When Titanic debuted in 1997, both critics and producers were flabbergasted by the massive success of a film that had teetered for months on the brink of financial disaster. Even more surprising was how many repeat viewers it attracted. Despite a three-hour runtime and a tragic though foregone ending, moviegoers piled into theaters again and again, and millions of fans still re-watch the film today.
In her 2020 retrospective on Titanic, video essayist Lindsay Ellis shed some light on this phenomenon, saying, “A well-told tragedy appeals to the human desire to hope.”
No matter how many times we’ve seen it, there’s a small part of us that, when we see the iceberg, hopes that this time the boat will turn. This time, the ship won’t sink. This time, Jack and Rose will end up together.
And while some car enthusiasts may [wrongfully] claim that Titanic is just a melodramatic flick, we see that same hopefulness in the automotive world.
If only Ralph Nader hadn’t written that book about Corvair.
If only the ‘55 Packards had come out two years earlier.
If only International Harvester workers hadn’t gone on that strike.
If only Pontiac could have survived the Great Recession.
We love to hope that, if things had just been a little bit different, our favorite cars and companies would have survived. And while I won’t claim to be on the same level as Titanic director James Cameron, I will admit that this same hopefulness influenced the production of The Last Independent Automaker, the new documentary my friends and I produced on the history of American Motors Corporation.
Although the story always ends with Chrysler buying American Motors in 1987, I wish we could go back in time and warn AMC management about the Ford Mustang, the first oil crisis, the GM rotary engine, Japanese imports, government regulations, the second oil crisis, the Renault merger, and on and on…
Imagine my amazement then, when I discovered there was one executive who did see some of these problems coming, and had he succeeded, AMC very well could have survived.
The 1970s were a rollercoaster for AMC. After acquiring Jeep from Kaiser Industries, American Motors started the decade in the red before climbing to record sales and profits by 1973-74. Powered by the Gremlin, Hornet, and lucrative Jeep line, the company went on a spending spree, which included the radical new 1975 Pacer. The car was a hit at first, but sales quickly cooled. Squeezed for capital and unable to refresh its aging lineup, AMC’s bread-and-butter cars had gone stale by 1977. This, combined with rampant inflation, government regulation, and imported foreign competition, caused sales and profits to collapse.
Amidst the crisis, president Bill Luneburg and chairman/CEO Roy Chapin Jr. were both planning to retire, and the search for their successors had fueled a cutthroat battle between vice president of product Gerald Meyers and vice chairman R. William McNealy.
McNealy had previously been VP of marketing, where he’d helped reinvent AMC’s image with the Javelin and AMX. He’d also spearheaded the remarkably successful Levi’s Gremlin and helped launch AMC’s much-loved Buyer Protection Plan. Meyers, on the other hand, had come up through the manufacturing division, was currently VP of product development.
Originally, McNealy looked like a shoo-in for the top job as chairman/CEO, with Roy Chapin Jr. even calling McNealy “my successor.” This was further cemented when Luneburg retired and Meyers was made president. But AMC’s board pulled a surprise in the autumn of 1977, asking McNealy and Meyers to a shootout, where each would present their vision of the future so the board could vote on a winner.
As our documentary explains in Episode 4, Meyer’s plan was to increase Jeep production, reduce car production, and find a foreign automaker to help AMC build a new high-tech, fuel-efficient car. The board chose Meyers, and McNealy resigned in protest.
As the story continues in Episode 5, Meyers eventually entered AMC into a partnership with the French automaker Renault. The plan was for the two companies to only share sales, technology, and manufacturing, but a second oil crisis and a massive recession in 1979 cut Jeep sales by half, which forced Renault to buy 46.1% of AMC just to keep the company solvent. From there, French management forced out Meyers and slowly took control of their American “partner.” Unfortunately, Renault’s cars didn’t catch on in the U.S., and the venture lost so much money that the French government eventually pressured Renault to sell AMC to Chrysler Corporation, thus ending the company’s existence.
Ultimately, Meyers’ 1977 proposal was a decent plan. Had the 1979 oil crisis and recession not happened, AMC may have never had to sell itself and its independence to Renault, and the company might still be around today. Ironically, data strongly suggests that AMC would have been profitable if Renault hadn’t sold them out!
But that’s not what happened.
During our research, I had the chance to read a detailed copy of McNealy’s plan, and I was shocked by how prescient it was. While nothing is guaranteed, I think he might have actually been able to save American Motors. But the company would have looked a lot different by the time he was done.
