It’s hard to tell the American Motors story on two pages. It’s a complicated family tree, rich in automotive lore. Names such as Rambler, Nash, and Hudson linger in designers’ minds, and Jeep is synonymous with American spirit. But AMC today is not the “odd-ball” car company of decade ago. Moreover, the company will soon face off against Detroit’s Big Three. So it’s time to take a look at what has transpired.
In 1902, the first Rambler was built in Kenosha, WI, can sold by the Thomas B. Jeffery Co. for $750. In 1916, the company became Nash Motors, which merged with Kelvinator in 1937. The American Motors name came in 1954, when Nash-Kelvinator merged with Hudson, and by 1970 they sold a half-million Ramblers in a single year, sold Kelvinator, and bought Kaiser-Jeep. The latter was the latest incarnation of the company John Willy had started in 1903, and which through merger had become Willys-Overland in 1909.
But that quick summary omits all texture. Jeffery had begun experimenting with one-cylinder “Ramblers” in 1897, working in his Chicago bicycle factory for three years before buying the Kenosha factory. In an age of high-top shoes, bowler hats, and far-sighted businessmen, Jeffery sold 1,500 Ramblers his first year. And in the next decade, Rambler surreys, roadsters, and delivery wagons appeared. Rambler archives include snapshots of Mark Twain, Buffalo Bill, and Teddy Roosevelt, all riding high in Ramblers. Between 1902 and 1916, Jeffery built 82,856 cars and trucks, and developed the four-wheel-drive WWI “Quad” truck. Then in 1916, Charles Nash entered the picture. After rising to head of Buick in 1910 and president of GM in 1912, he resigned to purchase the Jeffery firm in 1916. Re-organized, the company built 11,000 trucks in 1918, setting an annual production record. Nash then acquired Milwaukee’s Seaman CO., which built steel-reinforced bodies.
Ten years later, Nash was looking for someone else to sit behind the wheel. His search led him to George Mason, a Chrysler manufacturing whiz-kid and then president of Kelvinator, the refrigerator builder. When the two companies merged in 1937, headquarters were in Detroit.
Mason had Nash engineers create a new, lightweight car. The Nash 600 project marked the first American application of single-unit construction. Another famous name sharing Mason’s enthusiasm was George Romney, who joined Nash-Kelvinator in 1948. In 1950, Nash-Kelvinator in 1948. In 1950, Nash-Kelvinator showed the first compact, an 82-horsepower, six-cylinder convertible, reviving the Rambler name. With a hardtop the following spring and station-wagon and four-door 108-inch wheelbase models in ’54, Rambler’s industry penetration increased.
Another model destined for classic status arrived, the Metropolitan. The mini had a 42-horsepower delivering 40 mpg; built by Austin in England, 94,986 Metropolitans were delivered before production stopped in 1962.
Another or Mason’s postwar dreams was a merger of independent auto manufacturers to better utilize facilities and spread tooling costs. And in 1954, Nash merged with Hudson. Founded in 1908 by Detroit department store owner J.L. Hudson and steered by Roy Chapin, Hudson was famous for the 1916 “Super Six,” whose fully-balanced crankshaft cut engine vibration. But Hudson’s greater accomplishment was bringing the “closed” Essex within the reach of would-be buyers.
After the 1954 merger, the company’s name became American Motors. Romney assembled a young management team; one important player was Roy Abernathy, who succeeded Romney as president in 1962. In 1959, American Motors set a record of 401, 446; in 1963, they passed the half-million mark with a sleek restyling of the Rambler.
With Abernathy at the helm the company moved toward larger cars, such as the Ambassador and V-8 engines. Roy Caapin, Jr. became chairman and William Luneburg president in 1967, and the sporty Javelin and AMX were introduced. And in 1969, the last Rambler, number 4,204,925, rolled off the Kenosha line. The next year, when Gremlin debuted, the company acquired Kaiser Jeep, another long pedigree. In 1903 an energetic salesman named John Willys had contracted a year’s output of Overland autos, built in Terre Haute, Indiana. He reorganized the firm in 1908 and soon moved operations to Toledo, OH. By 1915, Willys-Overland was the nation’s second largest automaker.
In 1940, the U.S. Army selected Willy’s design for a four-wheel-drive quarter-ton. After WWII, the company registered the trademark and developed a line-up built on the military model, including the country’s first all-steel station wagon. The company was acquired by Henry J. Kaiser in 1953.
