(EXPANDED FROM 7/31/2023)
American Motors’ purchase of a four-cylinder engine from Volkswagen was one of CEO Roy D. Chapin Jr.’s last big decisions during his 10-year leadership of the automaker — and arguably his final whopper of a mistake.
According to The New York Times, the deal with Volkswagen included AMC paying Volkswagen “about $60 million for the use of the engine and for the tooling and assembly line equipment” (Stevens, 1977). The plan was to build the engines at a recently acquired plant in Richmond, Indiana.
Road & Track stated that the initial capacity of the assembly line was 192,000 units per year but could be upped to 275,000 (Baron, 1977). The latter was close to AMC’s passenger-car production for 1976, so they clearly had big plans for the engine. Those plans would prove to be embarrassingly unrealistic.
Much like Chapin’s other mistakes of the 1970s — such as coming out with the ill-fated Matador coupe and Pacer — buying the VW engine would prove to be so problematic that AMC might have been better off if Chapin had instead sat on his hands and done nothing.
AMC took a financially riskier approach than Chrysler
AMC followed in the footsteps of the Chrysler Corporation, which had previously made a deal with Volkswagen to use a smaller four-cylinder engine in its line of subcompact Plymouth Horizon/Dodge Omni cars then under development. However, Chrysler would buy the engines rather than build them.
Gerald C. Meyers told the Times that building its own 2.0-liter, four-cylinder engine would “liberate” the automaker to design smaller, lighter cars in the future (Stevens, 1977). Presumably AMC management thought that the cost per engine would be lower by building them in house.
Also see ‘Why does Joe Ligo’s PBS series sanewash AMC’s mid-70s recklessness?‘
In theory, building the engine made some sense. A weakness of Chapin’s failed attempt to equip the Pacer with a wankel engine built by General Motors was that it would have likely cost more than an in-house engine (go here for further discussion).
The big downside of the VW engine was that spending $60 million was a huge cash drain at a time when passenger-car sales were struggling so badly that they were losing money. To give you a sense of proportion, the Pacer’s development cost roughly $60 million (Foster, 2013). This was AMC’s most-expensive new car of the 1970s, overshadowing the 1970 Hornet and 1974 Matador, each of which cost around $40 million (Foster, 1993).
VW four proved too small for the Gremlin
Beginning in February 1977 the four was offered in AMC’s smallest car, the Gremlin. The Times stated that the new power plant was expected to “raise the Gremlin’s gasoline mileage from 23 to 25 miles per gallon in combined city and highway driving” (Stevens, 1977).
That’s not what Road & Track found with its test car, which returned only 19.5 mpg (Baron, 1977). This was despite its car having a four-speed manual transmission, which — remarkably enough — was the first time AMC had offered one in the Gremlin (Foster, 2013). The low gas mileage was not surprising given that the Gremlin was naught but a shortened compact that AMC vainly tried to sell against much more fuel-efficient subcompacts from both Detroit and abroad.
Also see ‘Pat Foster barks up wrong tree by lauding an AMC Gremlin GT with a 360 V8‘
Road & Track also found that the four-cylinder engine suffered from excessive noise and vibration while possessing “neither the horsepower nor more importantly the torque to power a 2745-lb Gremlin like the one we tested” (Baron, 1977; p. 44). The magazine recommended that buyers instead choose AMC’s trusty 258-cubic-inch six.
Not surprisingly, only 30,144 fours were produced in the three years the engine was offered on the Gremlin and its 1979 successor, the Spirit. That represented only 24 percent of total production. So rather than jump-starting flagging AMC sales at the bottom end of the market, the VW four diverted scarce capital from more promising ways to bolster the competitiveness of AMC’s increasingly obsolete cars.
AMC wisely switched to a bigger engine from GM
In 1980 the VW engine was dropped in favor of General Motors’ 2.5-liter “Iron Duke” four. Within a year the four-cylinder Spirit outsold the six for the first time. Patrick Foster (1993) reported that the switch gave AMC a four that had better low-end torque for its Jeep CJ models. The engine was also offered in the compact Concord and, beginning in 1981, the Eagle.
Perhaps most importantly, Foster noted that “AMC saved about $45 million in capital costs by cancelling the existing contract” with Volkswagen (1993, p. 230). If the total projected cost of the four-cylinder purchase came to around $60 million, then AMC may have spent $15 million. That comes out to almost $500 per car built. That’s a significant number for an entry-level model, so might American Motors have taken a loss on each car?