My co-producer, Pat Foster, managed to obtain a copy of Bill McNealy’s proposal, sent to AMC’s board about a month before the actual showdown. It’s an incredible piece of American Motors history. Credit – The Last Independent Automaker
McNealy was perhaps more realistic than Meyers but also far more bleak. He put the situation rather bluntly, saying,
“AM’s problems are simple. We lose so much money in the passenger car business, it hides our other profitable businesses.”
Continuing, he laid out AMC’s four main problems:
1. Jeep profits were being wiped out by passenger car losses, and soon Jeep would be in danger, too.
From 1973-76, AMC car sales had fallen by 100,000 units, while Jeep sales had nearly doubled. Despite being lower volume, Jeep had become the profit engine for the company, and the money-losing car division was sucking up those dollars.
Unfortunately, AMC had built its reputation and its product lineup around the compact Hornet platform, and the small car market in America was becoming increasingly crowded and competitive, which squeezed sales and margins. In addition, AMC was spending millions on its passenger cars to meet new Corporate Average Fuel Economy laws. What had once been a profitable niche market for American Motors in the ’50s and ’60s was now a loss-leader category for larger automakers. McNealy wrote:
“It is common knowledge in the industry and all of our studies confirm it, that you lose money on small cars and make it back on larger cars and trucks. We have neither the skill, time nor money to develop our own Cadillac or truck. In the meantime, the Japanese will keep anyone from being profitable at the bottom end. GM and Ford are fighting back, but this only makes our situation more difficult.”
More ominous, however, was that the government would soon release official fuel economy standards for light-duty trucks, which included SUVs. McNealy estimated that Jeep’s lineup would not meet the new standards without significant investment and could face millions of dollars in fines, saying:
“Protecting Jeep must therefore become our primary corporate objective.”
2. AMC had not allocated enough money to design an all-new Jeep.
As McNealy detailed, management recently decided not to allocate funds for Jeep updates unless passenger car sales were above 220,000 units. Reiterating his first point,
“The mood in Washington does not favor gambling on an ‘anything goes in four-wheel drive’ philosophy. We need to be ready for stricter rules because not to do so is to kill the profit engine we’ve lived on for the past five years…”
“The cycle plan says we can’t afford it unless 1978 AMC sales exceed 220,000. This is a gamble we can’t afford to take.”
To meet government regulations, McNealy proposed that Jeep would need a new lightweight, fuel-efficient replacement for the large SJ Wagoneer/Cherokee starting in 1980 or ’81, followed by an updated CJ soon after.
3. AMC was wasting time and money improving fuel economy on its passenger cars.
The “AMC” four-cylinder that debuted in 1977 wasn’t really designed by AMC. If you look closely, you can see the VW and Audi logos near the top of the block. Credit – The Last Independent Automaker
The U.S. car market was in a weird place by 1977. GM’s new downsized B-body cars were a huge success, proving consumers still wanted large sedans. At the same time, compact and subcompact imports were also seeing record sales. American Motors found itself squeezed on both sides.
Its only “big” car, the mid-size Matador, was outdated and too expensive to replace. But compared to other small cars, AMC’s compact Hornet and subcompact Gremlin were larger, heavier, and less efficient.
The company was spending a boatload to improve the fuel economy of its existing models, including $60 million just to license and manufacture an engine from Volkswagen, since AMC didn’t have an in-house four-cylinder yet.
But as McNealy saw it, AMC would never be competitive without an all-new passenger car platform, and there was no way the company could afford that just to compete in a market segment that wasn’t profitable anyway:
“Even with the four-cylinder engines–and lock-up converters, fuel feedback, spark control and programmed spark–we are below legal [CAFE] minimums by 1982 with our present Gremlin, Concord and Pacer sales mix.
The four-cylinder engine buys us one or, at most, two years, but it is the ante in a poker game that will require hundreds of millions to meet the 1982 standards and beyond.
We must decide whether to spend our limited capital to protect a threatened Jeep, (Engineering believes we can produce a whole new generation of lightweight Jeeps for $100,000,000), or put $55,000,000 into the four-cylinder engine, plus $100-400,000,000 for new bodies to protect the endangered and unprofitable passenger car business.
The conclusion is not debatable.”
You can probably see where this is heading…
4. AMC’s buyer loyalty was collapsing, and dealers needed more volume.
By the time McNealy wrote his proposal in mid-October, the 1977 model year had become a sales disaster for American Motors. Buyer loyalty had fallen to 25% from 45% in 1972, the lowest among domestic automakers.
When sales are poor, executives love to blame the dealerships. But McNealy knew the dealers were hurting too, and blamed the slump on high prices and low gas mileage.