In the seventies, American Motors built Pacer, Concord, and Eagle, the latter being the first domestically-built four-wheel-drive auto. But none proved long-term successes. The days of Rambler were past. And its recent course was proving a dead end. Something new needed to be done. But few could foresee the enormity of the reversals in store.
Jon Mowrey joined AMC in '82 and is now vice president of product planning and design. Before that, he was Chevy's manager of planning, responsible for all passenger car and truck programs.
AF: Fleet acceptance of compact pickups has grown enormously. How will Jeep Comanche fit into that market?
MOWREY: Comanche will be a mainstream, light-truck entry. The strategy is similar to the Alliance, which established us in the mainstream subcompact market; the truck will establish us in the high-truck will establish us in the high-volume compact-pickup truck market, which is almost half of the U.S. light-truck market.
AF: In what ways will Comanche be distinctively Jeep?
MOWREY: It will be different than other subcompact trucks in important ways. Comanche will retain and feature Jeep heritage strengths-ruggedness, durability, structural integrity, load-carrying capacity, and superior 4WD. In the first year, we'll have the XJ series drivetrains, including our turbo diesel option. That's three engines, three transmissions, and two transfer cases. The 4WD will have shift-on-the-fly, with the less expensive Command-Trac system and the premium Select-Trac systems both available. The family resemblance with the highly successful Cherokee and Wagoneer is obvious in the styling.
AF: What about its ride, for example, or load carrying capacity?
MOWREY: The vehicle will have truly superior ride qualities for a truck. It's hard to make light trucks with good load-carrying capacity that still have good ride. I mean not only reasonably soft over bumps but with a lot of structural integrity. They shouldn't vibrate and feel like they're falling apart when carrying heavy loads. Our truck will have a very light, solid, highly integrated structure and superior handling performance. Its load capacity will be among the best. Our four-cylinder engine will have fuel-injection, providing superior reliability. And in the interior, we've created comfortable, passenger-car qualities in feel and sound level.
AF: What's projected volume for the first year?
MOWREY: We're projecting a substantial volume for Comanche in 1986.
AF: The latest generation of Alpines has been around since '72 or '73. What does AMC plan to do with it?
MOWREY: There are three important things to remember about the Alpine. It's a high-performance two-plus-two sports car, as opposed to a two-passenger. It's low and very good-looking, with absolutely superb performance. It's also got unusual ride/handling characteristics; Renault designed the suspension to ride like a luxury car. You can go over railroad tracks or bumpy roads at 100 miles an hour, and it feels like you're going over glass.
AF: How will you tailor it for America?
MOWREY: We've been working with Renault on a U.S. version, adding features Americans appreciate, such as superior air conditioning, stereo systems, and sunroofs. We've tried not to change the basic design very much, because we don't want to compromise the vehicle's outstanding performance. The vehicle is ready, and it's great. It will be an eye-catching competitor for Corvettes and Porsches.
AF: The Alliance was designed from the Renault 9 in '81. Will it be reskinned later this decade?
MOWREY: We have plans to continually improve the Alliance including this year's larger 1.7 liter engine. We are not concentrating on appearance. The buyers in that segment want value. They want a good, reliable, modestly-priced product with sensible styling. In this segment, you're better off investing in reliability, quality, and value. We do recognize the need to update our styling so we have plans for later this decade, but not with a sense of urgency. We will be offering some new electronic features and some convenience options normally found only in more expensive cars.
AF: It's not as if you're playing catch-up.
MOWREY: Exactly. We were among the first with front-wheel-drive in that segment; we have excellent fuel efficiency; and the styling and interiors are very good.
AF: How do you sum up your overall future strategy?
MOWREY: We will position ourselves strongly in the market's major volume segments with viable mainstream entries. We will have some selected specialty entries to give our product line flavor. We also intend to maintain four-wheel-drive leadership and to substantially strengthen our truck market presence.
AF: Is there a danger working with a foreign partner that you might repeat things that Europeans perceive well but that Americans won't accept?
MOWREY: We're going to take our American product knowledge and try to build in the flavor from our European partnership. Sharing components, we can get some unique attributes. For example, Renault has a superb heritage of strong, high-revving powertrains that are very efficient and very powerful. We'll take advantage of their special techniques for low-cost products. Europeans have seats that are just as good as ours but have lower cost. Several European manufacturers are good at producing specialty products: Renault and Alpine to name a couple. In the future we will have strong specialty products from the U.S. and Europe. Our product opportunities are really unlimited; our challenge is to determine the proper priorities. You can expect a steady stream of strong new products from us for the next several years.
