufacture 2.0-liter engines in a factory it purchased in Richmond, Indiana, and sell them back to the German firm but demand for the four-cylinder-powered Gremlin wasn’t high enough to justify launching full-scale production so it canceled its manufacturing plans. It also announced having the four on its engine palette would allow it to design a small car in the vein of the Dodge Omni/Plymouth Horizon twins and the Volkswagen Rabbit but that project was canceled, too.

The Gremlin’s four was related but not exactly identical to the one that equipped the Audi 100, the Volkswagen LT and the Porsche 924 and very few parts were interchangeable. Interestingly, AMC was forbidden to reveal the engine’s origins so it had a difficult time explaining why it cost $253 (about $1,055 in 2019) more than the more powerful six. Better fuel economy wasn’t enough to justify the increase in the minds of most buyers. AMC stopped using Volkswagen engines in 1980. By that point, it was already in the arms of another European auto-maker. 

Renault comes in (1979)

Ironically for a company that championed compact cars for decades, AMC turned to Renault for help in expanding its presence on the bottom rungs of the American new car market. Both sides hailed the tie-up as a win-win situation. AMC would get smaller, more fuel-efficient cars while gaining access to the European market. Downsizing would also help it comply with Corporate Average Fuel Economy (CAFE) standards that mandated a fleet average of 27.5mpg by 1985. Renault would have a second chance to increase its presence in the United States after years of hardships and, hopefully, return its American division to its former glory. Above all, the take-over delayed AMC’s collapse by about a little over a decade.

Renault began investing in AMC in 1978 and purchased a controlling stake in the firm in 1980. The two companies had worked together in the past; Renault assembled Rambler models in Belgium during the 1960s and distributed them through its European dealer network. PICTURE: 1979 Concord 

The Eagle (1979)

Inspired by Subaru’s unexpected success and bolstered by Jeep’s deep-rooted expertise, AMC added four-wheel drive to the Concord to create a new line of models named Eagle. Released for the 1980 model year, the Eagle combined the all-weather capability of a truck and the comfort of a passenger car. The line-up initially included two- and four-door sedans and a station wagon.

AMC stopped offering a V8 engine during the 1980 model year so the Eagle came standard with a straight-six. Developed in England by FF Developments, its four-wheel drive system could distribute the engine’s torque between the front and rear axles as-needed. AMC expected it could sell 50,000 units of the Eagle annually but only 34,041 examples found a home in 1980. Annual sales never went above 40,000 units.

Renault, by AMC (1983)

AMC sold Renault’s 5 (known locally as the Le Car), 18 and Fuego models through its American dealer network. It started making an Americanized version of the Renault 9 named Alliance in its historic Kenosha, Wisconsin, factory in 1983. Production of an American-spec 11 called Encore started in 1984.

Both cars sold well early on, and they were among the more convincing economy cars ever made in America, but reliability issues quickly stained their reputation. Many of the problems were specific to Wisconsin-built cars and the warranty costs absorbed by Renault’s American division ballooned during the middle of the 1980s. Market-specific variants like a high-performance Alliance named GTA arrived too late to have a meaningful impact on AMC-Renault’s sales and image.

The XJ (1984)

Determined to end Jeep’s decades-long reliance on the CJ and the Wagoneer, AMC approved the development of a smaller, lighter SUV called XJ internally. Renault participated in developing the first all-new Jeep model in 20 years. The Cherokee’s down-sized dimensions were controversial at first but motorists realized it was nearly as spacious as its bigger, older siblings and just as capable off the beaten path.

Sales sky-rocketed when the XJ’s label changed from down-sized to right-sized. The XJ line-up (which included the Cherokee and the more luxurious Wagoneer) outsold every other Jeep model combined during the 1984 model year. It represented 79,536 units in the firm’s 1984 total of 153,801 cars. AMC was already sinking but the XJ gave executives a dim glimmer of hope.

AMC goes to China (1984)

In a surprising but ultimately useless display of foresight, AMC became the first western automaker to establish a presence in China when it formed a joint-venture called Beijing Jeep Corporation with Beijing Automotive Works (BAW) in 1983. One of the alliance’s earliest projects was making thorough updates to an aging off-roader named BJ212. It later manufactured the XJ-generation Jeep Cherokee locally. The Chinese-built SUV was nearly identical to its American-spec sibling early on but it later got a market-specific design and spawned some variants not sold outside of China. Local production ended in 2014.