Stuck in a doom spiral of rising inflation and shrinking volumes, AMC was struggling to price its cars competitively. As mentioned in #3, AMC was also struggling to match the fuel economy numbers of its competition. Dealers were stuck with cars with dated styling, higher prices, and lower MPG numbers. The results were predictable.
The truth that AMC enthusiasts frequently ignore is that American Motors had not been a gas-mileage leader since at least the mid-1960s. The years of winning back-to-back Mobilgas Economy Runs were well in the past. Until the VW four-cylinder came along in 1977, the company’s smallest engine offering was a 232-cubic-inch inline-six. While the 1973 oil crisis had been a boon for Gremlin and Hornet sales, neither was a class leader when it came to fuel economy.
My co-producer Pat Foster pointed this out during his interview in our third Episode, suggesting the success of Gremlin and Hornet gave AMC management a false sense of security. McNealy apparently realized this, too, and his analysis was even more scathing,
“We’ve been overpowered and out spent in the critically important area of fuel economy. The cost to regain leadership is tremendous, and fuel economy will grow as the number one reason to purchase in our segments…”
“We prospered undeservedly when in 1974 King Faisal turned off the oil. We had a long-standing reputation for good MPG and we reaped a harvest we may not have deserved.”
To solve these problems, Bill McNealy proposed the radical step of exiting the passenger car business completely and betting AMC’s future entirely on Jeep (and its subsidiaries).
First, he knew AMC couldn’t just kill its car line when dealers were already struggling to get enough volume. Thankfully, American Motors had been courting several foreign brands for U.S. distribution, including Honda and Peugeot. So far, the Peugeot deal looked promising, and McNealy encouraged it with haste.
As he put it, the ultimate goal was to unite enough brands under one roof that customers would see AMC dealers as “the supermarket of good cars.” Together with Jeep, they’d supply enough volume to keep everyone happy.
Second, to exit the passenger car business, he suggested American Motors Corporation find a large, successful company that could buy the entire car division outright and use its losses to offset earnings and reduce its future tax burden. If no such company could be found, McNealy outlined plans for ending production and closing down AMC’s Kenosha, Wisconsin, plants, where the majority of cars were built.
(Note: although the 4WD AMC Eagle had just been approved for development in the summer of 1977 for a 1980 debut, McNealy doesn’t mention it specifically in his proposal. Thus, it’s impossible to know whether he would have canceled the project or rolled it into the Jeep lineup.)
Third, he wanted American Motors to begin work on a new Jeep model as soon as possible. Having come from a marketing background, McNealy wanted this news to be a major announcement, which would help distract from AMC’s passenger car problems and get customers excited for future Jeep products. Similarly to Gerry Meyers, McNealy also proposed increasing production by converting AMC’s smaller Brampton, Ontario plant from building cars to Jeeps.
Like Willys and Kaiser before them, Jeep had become the beating heart of AMC. Abandoning the car business was a bold, risky plan, but looking at the brutal facts, McNealy’s argument was compelling:
“Unless we restrict the capital programs for passenger cars and reduce its operating losses, there will be no cash to re-tool the new lightweight, fuel-efficient Jeeps to meet future MPG regulations. The issue is clear because without Jeep there is no American Motors…”
“The Inside Directors are currently divided and most of the other Officers are so locked into the passenger car business by training, experience and emotion that they cannot be expected to raise these issues. And, yet, when asked how to work our way through these conflicting forces, they have no better solution to offer…”
My vote is already cast with the plan outlined here. It can revive and revitalize this company. I hope you will give it a chance.”
But leaving the car business entirely was just too difficult for AMC’s board. Many were lifelong auto industry men, and surrendering the passenger car market to only build “four-wheel-drives” (the term SUV didn’t really exist yet) was anathema to them. Supposedly, CEO Roy Chapin Jr. said, “If we can’t build cars, what can we build?”
But as McNealy pointed out, this was an emotional problem, not a logical one.
Alas, the board decided that waiting for another automaker to save them by sharing a new small car design was safer than betting everything on Jeep, and so they chose Gerald Meyers’ plan.
But what if they had swallowed their pride and chosen Bill McNealy, instead? What would have happened?
The key lynchpin of McNealy’s plan was a downsized Jeep for 1981. His primary motivation was meeting the still-unknown CAFE standards, but he also realized the secondary importance of fuel efficiency as a selling point.
As things turned out, Jeep wouldn’t release downsized models until 1984, as building the 1983 Renault Alliance subcompact took top priority. When they did finally arrive, the new “XJ” Cherokee & Wagoneer were a smash hit, but what if they had arrived three years earlier?