Francois Castaing is AMC's vice president of product engineering and development. He joined AMC five years ago, after spending a decade with the Renault racing group. He arrived in Detroit with the Renault 9 drawings, which were fated to become the award-winning Alliance.
AF: What was the greatest challenge in the R-9/Alliance project?
CASTAING: Our aim was the technological transfer of front-wheel-drive. Our primary job was to Americanize the Renault 9, creating the Alliance. The challenge was to walk that fine line between making the car really American and remaining a lightweight, compact, front-wheel-drive, modern European car.
AF: What are the intrinsic differences between the two?
CASTAING: With an American car, you can talk about ride, quietness, creature comforts, serviceability, so there was an accumulation of little things that were not in the French design. But on the other hand, there may be a tendency to make the car too much like a big car, with too much weight, chrome, and expensive fabrics.
AF: What were the contributions that Renault made in the development of the XJ?
CASTAING: There were two obvious contributions. One was that the number of engineers made it a stronger project. Secondly, the European technical culture brought something to the project.
For example, European cars have a good reputation for road-ability, while Jeeps have the reputation of being the best off-road handling cars. So we thought, "why don't we try at the same time to make it the best on-road car in the four-by-four market?"
But it's important to understand the basic engineering advantages of the Renault-AMC alliance. We try to use their transmissions and their engines to achieve economies of scale.
On top of the component strategy, we take advantage of Renault's advanced engineering knowledge wherever we can. Renault has expertise in designing light bodies and seats, to name two examples. So we either bring the specific engineer from Renault to work at AMC or subcontract part of the design or body to Renault.
Each individual engineering group at AMC tries to see what is the state-of-the-art at Renault at a given point in time. Then we decide either to adapt it or to ignore it if it's not responding to the American market. Each person knows his counterpart and they talk on the phone every day.
AF: How is the engineering on the new Jeep Comanche different from other entries in its class?
CASTAING: We are different from the other guys for the simple reason that we started with a sport-utility design, then from that we derived a four-wheel-drive truck and a two-wheel-drive truck. The industry has done the reverse.
The domestics and Japanese started by designing the two-wheel-drive or four-wheel-drive truck, and then they designed a sport-utility variation. Jeep decided four years ago to design the state-of-the-art four-wheel-drive compact utility or compact family vehicle, then make a truck out of it.
The benefits are obvious. First, our truck is going to be uniframe. It has a higher torsional strength. The Comanche is very rugged, very solid, very tough, and sticks together; you can feel it when you drive it.
AF: How is AMC engineering different from you competition?
CASTAING: Since there was no takeover of anybody by anybody else, there was really the combined goodwill of the Europeans and the Americans. They put their brains together for a better product-Normally one group comes in and removes everybody in the same room. So they lose all the know-how the other guy had. But from an engineering standpoint, we put the best of both companies together. What we have here is quite rare, and I think it shows in our products.
John Campagna is AMC's executive director of quality and product integrity, and he has been with the company for a decade. Previously he worked with Ford Truck Operations; before that he was in the aerospace industry.
AF: How has the quality of American Motors' products changed?
CAMPAGNA: Quality has become a way of life in our industry. To satisfy customers, you first have to understand what their wants and needs are from a car. Surveys indicate one of the main reasons for buying is the perception of quality and reliability. So it is extremely important for us to be able to measure the consistency of our product.
AF: How do you do that?
CAMPAGNA: First of all we set up objectives. When we design on a piece of paper, quality is part of that process. Then in the design execution phase, we work with engineering to make sure that those objectives are not bargained with. We also interface with the plant so we don't compromise the objective from the manufacturing standpoint either. We try to be the hub of this process, establishing objectives according to the customer's wishes. And we make sure that during the execution of the program, those objectives don't get compromised.
We have really worked very hard to achieve an understanding throughout the company of our system to measure quality on a day-to-day basis. We call it the AQR system-Action Quality Requirements. It translates into the most independent look at a vehicle from a customer's standpoint. We are doing it every day, picking cars out of the shipping yards at each plant. We measure every plant versus the others.
AF: What's unique about the system?
CAMPAGNA: What is unique is our awareness of this system. It's so well ingrained throughout the corporation. You talk to marketing and they know it. You talk to sales, they know it.
AF: How does it work?
