Charles Hyde’s AMC book doesn’t get why automaker failed

(UPDATED FROM 10/16/2020)

Charles K. Hyde’s history of American Motors and its constituent companies is a valuable scholarly addition to the literature. His book, Storied Independent Automakers: Nash, Hudson and American Motors, offers considerably more detailed business analysis than those written for lay readers. However, Hyde doesn’t adequately address how a series of disastrous product decisions played a key role in killing AMC’s viability.

Storied Independent Automakers is a 310-page hard-cover book that consists mostly of text spiced with data tables and small black-and-white photographs.

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Hyde’s narrative is not flashy, but it is thorough and accessible. Most importantly, his historical details appear to be the product of exhaustive archival research. For that reason, Storied Independent Automakers is a great source of references for the armchair auto historian.

This book’s analysis is strongest in areas such as labor relations, finance and corporate governance. Storied Independent Automakers is weakest when it comes to product planning. Indeed, Hyde’s assessment of AMC passenger cars is so credulous that it often reads like a corporate press release.

Hyde does not acknowledge AMC’s market failures

Storied Independent Automakers is not the place to look for a hard-nosed assessment of AMC’s product failures in the 1970s. As a case in point, he argues that CEO Roy D. Chapin Jr. had a “good sense of the market” and that “the products he supported — Javelin, Hornet, Gremlin, and Pacer, among others — helped AMC survive” (p. 229).

Huh? Due to expensive mistakes such as the Pacer and Matador coupe, by 1977 passenger-car sales had fallen below levels not seen since 1967. That was when the company was last in danger of going out of business. After the sales collapse of 1977, AMC could never again afford a new internally-developed platform. This is why Renault was sought as a partner.

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Instead of blaming management, Hyde instead points to “the fundamental economic disadvantage it faced in trying to compete against the other automakers with their large economies of scale” (p. 254). 

Seeing the trees but not the forest

In a sense Hyde is correct to point to external forces that made it increasingly difficult for AMC to survive. Chapin may have also been a decent leader in many respects. The problem with Storied Independent Automakers is that it does not adequately question his strategic assumptions.

For example, Hyde notes that Chapin once described the Pacer as his single biggest disappointment, noting that he expected to sell 150,000 units per year. However, Hyde does not question whether that was a realistic projection for such a narrow line of cars — even if they had not suffered from debilitating weaknesses (go here for further discussion).

Also see ‘Collectible Automobile puffs up the 1971-74 AMC Javelin’

Nor does Hyde acknowledge that the $60 million spent on the Pacer was a double loss because the car’s platform did not lend itself to spinoffs. This was a significant — and fatal — shift in corporate strategy. Previously AMC had increased its economies of scale by designing platforms flexible enough to field a variety of cars.

In addition, Hyde’s coverage of AMC’s product line is uneven. He spends a fair amount of space discussing the Hornet and Gremlin but ignores the 1974 Matador coupe. This is a key omission because the Matador was one of AMC’s all-time biggest flops. Chapin displayed a serious lapse in judgment to so heavily gamble on a sporty coupe when the mid-sized field had shifted to luxury coupes (go here for further discussion).

Hyde tends to perpetuate industry groupthink

The meta problem with Storied Independent Automakers is that Hyde focuses too much on documenting historical facts. What analysis he does offer tends to come from his sources. Those sources were often steeped in the industry groupthink of that era.

For example, he points to a positive review of the 1974 Matador station wagon. Fair enough, but Hyde does not acknowledge that the car sold poorly because its design was old and ugly (go here for further discussion).

Also see ‘Counterfactuals and whether AMC had a chance of survival’

More significantly, Storied Independent Automakers compares AMC head Roy Abernethy and Chapin in a lopsided fashion similar to author Patrick Foster (2013). Hyde concludes that Abernethy “brought American Motors to the brink of disaster” (p. 200). In contrast, Chapin is summarized as a “generally effective leader” who made good decisions such as to sell the Kelvinator appliance division and purchase Kaiser Jeep (p. 229). That strikes me as unduly positive given that AMC lost its independence under Chapin due to much bigger mistakes than Abernethy made.

All in all, Storied Independent Automakers is a valuable book because of its exhaustive research about AMC and its corporate predecessors. If Hyde wrote a second edition he might consider further fleshing out his analysis.

Storied Independent Automakers: Nash, Hudson, and American Motors

• Charles K. Hyde; 2009
• Wayne State University Press, Detroit, MI

“Packard and Studebaker both suffered operating losses in 1953, in contrast to Nash-Kelvinator’s profits of $14.1 million. In March 1954, the investment firm of Smith, Barney & Company proposed a merger of all the remaining independents. Nance seriously considered Hudson as a partner for Packard, but his need to be the dominant figure in any new company ruled out Nash-Kelvinator. In February 1954, as the Nash-Hudson merger was consummated, Mason and Romney met with Nance and Packard executives at the Book-Cadillac Hotel in Detroit. They laid out the advantages to Packard of joining the Nash-Hudson combination, but Nance rejected their advances.” (p. 89)

“Fortune speculated that American Motors should enjoy and make the most of 1959 as a year of grace before the onslaught of the Big Three’s compact cars. AMC was well situated at the start of 1959. The company had paid off all of its bank loans in July 1958 and launched a $10 million expansion program to increase capacity to 450,000 cars by the end of 1959. Economies had reduced AMC’s break-even point to 125,000 cars, so the company could survive even if it lost a good part of its sales to the new compacts. Fortune also speculated that AMC’s 1960 sales would probably be no greater than 300,000 units and might be as little as 200,000. The actual production in 1960 (485,745 units) shows how badly these observers underestimated AMC’s strengths.” (p. 189)

“Teague initially struggled with his superiors at AMC who did not share his notions of automotive design. With the success of Javelin and AMX, Teague’s prestige increased greatly and, more important, Roy Chapin gave Teague freedom to control his designs. The Hornet, Gremlin, and later the Pacer were all successful models.” (p. 209)

OTHER REVIEWS:

Wayne State University Press | eCommons | Cambridge Core | Amazon

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RE:SOURCES

• Foster, Patrick R.; 2013. American Motors Corporation: The Rise and Fall of America’s Last Independent Automaker. MBI Publishing Co., Minneapolis, MN.

This is an updated version of a review first posted April 30, 2013 and updated on Oct. 16, 2020.