Roy Abernethy - Changing AMC

Changing AMC

American Motors was formed from the merger of Nash Motors and Hudson Motor Car Company and the company hired Abernethy in 1954. During AMC's formative years, the company struggled with costs and sales. Abernethy became vice president of sales and concentrated on building AMC’s sales and distribution network. He recognized that promotion and advertising is useless without a strong dealer organization, so his first task was to convert every Hudson and Nash dealer into an AMC dealer. He then kept many of these dealers allied with AMC, thus helping to keep the corporation afloat, until AMC found its compact car niche under Romney's leadership. He was known to fly 50,000 miles (80,000 km) miles a year to make AMC synonymous with the compact car. Abernethy achieved sales successes for the company and by 1962, Rambler was number three in sales rank among all the brands of cars sold in the United States.

The "rigidly conservative" Romney resigned from running AMC in February 1962, to successfully be elected serve as governor of Michigan. On February 12, 1962, the AMC board of directors selected the 56-year old Abernethy to replace Romney. This was also the first time that the company separated the position of president from the chairperson of the board. Abernethy became responsible for day-to-day operations as president, while Richard E. Cross, the automaker's legal counsel and new chairman was now called AMC's Chief Executive Officer.

Both took command of a financially strong company (working capital increased from a low of $46 million in 1957, to $103 million, and the firm eliminated all long-term debt), with sales increasing from $362 million (91,469 automobiles) in 1957, to more than $1 billion (422,273 total units) in 1960. Abernethy was predicting a total of 450,000 Ramblers to be delivered for the 1962 year, despite increasing competition from the new domestic-made compact cars offered by the Big Three. However, Abernethy "was more or less given an anchor and told to swim" after taking over the automaker from Romney. He "may lack some of the eloquence of his predecessor, George Romney, who revived the company in the late 1950s, but he makes up for it with vocal volume." One of the fist tasks for the small automaker was to make its capital work harded in the face of competition with the automotive giants.

Roy Abernethy continued Romney's prohibition on automobile racing that was instituted by the Automobile Manufacturers Association (AMA) in 1957. He made AMC observe both the letter and spirit of AMA's resolution, and was against a renewal of the auto industry's horsepower race by offering ever more powerful engines, as well as corporate sponsorship of activities that glamorize speed and performance. As AMC's market performance reached record levels in 1964 placing the Rambler brand in third place position in the domestic sales race. At the same time AMC publicly disavowed any interest in automobile competition. Corporate advertising answered the question "Why don't we enter high-performance Rambler V-8s in racing?" with "Because the only race Rambler cares about is the human race." The "messianic fervor with which both former AMC president George Romney and his successor, Roy Abernethy, spread the message of fundamental motoring" helped solidify the image of the "Rambler driver" - a market segment that finds "any forms of performance repugnant." Nevertheless, in mid-1963 AMC announced a new 287 cu in (4.7 L) V8 option in the Rambler Classic models (which were previously available only with I6 engines, and the V8s reserved for the Ambassador line) as well as make a partial attempt to tap into the rapidly growing muscle and performance car image by introducing the sporty Rambler Marlin midway in the 1965 model year. The mid-sized fastback model made the public "aware of changes in Rambler's styling - the reaction is favorable."

However, Abernethy is now known for reversing Romney's plans for AMC that involved maximum parts compatibility for all lines of AMC vehicles. Abernethy was a big man of 237 pounds (108 kg) — smoking ten corona cigars a day, — and had big ideas for the company. He was convinced that with the right marketing AMC could take on the “Big Three” (General Motors, Ford and Chrysler) model for model, if the company could shed its "economy car" reputation. In contrast to Romney, who thought only of compacts, as the automaker's new head, "Abernethy looked at the company's volume and decided it meant that AMC should go toe-to-toe with the Big Three."

Abernethy said repeatedly that AMC's "main problem was its image lag — the fact that too many people still thought of American Motors as the builder of plain jane compacts." He also started to move the Ambassador upscale to compete with other manufacturers' full-size cars. Moreover, larger models typically return bigger profits. Offering larger, and often more prestigious or "halo cars", can also help make the firm's smaller models look more attractive to consumers. Thus, as part of this vision, Abernethy put into a motion a total remake of AMC's corporate identity and its marketing mix that would divorce its larger car lines from its Rambler brand and his perceived "negative" compact car image.

The first models with Abernethy’s corporate strategy "in the business world's toughest race — the grinding contest against the Big Three automobile makers" were the cars introduced for the 1965 model year. They were billed as the "Sensible Spectaculars" with the new Ambassador billed as "a whole new horizon in size, style, stunning performance" for 1965. The 1965 models were a major makeover of the completely new platform that was just introduced in 1963. American Motors' new cars included the stretched and more luxurious Ambassadors, as well as new convertibles for the large models. New styling, the more powerful engines, as well as numerous comfort and sports-type options were now emphasized. Abernethy even switched the automaker's advertising agency to promote "a better luxury and sports car image". However, Abernethy had his critics who contended that AMC "had its great success when it was doing what the Big Three weren't doing".

The strategy shift at first seemed to be working because sales of the redesigned 1965 and 1966 Ambassadors improved, even as AMC's overall production decreased from the record level achieved in 1963. However, corporate earnings per share were a meager 27 cents per share, the lowest since AMC made its famous compact car comeback in 1958. Investors received message of the changing fortune of the automaker when the company's 1966 annual financial report was delivered in a plain brown wrapper, instead of the previous year's glossy cover.

Moreover, a completely new design was also slated for the larger 1967 models. This strategy added $60 million in retooling costs, which was a major stretch for the company. The objective was to position the 1967 AMC Rebel and Ambassador designs on an equal basis with competitive models marketed by the Big Three. The new 1967 models also came with completely modern "GEN-2" AMC V8 engines. Furthermore, AMC introduced a revolutionary guarantee. The engine and drivetrain were covered for five years or 50,000 miles (80,000 km). The media was positive in covering the new models, with experts such as Tom McCahill highly praising the new car's performance and ride comfort.