CAMPAGNA: We relate a number to a level of quality, with 162 being perfection. A perfect vehicle meets all the criteria that the customer can come up with. We try to be totally independent when looking at a vehicle, and we have created an operator-insensitive, foolproof inspection so that we don't have one operator give a car a five-point demerit and the other one say, "That's good enough." The checks are extensive, including body, chassis, trim, and test drive. We spend two hours to two and one-half hours checking one percent of our production with this system.
AF: How critical are the checks?
CAMPAGNA: Embedded in that formula are demerits that the most severe customer would not detect. With metallic paint, for example, we look at it very closely, checking for flaws-much more closely than any buyer would. Not everything will necessarily translate into customer dissatisfaction, but we want to prevent that. We want to have a very severe look because we want to take corrective steps before it gets visible to the customer. And we have a very severe penalty should we see something that will definitely be a customer complaint. We're trying to detect the moment that things are slipping. We are very interested in range of consistency; AQR takes away the operator's interpretation. Earlier, we had too much variation between operators looking at the same car. Now they're given no latitude. You check a margin by measuring it. There's no way to say "Well, that looks okay to me."
AF: Where was this system developed?
CAMPAGNA: The AQR system was developed by Renault, and fully incorporated on the R-9. We then adapted it to the Alliance, Encore, and Jeep Cherokee and Wagoneer. This system also allows us to look at what we achieve with Renault. We have the same system for our Eagles in Canada.
AF: How has the American public responded, and what is its perception of AMC quality today?
CAMPAGNA: Customer satisfaction with the Alliance is the highest ever obtained with any of our products, and many of those are conquest sales.
AF: Does AQR evaluate reliability?
CAMPAGNA: That is the only thing AQR doesn't evaluate. But durability and reliability we evaluate through other means including our proving grounds in Arizona and Wisconsin.
AF: What does the future hold?
CAMPAGNA: In terms of quality, we're not standing still. AMC's relationship with Renault is exciting. It took two or three years to get acquainted and become confident with each other. We have now achieved a true partnership, which best utilizes our two resources on new products.
Kenosha is not a name that looms large in the American mythology. But the Wisconsin town on the west shore of Lake Michigan has played an important role in the development of American Motors' mythology. The first one-cylinder Rambler-sold by the Thomas B. Jeffery Company at the 1902 Chicago Auto show for $750 was built at the Kenosha plant, which had originally been turning out Sterling bicycles. And the plant today is AMC's main and only U.S. car assembly facility.
Over the years, the Kenosha plant has seen many name changers: the name of the early 12-horsepower Rambler was changed to Jeffery after the manufacturer's death in 1914, and through 1916, the company had sold 82,000 units. After purchase by Charles Nash, the name changed to Nash. Then following the 1954 merger of Hudson and Nash-Kelvinator, the newly formed American Motors moved its headquarters to Detroit, but vehicle assembly stayed in Kenosha, where Ambassador, AMX, Rebel, Marlin, Hornet, Javelin, Matador, Pacer, Gremlin, Concord, Spirit, and Eagle were built.
Over the years, the Rambler name has been fated to be attached to the best-selling line. In 1963, for example, the Kenosha plant produced a record 511,000 Ramblers, offered in three styles-American Classic, and Ambassador. That was also the year Kenosha enjoyed record employment, 16,000 workers, compared with about half that number today. That year, 50 percent of Kenosha's population owned Ramblers, though some cynics point out that one reason for brand loyalty was George Romney's dictate that only Ramblers could be parked in the company lot.
In addition to the Kenosha assembly plant, AMC also has a body plant along nearby Lake Michigan, with engine and trim operations performed in its six-million-square-foot complex, and a stamping plant is located in Milwaukee.
But Kenosha is different from other domestics' facilities because it is where AMC's affiliation with Renault first showed its metal. The first car born of the new affiliation bowed on September 22, 1982, and was appropriately called the Alliance. The car's success in the marketplace is well documented; the Kenosha achievement is not as well known.
Gerald Meyers, then company chairman, said the affiliation "saved American Motors Corporation $1 billion and 10 years' time." Meyers was referring to the fact that while AMC was a small-car expert-having made no expertise in producing front-wheel-drive vehicles. Renault, on the other hand, was the leader in front-wheel-drive componentry, producing more front-drive cars than any other automaker in the world. The $1 billion and 10-year savings refer to the fact that, by using existing Renault design and technology, AMC was able to save expensive and lengthy development costs.
Those dollars went to acquiring state-of-the-art technology, but the Renault connection again effected economy. AMC had used some robot welding on the former Pacer, but with the Alliance, AMC began using robot welders in much greater numbers.
