Business: AMC's Charge

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No longer the sickly child

President W. Paul Tippett Jr. of American Motors Corp. used to joke that his company actually had a three-word name: "Ailing American Motors." Now Tippett and his colleagues are laughing for a different reason. AMC has pulled back from the brink yet again, chiefly by cutting its work force, consolidating its plants and concentrating on a few small cars and specialized vehicles.

Last week, like proud parents of a sickly child who suddenly won the bantam championship, AMC announced that profits more than doubled, to a record $83.9 million on sales of $3.1 billion for the fiscal year ended in September. True, earnings declined in the industry's dismal last quarter, but they were down less than those at the Big Three. In October, AMC rode up again: car sales surged 37%, while they sank 21% for the industry as a whole.

AMC has rested its survival strategy on what Chairman Gerald Meyers calls a "three-legged stool" of small cars, Jeeps and steady Government contracts for postal vehicles and military tactical trucks. Since 1974, AMC's line-up of cars has shrunk from six to three: Concord, Spirit and Pacer. While analysts say that they are not making money, the high-profit Jeep continues to rake it in. There was some sales softness earlier in the year because of its fuel thirst, but the Jeep rebounded strongly in September and October.

By putting a Concord compact body on a four-wheel Jeep-like drive train, the company has produced a new car that gets about 16 m.p.g. and sells for some $7,000. Name: the Eagle. It rides easily, stops quickly on icy roads, and is designed for doctors, firemen, people who drive snowplows and others in rough climes. AMC planned to build 50,000 in this model year, but reception has been so strong that there is talk of aiming toward 90,000.

The best future asset is the forthcoming liaison with France's rich dowager, Renault, which will eventually own 22.5% of American Motors stock. Renault's mini Le Car is selling well in AMC showrooms and drawing customers to some of American Motors' own models. Automakers will survive in the future, says Meyers, if they sharply focus their markets and hook up with international partners. Those that do not, he adds, "will be wiped out as thoroughly as Custer's 7th Cavalry."