Also see ‘Automotive News treats Gerald C. Meyers’ tenure at AMC with kid gloves‘
As with so many of Chapin’s big mistakes, his VW engine adventure had a kernel of a good idea. The automaker arguably needed a four-cylinder engine to stay competitive as U.S. automakers began to downsize their passenger-car lineups. However, VW’s power plant was clearly too small and finicky for the American Motors’ existing passenger-cars and trucks.
Chapin essentially bet that he could raise enough money to significantly downsize AMC’s lineup so it was more suitable for the VW engine. That proved to be an absurd idea after both the Matador coupe and the Pacer flopped, thereby flushing $100 million in development dollars down the toilet.
Should AMC have made a four from its six?
Paul Niedermeyer (2023) has argued that AMC should have eschewed the VW engine in favor of slicing off two cylinders from its own six. That’s what the automaker finally did in 1984, when it created a 2.5-liter engine. That power plant ended up being used in Chrysler products until 2002 (Wikipedia, 2023).
This may very well have been the most logical option if the goal was to develop a four that could be used with both cars and Jeeps. However, timing could have been an issue. The development costs of an in-house engine design may have been high enough that AMC needed to initially buy engines from elsewhere. Recall that AMC did not go this route until it was controlled by the French automaker Renault, which had deeper pockets.
I am intrigued by the question of when might have been the ideal time for AMC to begin offering a four-cylinder engine. Note that Jeep had a history of doing so, particularly on the CJ-5 (Foster, 2014). Might it have made sense to once again offer a four by the early-70s in light of soaring import sales? And while I have argued that AMC went too far downmarket with the Gremlin (go here), might a four have made sense on an entry-level model by circa 1973?
Of course, that would have required a four robust enough to power a compact — which brings us back to the idea of a shortened six. Might that have been a better investment than Chapin’s evolutionary dead ends such as the two-seater AMX and the “full-sized” Ambassador?
NOTES:
This story originally was posted on July 31, 2023 and updated on Oct. 17, 2025. Product specifications are from Flammang and Kowalke (1999).
RE:SOURCES
- Baron, Rich; 2025. “Vintage R & T Review: 1977 AMC Gremlin 2.0 Four Cylinder – A (Porsche) Engine Waiting For A Better Car.” Curbside Classic. Posted Aug. 4.
- Foster, Patrick R.; 1993. American Motors: The Last Independent. Krause Publications, Iola, WI.
- ——–; 2013. American Motors Corporation: The Rise and Fall of America’s Last Independent Automaker. MBI Publishing Co., Minneapolis, MN.
- ——–; 2014. Jeep: The History of America’s Greatest Vehicle. Motorbooks, Minneapolis, MN.
- Flammang, James M. and Ron Kowalke; 1999. Standard Catalog of American Cars, 1976-1999. Third Ed. Krause Publications, Iola, WI.
- Niedermeyer, Paul; 2023. Comment in “Vintage R & T Review: 1977 AMC Gremlin 2.0 Four Cylinder – A (Porsche) Engine Waiting For A Better Car.” Curbside Classic. Posted 8:02 a.m., July 30.
- Road & Track; 1977. “AMC Gremlin 2 Liter.” Feb. issue: pp. 42-45. Posted by Rich Baron in Curbside Classic July 30.
- Stevens, William K.; 1977. “A.M.C. to Use 4-Cylinder Engine As Way to Improve Its Car Sales.” The New York Times. Published Jan. 13.
- Wikipedia; 2023. “AMC straight-4 engine.” Page last modified Jan. 3.
ADS, BROCHURES & IMAGES:
- oldcarbrochures.org: AMC Concord (1980); AMC Gremlin (1977, 1978); Eagle Premiere (1988)
Did the AMC Straight-Four (and Straight-Six) possess a similar potential like Chrysler’s 2.2/2.5-litre Four in possessing ability to be reduced to 2-litres (and 3-litres in case of Straight-Six), turbocharged and converted to diesel with the latter being an in-house alternative to the powerful yet expensive and rare 150 hp 3.6-litre VM Motor 6-cylinder turbo diesel conversion in the AMC Eagle?
Also having read the Chrysler PowerTech V6/V8 engines were designed at AMC early on, is it known if they were distantly related to the AMC V8 as was said to be the case with Chrysler’s V8s from the A and LA to Magnum/etc?
Would AMC have also benefited from cutting down their V8 to create their own answer to Chrysler’s LA V6 engine as a potentially more compact unit than the AMC Straight-Six?
As Paul Niedermeyer noted in the article comments, it’s a mystery why AMC didn’t simply elect to develop a four from it’s existing proven and well-regarded six-cylinder engine. A four using the bore/stroke dimensions from the older 199 cid version of the six would have come in at 2.2 liters, more suitable for the existing RWD cars than the VW engine, and as adaptable for future FWD applications as the Iron Duke was for GM.