AMC spokesman Lloyd Northard sums up the advances made on the Alliance project: "What we got was a highly automated body-framing line with robot welders, a new E-dip anti-corrosion process, and a car." The E-dip Northard mentions is indicative of AMC's new-product integrity, allowing rust-preventative material to be electrically bonded to Alliance and Encore bodies. Renault also contributed engine cradles, providing higher quality assembly, as well as door-framing equipment.
Although such production technology was important, it doesn't overshadow Renault's basic contribution- the R-9 program representing years of design research and engineering expertise, which otherwise would have been beyond AMC's financial grasp.
But not all Kenosha technology came from across the Atlantic. AMC applied a little bit of Japanese know-how, namely, the Kandban "just in time" inventory-control process. "With Kanban," Northard explains," "over 70 percent of all the materials and components we use at Kenosha arrive within 24 hours before they go into the actual vehicle. "To facilitate inventory control, all parts and components are barcoded. "With bar coding," Northard explains, "we eliminate duplication of parts and reduce the rejection of parts. The suppliers also know that the parts have to be up to quality, because if they aren't we won't be able to produce cars."
The more one learns about Kenosha, the greater the achievement seems. It remains the place where Renault's engineering and production technology was first fully integrated into AMC. And the success of that integration can be read in the success of Kenosha's products.
Last year, Joseph Cappy was named group vice president of sales and marketing. Before joining AMC in '82, he spent 26 years with Ford, serving finally as general marketing manager for Lincoln-Mercury.
AF: What is you overall marketing strategy for AMC product?
CAPPY: We have two brands we will be promoting in the future. All of our passenger cars, starting with the Alliance, are branded Renault. And all of our truck products carry the Jeep brand. The Jeep brand is probably one of the best-known brands in the world, while the Renault brand is very well known outside the U.S. The Renault marketing umbrella for our cars essentially means European technology and quality at an affordable price.
CAPPY: By '87, we will have increased consumer awareness of the Renault brand substantially. We started from nothing. With the Alliance, half the people who bought the car did not start with Renault; they ran across the car in their shopping excursions. We find that when we make people aware of the product, its attributes, its strengths, its value, we can convert them.
The success of the Alliance and Encore and of Cherokee and Wagoneer demonstrates something. The Alliance has consistently run about fourth or fifth out of 22 nameplates in the most competitive segment where 11 of the world's greatest manufacturers are competing. We've proven that regardless of our size we can produce and sell in volume with any of the world's leading manufacturers.
We've done the same thing with Jeep vehicles. For the first six months of the 1985 model year, we have outsold the Bronco II with our Cherokee/Wagoneer. It proves that we can design, produce, and merchandise products that will stand the test of the marketplace.
AF: What does "European" mean as part of your sales strategy?
CAPPY: First off, you should understand that Renault has been among the volume manufacturers not just in France but in Europe. They have been the leaders in front-wheel-drive. With the Alliance, that meant excellent engineering at an affordable price. Basically, we had the closest domestic thing to a Japanese car. Japanese cars are a hybrid, blending European design with American luxury. We're the only domestic manufacturer that offers a hybrid, by taking French design and accommodating it to American tastes. That produces the value that the consumer sees. He sits in the Alliance and he says "Wow" because it's got all the form-follows-function configurations in actual vehicle design. And on top of that, it's got the right seats, right feel in the cloth, in the door trim panel, plus the right sound, ride, and handling. That's the strength of our European hybrid.
AF: Fleet sales involve selling more than just a car; they involve selling company integrity. What do your customers need to know?
CAPPY: One of the important things is what we've done with our dealer body. In the past three years, we've made dramatic changes in our dealer body. Our target is about 1,200 high-volume dealers, and in the last two years, we've picked up over 200 brand-new dealers. All of then are blue-chippers, successful dealers who own maybe a GM, Ford, or Toyota franchise. In the past, our dealer body just didn't have the clout; our representation was concentrated in the Northeast and the Midwest, with minimal showing in the Sunbelt and the West. But in California alone we've substantially upgraded our dealer body. And we've attracted the guys that have the managerial talent, capital, and resources to make a franchise successful.
But that doesn't do us any good if we sell a vehicle to the consumer who later finds that the dealer doesn't have enough service capacity or trained technicians. So we've improved and upgraded our dealer body enormously, and we will continue to do so. The progress we've made so far has been excellent, and it's going to continue.