Although nobody—including McNealy—could have predicted the 1979 oil crisis, Jeep would have been much better prepared under his plan. Debuting in mid-1980 as an ‘81 model, the XJ would offer nearly double the gas mileage of the old SJ Jeeps, and it would be the first American compact SUV, beating both the 1984 Ford Bronco II and 1983 Chevy S-10 Blazer to market. While 1979-81 were brutal years for every car company, I think the XJ would have fared well, and McNealy’s plan for a new CJ would have helped, too.
Equally important, winding down AMC’s car operations would have reduced their drag on profits, as car sales from 1979-1982 struggled to stay above the 220,000-unit breakeven point McNealy mentioned earlier in his report. American Motors Corporation’s overall revenue would have been lower, but so would its losses. If McNealy could have kept things afloat until 1983, the company would have been in a much better position for the second half of the 1980s, too.
As we mentioned in the sixth and final episode of our series, AMC and Renault invested a fortune in building the Alliance subcompact, only for gas prices to recede and the bottom to fall out of the small car market in 1985. The return of cheap gasoline caused a rapid shift back to big cars, of which AMC and Renault offered none. All of McNealy’s ominous warnings about the subcompact market having too much competition and razor-thin margins proved to be true, much to AMC’s detriment. One can only wonder what would have happened if all the money wasted on the Alliance had gone toward new Jeep models instead.
Of course, McNealy’s plan was not without potential flaws, the biggest of which was counting on import distribution deals for extra profits. By the early 80s, most Japanese brands were either successful enough that they didn’t need AMC’s dealer network, or they had already had deals with the Big Three. (Although it’s wild to think AMC could have signed a deal with Honda!) VW and Mercedes were unlikely to need American Motors, either. This would have limited the company to lesser-known European automakers, which have had a spotty record in the U.S. market.
Gerry Meyers ultimately passed on the Peugeot distribution deal in favor of a distribution and manufacturing deal with Renault instead, but both brands’ performance in the U.S. proved that American buyers weren’t crazy about French cars. Any British car distribution deal would have likely been a failure, too. One potentially bright spot could be Volvo, whose drab but indestructible cars would have likely appealed to AMC loyalists. Saab may have been a good fit, too. Personally, I think BMW would have complemented Jeep nicely, as 1980s market research showed many German luxury car buyers also owned Wagoneers and Cherokees.
The other big flaw in McNealy’s plan was the same one that had plagued AMC before; after finding a profitable marketing niche, the rest of the auto industry would rush in after it. Living on Jeep sales alone could have gotten AMC through the 1980s, sure. But could an independent Jeep have survived the SUV wars of the 1990s, or the meteoric rise of pickup trucks in the 2000s? McNealy admitted back in 1977 that AMC didn’t have the resources to develop a truck line.
On top of that, without a car line, AMC would have to consistently increase Jeep sales to earn enough money to keep designing new products. Under Chrysler, Jeep did manage yearly U.S. sales of 500,000 units by the late ’90s, but that number was likely bolstered by the size and strength of Chrysler’s resources and dealer network.
Working out these hypothetical AMC scenarios, I’m reminded of a National Geographic special where James Cameron and a bunch of other history nerds debate risky schemes that could have saved the Titanic after it hit the iceberg, like driving the ship backwards or filling the hole with mattresses from the passengers’ beds. Eventually, however, the group admits that the ship’s crew probably did the best they could given their horrible circumstances.
It’s entirely possible that Bill McNealy could have prolonged AMC’s independence, only for the company to end up merging with a different automaker anyway. AMC’s size and scale disadvantage compared to the rest of the industry would have only gotten worse as time went by, and the temptation for a large conglomerate to scoop it up was always there. Sadly, Bill McNealy passed away in 2014, meaning we never had the chance to interview him for The Last Independent Automaker. There are so many questions we could have asked about his time at American Motors.
Having personally met Gerry Meyers, I don’t fault him for what happened to AMC. The Renault partnership made sense on paper. Had circumstances been different, perhaps millions of Americans today would be driving Alliances instead of Corollas. I’d say he probably did the best he could with the situation he was handed.
But there will always be a part of me that wonders what could have happened. I guess that curiosity of “what could have been” is part of what led me to spend a decade of my life researching American Motors. And when people watch The Last Independent Automaker, I hope our story will give them a reason to wonder, too.
Joe Ligo is the producer/director of The Last Independent Automaker, a six-part documentary series on the history of American Motors Corporation. All six episodes are now available to watch YouTube, the PBS app, and on Public Television stations around the country.
Pretty good chance there is a second chance to see this play out… Stellantis seems to be struggling and just about anyone would take over the Jeep brand, not sure about the rest of it.
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