We could also wonder what if AMC had decided to use GM’s “Iron Duke” right from the start instead of using the VW engine?
Would it have been possible for a 199 cid-based four to incorporate the bore of the 250 cid V8, allowing the four to have a capacity range of around 1.9-2.5-litres sans Chinese-built 2.7-litre?
Auto historian Pat Foster once called the ‘74 Matador “the car that more than any other” sealed AMC’s fate. While I’m not arguing that assessment, I maintain that AMC was doomed even if a redesigned Matador lineup had succeeded. The economic catastrophe of the late 70s/early 80s would’ve sunk them regardless; even Chrysler (being 5-6 times bigger) only just survived with Federal loan guarantees. AMC just didn’t have the money (or the Congressional support) to survive…
If I had to pick just one fatal mistake it would be the Pacer rather than the Matador coupe because 1) it cost more to develop, 2) it was a new platform rather than new sheetmetal on an existing one, and 3) by 1976 AMC was running out of time to fix its solvable problems. The money for the Pacer could have gone into an updated line of compacts that plausibly might have sold well enough to take AMC through the end of the 1970s.
The early-80s strike me as another matter. Perhaps the biggest problem was that AMC waited too long to downsize the senior Jeeps. If they had done so by the late-70s and designed the new platform so it could be easily produced in the main Kenosha plant, AMC might have been able to achieve adequate economies of scale to survive the depths of the early-80s recession. Unfortunately, Chapin’s management team treated Jeep as a cash cow rather than reinvesting in it. Imagine the funds spent on the Matador coupe instead on at least the beginnings of a more modern Jeep Cherokee/Wagoneer/truck.
As long as Jeep sold decently AMC could have had a little wiggle room to stay in the passenger-car field with relatively modest volume — particularly if they had moved at least somewhat upmarket. Ford was able to squeeze a surprising number of years out of its compact Fox platform, so AMC might have been able to make do with a competent rear-wheel-drive lineup (although it might have helped if AMC had developed a partnership with a foreign automaker such as Subaru, both to meet CAFE standards and give dealers a subcompact to sell).
Running a smaller automaker during this time period was unusually difficult, so you may be right that AMC was likely doomed even if it had better management. That said, I think that we should be wary of viewing AMC’s prospects through the distorted lens of Chapin’s tenure (1967-78). He screwed up in so many ways that it’s easy to dismiss how the company could have done meaningfully better with a management team that possessed even an average level of competence.
Agreed. The Pacer money SHOULD have been used to redesign the Hornet, which was entering its SEVENTH year of production in ‘76, was a much more mainstream car and was CRYING for a redesign by then. Even if AMC had continued the “cut-down Hornet” formula to create the Gremlin, that car would have been refreshed as well.
Against the GM Iron Duke, Volkswagen (both the VW/Audi EA831 and EA827) as well as the AMC Straight-Four engines, where did the 2.2-litre PSA-Renault J-Type used in the Eagle Medallion stand in comparison?
Know the J-Type in 2.1-litre diesel guise was also used in some Jeep models, though since the J-Type was introduced just before AMC’s partnership with Renault did the former ever experiment with fitting the petrol version into the Spirit and Concord?
I owned a 1980 AMC Spirit with a 4 cylinder engine. At 63,000 miles the engine was toast. Turns out the engine used in that vehicle was a European sourced GM 4 cylinder engine and could only be replaced by a European GM 4 banger. The one they found had 25,000 more mile on it than the one that died. the “new” used engine didn’t make it a year before it died. GM supplied AMC with both American and European manufactured 4 cylinder engines.
I had to crawl along to the dealer that took it in on trade and fortunately enough it ran normally for them on their test drive. The only reason I bought it was that the AMC dealer was the only place I could get more than I owed on my (Lemon) 1978 Chrysler LeBaron Medallion
I happened to have read this after coming across a posting from earlier this year concerning Popular Mechanics criticizing Chrysler’s “blame game” regarding meeting safety and emissions regulations. I’ve long thought that the EPA put extreme pressure on the domestic manufacturers, compelling them to roll out some fairly radical changes in a very short amount of time. I also have suspected that this was one of the factors in the near-demise of Chrysler Corporation and the mortal wounding of AMC.
The short timeline implementation of the CAFE standards was a very steep path to climb, and if I remember correctly, there was little assistance available to the OEMs. Unlike today, where every wannabe electric car manufacturer (Lordstown, cough, cough) gets wads of cash thrown at them by the US government to see what sticks to the wall. Certainly, in the 1970’s both Chrysler and AMC were financial disasters, and we were soon to find out about FoMoCo’s troubles shortly after. Only GM was in any kind of financial state to weather the multiple challenges of regulations and foreign competition, some with very favorable exchange rates.