Improvements in facilities in just the last six months have been dramatic. We basically told them, "Look, we want to go for volume. And you can't go for volume if you're sitting there as a mom-and-pop store selling 10 a month." So the number of dealers selling over 1,000 a year had jumped dramatically.
The same holds for service. We keep sitting down and counseling with the dealers on a regular basis until finally they take the action that is best for both of us. It doesn't just help us here in Detroit; the dealer ends up doing much better, too. I'm very proud of these accomplishments.
Last year, Peter Guptill became AMC's vice president of U.S. sales. After working with Ford, he joined the company in '71 and has managed zones nationwide.
AF: What is your fundamental thinking about fleet sales?
GUPTILL: While retail is much subjective opinion and image, the fleet buyer is totally objective. You don't sell the sizzle to the fleet buyer, you sell the steak. Confidence is extremely important, and confidence has to be endorsed with fact.
AF: What has been your progress in doing that?
GUPTILL: We have made tremendous inroads in proving to fleet buyers that our products are valid alternatives. A few years ago, we were not on selector lists, and American Motors' fleet penetration was basically in the government sector, won by bids. In the '79 model year we sold under 2,000 cars to the rent-a-car community. In '84, we sold rental in excess of 30,000, excluding 4WD. Rental buyers are astute; you don't have that sales increase with whistles and balloons.
A vehicle in a fleet is a tool. We're out to ensure that when someone buys a Renault or Jeep vehicle was purchased for. We keep it on the road at a minimal cost. Fleet is not an afterthought at AMC. In our product planning and marketing actions, fleet is right up there. Fleet will always be important for AMC. When vehicles have been short, we've always taken great pains to recognize the needs of our fleet customers.
AF: Where do you expect to see greater fleet penetration?
GUPTILL: I don't have any question when drivers try our vehicles and compare them with the competition, buyers will opt for AMC. So I expect to first see great inroads in driver-choice fleets with our intermediate car. This will be followed by purchase administrators saying, "Gee, this really is a pretty good car. Let's include it in our buy list."
AF: Is you company at a disadvantage because of lag time between when a vehicle appears in Europe and when it appears here?
GUPTILL: Not at all. Remember, this is the sort of thing the Japanese do; every Japanese product launched here has been on the market in Japan for at least a year. The advantage is that they get all the bugs worked out. It helps maintain a record on quality.
AF: Are you planning on marketing the Cherokee as a competitive fleet vehicle?
GUPTILL: Yes. The two-wheel-drive is an excellent alternative to station wagons, with some terrific advantages. We've got great cargo capacity, room for five, four doors, not to forget good ground clearance for off-road. You should also think of it as an alternative to minivans. In snow markets like Chicago, New York, Detroit, Buffalo, and Cleveland, rent-a-car operators see that Jeep vehicles are much better rent-a-cars. The driver feels safer and more comfortable.
AF: What is your overall resale strategy?
GUPTILL: American Motors' philosophy was to fill the market niches where other manufacturers didn't compete. That philosophy is no longer valid. AMC intends to compete in the mainstream. But how do you prove that? You don't prove it overnight; you prove it by launching products and garnering the respect of critics and retail purchasers. What better endorsement is there than to finish a calendar year selling 169.000 Renault-branded made-in-America Alliance/Encores and selling almost a third of the segment in sports/utility?
But the importance of that is that resale is a function of demand. Fleet purchasers waited for the endorsement that came from the retail marketplace. The strength of our products is the key to resale strength, and we're establishing a new track record.
AF: You plan to increase your market share to about five percent by '88. What role does fleet play in AMC overall sales?
GUPTILL: Remember that we don't intend to increase penetration by only increasing sales of current products. That's the big difference with AMC. We will increase our volume and penetration by entering new market segments. When we do our product planning and sales and marketing, fleet's involved. We're not just in the fleet business in case retail falls off. We want our commitment to fleet to remain a very sincere commitment, not a paper commitment or a whistles-and-balloons commitment. And we are dedicated to proving that.
Pierre Jocou was one of AMC's first imports from Renault and is now managing director of the parts and service division. Jocou came to the U.S. in '83 after 20 years with Renault in France, Algeria, the Caribbean, Mexico, Sweden, and the United Kingdom
AF: Phase Two calls for an increase of AMC's segment penetration. How is the service division preparing for tremendous volume increase?
JOCOU: We emphasize two things: Be Better, Be Bigger. More quality, more capacity. We are pushing our dealers to improve and to expand. Our network's service capacity has increased by more than 30 percent this year, far beyond the dealer population increase.