AMC entered the Chinese market well before it blossomed so it didn’t reap the rewards of being the first firm on the ground. In hindsight, Beijing Jeep makes for an interesting footnote in its history but the joint-venture alone couldn’t have kept AMC afloat; in 1984, a vast majority of Chinese citizens did not have a driver’s license.

Contract manufacturing (1986)

AMC nearly closed its Kenosha, Wisconsin, factory during the 1980s because it wasn’t selling enough cars to keep the plant operational. In 1986, Alliance and Encore production dropped to 55,603 and 17,671 units, respectively, and Eagle sales plummeted to 9,020. Honda and Volkswagen outsold AMC on the American market and the company posted a $91.3 million loss in 1986 ($210 million in 2019).

While Kenosha officials were examining options for the property and bracing for the worst, AMC executives inked a deal with Chrysler to build cars in Wisconsin. Employment rose from 2,500 to over 6,000 workers as the plant churned out the Dodge Diplomat, the Plymouth Gran Fury (pictured) and the Chrysler Fifth Avenue starting in 1986. The Plymouth Horizon and the Dodge Omni were later made there, too.

Chrysler buys out Renault (1987)

The situation AMC and Renault found themselves in during the second half of the 1980s was far from envious. Renault missed its last shot at becoming relevant on the American market; AMC missed its last boat to salvation. Rumors of the company's demise began making headlines on an increasingly regular basis.

They were credible, too. AMC’s own cars were too outdated to realistically compete against models made by Ford, Chevrolet and Chrysler and its line-up was too small. Renault’s cars had acquired an unshakeable reputation for being troublesome at best. Half of the nameplates sold by Jeep traced their roots to the 1960s. The group’s saving grace was the Cherokee, which continued to sell well, while the Wrangler (pictured) was a promising up-and-comer. Two Jeeps couldn't tow an entire automaker to profitability, though.

AMC’s high-water mark was 1960, when it held a 7.5% share of the American new car market. That figured dropped to 0.9% in 1986. While sales dropped, losses sky-rocketed; AMC lost approximately $800 million (about $1.7 billion in 2019 money) between 1980 and 1987. Renault had other problems at home to worry about so it started looking for a way out. It sold its shares in AMC to Chrysler in 1987 and swiftly left the American market. As of 2019, it hasn’t been back.

AMC’s legacy

Chrysler executives did little to quell the rumors claiming they purchased AMC solely to get their hands on Jeep. AMC-designed models left the Chrysler portfolio one at a time. The Renault 25-derived Eagle Premier and Dodge Monaco both retired in 1992, though Chrysler updated their front-wheel drive platform and used it to underpin numerous models (including the LHS) during the 1990s. The last four-wheeled vestige from the AMC era sold in the United States was the XJ-generation Jeep Cherokee, which retired from the American market in 2001. Bits and pieces from the company’s past survived longer, though.

The former Nash factory in Kenosha, Wisconsin became an engine plant under Chrysler’s stewardship. It notably manufactured the 4.0-liter straight-six that equipped the Wrangler until 2006. Chrysler closed the facility in 2010 in the wake of its bankruptcy. The Brampton, Ontario, factory AMC opened in 1986 still makes the Chrysler 300 plus Dodge's Challenger and Charger models in 2019. PICTURE: Chrysler LHS

The Hummer connection

Renault’s 1980 acquisition of AMC created a multi-national problem. At the time, AMC still owned AM General, Renault was controlled by the French government and American regulations prohibited foreign governments from purchasing defense contractors that worked for the United States. AMC consequently sold AM General to LTV Corporation in 1983.

The Humvee that AM General developed under AMC entered production in 1983 and sales to civilian buyers started in 1992 under the name Hummer. General Motors purchased the brand in 1999 and expanded its line-up by releasing a pair of smaller, less war-ready models named H2 and H3, respectively. Both wore a rugged design that borrowed styling cues like round headlights and a seven-slot grille from the Humvee designed during the AMC days. In the 1980s, AMC stylists didn't mind creating a visual link between the Humvee and the Jeep CJ; the connection was probably intentional. In the 2000s, Jeep was far less content about watching a rival brand liberally using its trade-marked design features.

In 2001, DaimlerChrysler and General Motors sued each other – 11 minutes apart – over the H2’s seven-slot grille. Hummer was allowed to keep selling the model without re-designing it after a lengthy court battle. The 7th United States Circuit Court of Appeals notably cited Jeep and Hummer’s common heritage as one of the reasons for its decision.