(EXPANDED FROM 1/8/2021)
When writing a story about the 1974 AMC Ambassador, I came across American Motors car brochures for 1979 and 1980 that took the unusual step of picturing the company’s headquarters in Southfield, Michigan. In the 1979 brochure the building was described as “symbol of the growth that has taken the company far beyond its pioneering role as a manufacturer of passenger cars.”
AMC’s new headquarters were completed in 1975 as part of an ambitious corporate expansion and modernization effort. The building was as good of a metaphor as any for the tenure of Roy D. Chapin Jr. When he became CEO of American Motors in 1967, he proceeded to take the automaker in very different directions than his much more cautious predecessors.
Roy D. Chapin Jr. discards AMC’s penny-pinching ways
AMC’s organizational DNA primarily grew out of the Nash Motor Company. Founder Charles Nash ran such a “lean operation in terms of raw materials and finished automobiles” that his was the only automaker other than General Motors to generate a profit in 1932 (Hyde, 2009; p. 52). Nash once stated in an interview, “I never made money by gambling, but by thrift” (Hyde, 2009; p. 54).
Although his successor, George Mason, moved the automaker into new markets and merged it with the Hudson Motor Car Company, his replacement — George Romney — echoed Nash’s approach by pruning the product range so dramatically that from 1958 to 1962 American Motors didn’t even offer a single two-door hardtop model. That was a basic violation of industry groupthink prevalent during the post-war era.
Even Romney’s more expansionist successor, Roy Abernethy, couldn’t hold a candle to Chapin’s high-stakes gambling. The son of Hudson cofounder Roy Chapin is best known for AMC’s purchase of Jeep in 1970. However, during the course of his 10-year tenure, the company also diversified into transit buses, tractors and plastics. Perhaps most importantly, by 1975 AMC’s passenger-car line sprawled across four distinct body shells — twice as many as a decade earlier under Abernethy.
Historian Patrick R. Foster noted that “AMC had made itself successful by building cars on shared bodies; it cut tooling costs by a large percentage. Now (in the mid-70s) it was going in the opposite direction. . . .” (2013, p. 139).
Fixed costs prove too high to survive sales decline
The added fixed costs proved to be a fatal problem as sales declined in the second half of the 1970s. Even in the relatively good year of 1975 AMC lost $27.5 million despite retailing 296,000 passenger cars (Foster, 2013). That level of volume was above the break-even point back in 1972 (Hyde, 2009).
To make matters worse, Chapin threw away another strategy that had long helped the company increase its economies of scale. Most of the new designs introduced during his tenure were stylish two-door coupes rather than more practical sedans and wagons that could generate fairly consistent sales throughout an unusually long production cycle.
As a case in point, Chapin invested upwards of $100 million on the Matador coupe and Pacer (Foster, 1993). The success of both of these cars primarily depended upon the public’s acceptance of their controversial styling. Chapin lost both gambles: Sales fell off so quickly for each car that it is unlikely AMC came anywhere close to recovering their cost of development.
This stood in sharp contrast to the 1956-62 senior Rambler family cars, which generated around 1.3 million units over their life cycle. That proved to be extraordinarily high sales from an independent automaker despite an aging design that did not match the lower, longer, wider look of an enormous wave of Big Three competition beginning in 1960.
What was Romney’s secret to success with the Rambler? He bet correctly that flashy styling was less important than a lineup of slow-changing cars which emphasized practicality, a high quality of manufacture and reliability.
AMC builds new headquarters right before its collapse
Even AMC’s gleaming new headquarters building — called the American Center — turned out to be a questionable idea. Detroit’s mayor was so angry that AMC moved its headquarters outside the city that he barred the company from bidding on contracts (Hyde, 2009).
Although the land for the new headquarters was purchased in 1973, when company profits were soaring, AMC was in permanent decline by the time the 24-story building was occupied in 1975. When the above-mentioned 1979 brochure was printed, only a “partnership” with Renault could save AMC (at least in name).
The French automaker failed to turn AMC around despite making significant investments over most of the 1980s. AMC’s headquarters building was sold off and is now leased to a variety of tenants (Wikipedia, 2020). However, it is still called the American Center.
Today this building stands as a monument to Chapin’s hubris. Much like Packard CEO James Nance, he vainly thought that he could run AMC like a much bigger automaker. Instead he ran it into the ground.
NOTES:
This story was originally posted July 6, 2014 and restructured on Jan. 8, 2021 and expanded on Aug. 18, 2026. Production figures for American Motors cars are from Over 100 Years: The American Auto (Auto editors of Consumer Guide, 2010) and Wikipedia (2013).
Share your reactions to this post with a comment below or a note to the editor.
RE:SOURCES
- Auto editors of Consumer Guide; 2010. Over 100 Years: The American Auto. Publications International, Lincolnwood, Ill.
- 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.
- Hyde, Charles K; 2009. Storied Independent Automakers: Nash, Hudson, and American Motors. Wayne State University Press, Detroit, MI.
- Wikipedia; 2013. “U.S. Automobile Production Figures.” Accessed July 5 (page no longer available).
- ——; 2020. “American Center.” Page last modified, May 18; accessed October 18.
BROCHURES & ADVERTISING:
- oldcarbrochures.org: AMC (1979, 1980); AMC Matador (1977); AMC Pacer (1978); Rambler (1962)
Roy Dikeman Chapin was both chairman and chief executive officer from 1967 until 1977.
Those two roles should always be separated. Each has distinctly different responsibilities and objectives.
The Chairman looks after the interests of investors. The CEO runs the business. It’s not possible to do both at once satisfactorily.
When combined, too much power is concentrated in one individual, particularly control of expenditure.
If the company starts losing money, who holds the CEO accountable?
Would Roy dismiss himself? Of course not. He trusted his judgement, even while he was burning shareholders’ money.
There was no customer benefit to be derived from a huge new office tower, particularly one located so far away from people and services.
Buying Jeep was smart, but snowbelt customers had to wait until three years after Roy retired to get themselves a 4×4 drivetrain in a Concord/Eagle.
Roy was a smart guy, a Yale graduate who gained decades of auto experience before being given too much authority for his own good.
He clearly didn’t have the product instincts of Lee Iacocca or Bob Lutz.
https://www.autoweek.com/news/a2121221/roy-d-chapin-jr-former-head-american-motors-dies/