AF: Do you have a problem with the customer's perception that there is a difficulty servicing foreign product?
JOCOU: Yes, there is definitely a perception problem. But a foreign product is in no way different from a domestic product. An engine is an engine, no matter where it comes from. The problem is to delete this perception in the customer's eyes.
The perception problem is linked with parts availability. But the solution is a matter of investment, a matter of having the parts imported and having the proper inventories, plus a modern means of communication.
In this country we have 15 warehouses and $70 million in inventories, and the consumer needs to know that. We don't just bring parts from Renault. We have 1,000 different vendors in this country, and we distribute parts to our dealer network in 24 hours.
AF: What role does the company's size play in its ability to make changes?
JOCOU: I think we have a very big advantage in being a small company. Each of us has direct, easy links to anybody in the corporation. For example, I have a meeting every Friday with the vice presidents of engineering, quality, manufacturing, styling, and purchasing. I present those guys with problems identified in the field, many of them by fleets. Fleets are very quick to identify problems. I have technicians who just visit fleets, getting very prompt and complete information.
In '84, we put a lot of emphasis on fleets. We authorized fleets to process warranty claims and make decisions on the spot. Out zones think of a fleet owner or fleet location like a dealership. Fleets own a large number of cars, so they are in need of tools, documentation, training, advice, exactly like a dealer. We are committed to treating them like part of our network.
AF: For fleets vehicle downtime doesn't mean just an inconvenience. Service problems hamper business. AMC's reputation for service was not good before the Renault merger. What have you been doing to improve?
JOCOU: First of all, we've totally changed our network. For many years, there were separate American Motors dealers and Renault dealers. But these duplicate networks have been replaced; about 80 percent of our dealers are new.
Our second problem came from the introduction of new products built with a technology that neither Renault dealers nor American Motors dealers were familiar with. So while building up a network, we were developing new products.
Now we have 30 service schools around the county with 24 instructors, training 14,000 to 15,000 mechanics every year, which means that every mechanic comes to our schools 2.5 times per year. And we don't foresee a slow-down in training before 1990.
The third problem was communication. We improved our communication by improving our methods of keeping dealers abreast of technical changes and technical problems.
For example, we equipped most of our network with videodisc players. Now we use videodiscs not only to talk about the product technicalities but to talk about marketing, service marketing, parts marketing, even business organization.
We have also divided the company into 12 different zone offices and we have 120 technical reps visiting dealers more than once a month, giving technical advice and technical help.
AF: Have you started to see results?
JOCOU: We've seen the dawn of better dealer quality. Customer surveys are starting to show increased satisfaction, and we've seen a decrease in complaints.
We are at the beginning of the curve. We've convinced our dealers that today's customers are basically different than ten years ago. Today the customer doesn't buy only product; the buys a means of transportation, including products and service.
Bob Lalain has been with the company since '75 and is now director of fleet operations. Before joining AMC, he worked with Ford for 14 years.
AF: How do you plan to make your company a legitimate fleet alternative?
LALAIN: Our main goal every year has been to create and implement highly aggressive fleet programs. For the last two years, we have been the first of the manufacturers to announce fleet programs. We've been highly competitive, and we've been first on the street.
Additionally, we've increased our advertising four-fold in just four years. For us, that's a considerable increase. Last year, we adopted a direct-mail program geared to all the top fleet users in the country. Those mailings went to more than 100,000 prospects. Finally, a year ago we formed a service group within the feet department, which has done much to improve our legitimacy as a provider of vehicles and service. We're interested in fleets after the sale, too. When we run into a service problem, we respond and correct the problem immediately.
AF: How do your programs stack up against the Big Three?
LALAIN: We have to keep our programs highly competitive. If GM is offering $300 on one of their cars, we can't expect to offer $300 and get the business. We've got to have something more competitive and a heck of a lot stronger to get a fleet buyer's interest.
So we write our programs strong. In the last few years, we've never had to come back and change a program-even tough we announced first.
When we walk into a buying situation with a fleet customer, we know we're probably the fourth contender on his or her list. That's why we've got to be highly competitive, highly visible. We've got to prove that we've got service reliability and that our resale values are holding up.
AF: The fleet buyer is an astute buyer concerned with the proverbial "bottom line." How do you compare with your competition?