I’m not an automotive engineer, but I think I understand what Roy Chapin was trying to do; get the pieces together in order to have them in place for a new generation of AMC vehicles. That the Porsche engine was too small for the then-current AMC lineup was a gaffe for sure, and the money could have been used for other purposes. Maybe Mr. Chapin thought there would be some bragging rights about having a technologically advanced four cylinder engine in upcoming AMC models?
Whatever purpose the Porsche motor was to serve obviously never came to fruition as far as anyone knows. It seems the buying public didn’t see the value proposition of an expensive and weak four banger in the Gremlin. AMC had a working relationship with Renault for European assembly of AMC vehicles in the 60’s and distributing Jeeps in Europe before the buyout. Maybe there had been a plan to show investors and banks that there was a future for AMC before the talks with Renault became serious. it’s anyone’s guess.
Ultimately, AMC figured out what to do about the four cylinder engine they needed. Was there a concern about GM being able to supply enough Iron Dukes for AMC? It seems odd to me, as AMC bought GM engines through the first half of the 80’s and also, that GM had an entire engine plant dedicated to the Iron Duke.
Here is what I do not understand, and maybe I was lucky: I owned two Dodge Omnis, both with 1.7-litre VW engines. They were economical, gave great mileage, were peppy, quiet and dead-solid reliable. I am guessing that the Richmond, Indiana plant that A.M.C. used to build the VW-licensed engine was the old Inteernational Harvester engine foundry and assembly plant with a very embittered U.A.W. labor force, given the way I.H. went into bankruptcy. On paper, the VW Rabbit engine deal made sense. But I think A.M.C. lost the focus that George Romney possessed. I think Romney would have focused on the compact and intermediate platforms and would have acquired Jeep from Kaiser at the price Romney wanted to pay. While there might have been sporty hardtops and a convertible or two, the focus would have precluded the AMX, the Pacer and a special two-door like the Matador coupe. I don’t know if Romney would have okayed the Javelin. And while I believe Wells, Rich, Greene was a great advertising agency, advertising does not insure great demand from the number four domestic automaker with a shrinking dealer network and an influx of imported makes.
International Harvester Company never declared bankruptcy
It may be that the VW engine was a flawed decision but there are some aspects that may explain parts of the reasoning.
The VW engine was completely modern design to international standards with overhead cam. Any discussion of trying to make something out of the AMC 6 cylinder would have none of those attributes as they were old style legacy engines.
The VW engine was designed so it was compatible with front wheel drive. No doubt that this was a consideration as during this period of time fwd was the recognized “future” throughout the industry. One would speculate that AMC was doing product planning that envisioned that.
The Rabbit was the model of where the small car’s future was at that time. The ChryCo development Omnis & Horizons were running around Detroit as modified Rabbit/Golfs.
VW had a reputation of being well engineered and reliable. That would take out most of the other Europeans as choices. One might seriously question AMS’s internal ability to fully design an engine of its own.
Consider that in this time period the prevailing thought was that inline 4s much above 2 liters were going to have a balancing problem. The first one to really solve that was Mitsubishi with the balance shaft.
One might also put into the mix of consideration how the GM rotary that AMC had counted on had vanished. So, would one reasonably consider that the way to avoid that occurring again was to control the manufacturing in-house?
My own 1980 AMC Spirit with the GM 4 banger went kablewy at 63K. Turns out mine was one where the GM 4 banger came from Europe. While I was able to find a replacement with 47K, it was made in the USA. The two powerplants were not interchangeable. I did manage to find an engine from Europe with 82K. Less than a year later with that powerplant I was praying that it would last me until I traded it off on an Oldsmobile Cutlass Ciera Brougham Holiday Coupe and the nobody would drive it in it’s current condition. Thankfully on the day of the trade evaluation, it behaved itself. A year later my RED BOMB was still parked behind the dealer’s fence of shame along with all of the other junkers it had taken in on trade. So don’t extoll the virtues of the GM sourced 4 banger with me as my two were both a POS. I should have gotten a 6 cyl automatic instead of the 4cyl 4 speed. Likes the car, not the powertrain. But that dealer was the only one that would give me more than what I owed on my 1978 Chrysler Lebaron with it’s troublesome computer issues.
But that’s an entirely different story.
Ouch, that’s a drag. The AMC six didn’t get as good gas mileage but seemed to be fairly reliable for a U.S. engine of that era.