LALAIN: As far as operating costs are concerned, you can go by a recent comparison from Runzheimer International, the respected transportation consultants. In Runzheimer's comparison of operating cost for several vehicles to fill a state bid, we were fortunate enough to come out on top. Basically, the Alliance and Encore are highly competitive fleet pieces for the subcompact segment. In the recent past, our residual values have been very competitive in the subcompact segment.
AF: Have your sales figures borne out those strengths?
LALAIN: For '84 model year, our fleet sales were up 118.9 percent over '83 model year, our sales were up 40.5 percent over '83. So there's been tremendous growth for American Motors Corporation in the fleet segment.
AF: What kind of new fleet opportunities have the Alliance, Encore, and Cherokee/Wagoneer given you?
LALAIN: Alliance and Encore have given us greater penetration into the fleet and leasing segments, where in years past our products such as Concord and Spirit weren't so successful. On the rent-a-car side, Alliance and Encore have been tremendously successful for three years in a raw. Hertz is currently our Number One fleet customer. Opportunity has also come to us via the federal government's General Services Administration. That business started last year, and it continues with the several federal agencies' use of this year's new Jeep Cherokee and Wagoneer.
AF: But isn't daily rental your area of greatest penetration?
LALAIN: Yes, for good reason. Rental firms look at vehicles not from an aesthetic standpoint but from a utility standpoint. To them, the car is a tool. Additionally, we've been able to provide highly competitive programs and early delivery-both of which make for lower operating costs and higher residuals.
Rental firms are important to us not only because of sales volume, but because of the exposure we gain as the cars are rented. These vehicles are exposed nine times a month. So if you have 30,000 vehicles in service, AMC is getting 270,000 exposures a month. And that leads to conquest sales.
AF: How has Hertz found you product to hold up?
LALAIN: We had some initial problems with the '83s and '84s, as with any new product, but those problems have been worked out. To date, the '85s are bullet-proof; we've had no problems from a reliability stand-point. And many of our customers have already made favorable indications toward the '86s. The bottom line is that the '85s have had outstanding reliability, and that will help us secure orders for '86.
AF: But your lease-segment penetration remains small. When will it pick up?
LALAIN: We won't penetrate deeply into the leasing companies until we come out with our mid-size car in '87-'88. We're doing as well as can be expected with the subcompact Alliance and Encore in the fleet-lease market. But because of the price of gas, most fleet cars are mid-size. As soon as we get the Brampton mid-size, we'll make greater inroads with the fleet and leasing segment.
AF: What do you expect the Comanche to do in fleet?
LALAIN: Even though we're stepping into a highly competitive market, we feel we're going to do extremely well with our two-wheel-drive/four-wheel-drive combinations. Fleets are moving towards compact trucks in a big way, and Comanhe will be a competitive truck. So we're hoping to get into the light-truck fleet market on a grand scale. Remember, the Comanche will be the first two-wheel-drive truck this corporation has had in more than 20 years.
AF: Bob, you know fleet. What changes are down the road? And what volumes do you project?
LALAIN: We see tremendous growth in the whole fleet segment over the next several years. Because of fleet operator preference leasing is going to become more dominant than ever. It will certainly be one of the strongest growth segments as far as fleets are concerned.
We believe that the rent-a-car segments of the fleet community will also continue to show growth.
As far as our corporation is concerned, our fleet goal this year is 47,000. We should meet that goal, unless there's a tremendous change in the market. Over the next five years, we will be looking at volumes exceeding 100,000 fleet units. Also over the next five years, we will be covering more than 50 percent of the market with our product.
AF: There has been a noticeable improvement in the way AMC sells itself. I'm thinking of first-class previews, buyers' guides, and promotional material. Can you speak in overall terms about changes in the quality of your operation?
LALAIN: In may of '81, we had some very simple goals. One was to increase volume. Over the last four years, our total volume has increased by more than 30 percent.
Another goal was to increase our corporation's exposure on vehicles we can provide the fleet community. We've attended many more conventions than we have in the past-we attended 18 last year alone. Not only do we attend them, but we also participate by sponsorship and by displaying our vehicles. We adopted a direct-mail program, sending hard-hitting letters and brochures to fleets who might be interested. We've increased our fleet and lease management contacts in the field. Our goal is to increase exposure in may ways and those were just a few. We've come a long way as far as becoming a viable consideration in the fleet market.
Next year will also be an interesting year for us because we'll still only be involved in the subcompact market. I'm confident that '86 will be a strong year for us. But the real potential for this corporation and the real growth should come in '87-'88. We're committed to giving our fleet customers a product that will provide reliable service at a competitive cost.