Counterfactuals and whether AMC had a chance of survival

(UPATED 3/9/2023)

A few years ago Lotus Rebel (2021) drew upon our AMC Pacer story to suggest alternative approaches for that car’s design in a comment at Ate Up With Motor. That website’s publisher, Aaron Severson (2021), offered a nuanced response which is worth reading in its entirety. However, I would like to focus on what appears to be his conclusion about AMC’s longer-term viability:

“What I don’t believe is that there was any straightforward ‘one weird trick’ product change that AMC could have made that would have miraculously turned the tide. At the end of the day, capital is the thing, and that’s something AMC just didn’t have enough of.” (Severson, 2021)

This is a good summary of the conventional wisdom about AMC’s prospects in the late-70s. I grant you that this take is more realistic than George Romney’s. The automaker’s former CEO argued in 1994 that American Motors could have become “one of the top, big automobile companies in this country today” if it had continued his emphasis on a narrow line of compact cars (Lehman, 2011). That strikes me as pretty over the top, but I would also suggest that AMC’s potential to survive longer as an independent passenger-car producer has tended to be underrated by automotive historians.

This raises interesting — if nerdy — methodological questions. To explain what I mean, let’s start by looking at how automotive history is produced.

Auto history lacks a cohesive analytical foundation

American automotive history tends to be descriptive rather than analytical. A big reason why is because most historical accounts have been written for commercial media by car buffs, journalists and industry insiders. To make matters worse, the scholarly field of auto history appears to be fairly small and fragmented.

One result is that scholar Charles Hyde (2009) could write an admirably detailed history of American Motors that didn’t have a whole lot of analysis about the automaker’s product strategy. Not surprisingly, he glossed over major managerial mistakes and placed too much blame for AMC’s demise on its lack of scale.

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

My goal here isn’t to wag a finger at Hyde but point to a systems problem. If he had been writing a mainstream political science book, Hyde could have arguably drawn from an enviable diversity of theories to ground his research. Just as importantly, he would have had access to an abundant array of venues to test out the fine points of his argument.

In contrast, automotive history appears to be treated as a subfield loosely associated with disciplines such as business management, history and engineering. This can make it harder to advance scholarly knowledge in a cohesive way.

How to transcend truisms and conventional wisdom?

Despite the laudable efforts of such groups as the Society of Automotive Historians, American auto history is a heavily commercialized, fragmented and individualistic field of study. This can lead to an over-reliance on truisms and conventional wisdom at the expense of robust analysis. How might we cultivate a dialogue that better moves the field forward?

That question demands a multifaceted answer, but in this post I would like to focus on one potentially useful analytical tool — the counterfactual. Exploring alternative scenarios can help both armchair and professional historians see a topic of study with fresh eyes — and better understand their own underlying assumptions.

Also see ‘Wheel spinning happens when car buffs and scholarly historians don’t collaborate’

Counterfactuals can quite rightly be frowned upon by more serious writers because they step off the solid ground of facts. Indeed, historical speculation can give itself a bad name by engaging in “one weird trick” scenarios. “The car that could have saved _____” articles generally indulge in fantasies grounded more in wishful thinking than a serious attempt to better understand why things turned out the way they did.

At Indie Auto I try to use counterfactuals as a way to shed light on the groupthink that constricts our ability to accurately understand past events. As a case in point, let’s discuss American Motors.

Applying counterfactuals to American Motors

I don’t think that a better Pacer would have “saved” AMC. However, that ill-fated car’s development costs were roughly $66 million. Add that to the $40 million spent on the poor-selling 1974 Matador and you reach $106 million.

I don’t know whether this would have been enough money to develop a front-wheel-drive platform, but it surely could have funded a much stronger competitor to Ford’s 1975 Granada/Monarch and Chrysler’s 1976 Volare/Aspen than the aging Hornet and belated Concord.

Also see ‘Compact cars became the neglected stepchildren of U.S. automakers’

One could also argue that AMC might have had more capital to work with in the mid-70s if it had never wavered from two key elements of Romney’s playbook: 1) concentrating on the compact market and 2) maximizing economies of scale with modular platforms and an unusually narrow range of models.

Such a strategy would have violated the groupthink prevalent among U.S. automakers, which emphasized product proliferation and bigger, glitzier and more powerful cars. Yet we know in hindsight that some of the more successful cars of the late-60s and early-70s were compacts, e.g., Chrysler’s Valiant/Dart. Would AMC have struggled for sales if it had not deemphasized compacts during that time period?

Could AMC have become the American Mercedes?

Romney’s successors significantly focused on the mid- and full-sized fields because they saw more profit potential. Ironically, AMC might have been able to more easily move upmarket if it had instead filled out its line of compacts well before the rest of Detroit did so in the mid-70s.

One could go as far as speculating that higher-end Ramblers could have evolved into a poor-person’s Mercedes if they had been given more European packaging and independent rear suspension. Over time these cars might have become competitive in foreign markets, giving AMC a broader base than the U.S. market.

Also see ‘George Romney made eight big mistakes at AMC’

Of course, it would have taken a staunchly iconoclastic leader such as Romney go this route in the late-60s and early-70s. I think that says a lot about the level of conformity which gripped the U.S. auto industry.

If Romney had stayed at American Motors through the mid-70s, I suspect that he would have generated at least somewhat greater sales — and profits — than his successors. And much like Tesla has spurred the rest of the auto industry to take electric vehicles more seriously, a hot-selling AMC might have nudged the Big Three to adapt more quickly and effectively to a second wave of imports.

Yes, but what about capital?

Smaller automakers will almost always be at a lopsided disadvantage relative to their larger competitors. That said, if money were everything, then the Edsel would have succeeded.

By the same token, some smaller automakers did manage to stay independent longer than AMC, such as Mazda, Porsche, Subaru and Volvo. BMW even grew into a major automaker.

The trajectories for each of these smaller automakers varied because of their unique circumstances. However, one shared factor in their longevity was arguably the competence of corporate management. For example, BMW may have had some lucky breaks in its transformation from a producer of mostly economy cars into one of the leading prestige brands in the world, but it also had unusually talented leadership.

Also see ‘AMC’s Roy Abernethy was confronted with three big threats in 1960s’

In contrast, American Motors only had one competent CEO — Romney. His first two successors, Roy Abernethy and Roy D. Chapin Jr., had weaknesses so great that they prematurely robbed the automaker of its independence.

What might have happened to American Motors if it consistently had the same caliber of management as BMW? AMC still might have been eaten by a bigger fish, but along the way it could have played a more significant role in Detroit’s response to the imports.

NOTES:

This story was originally posted on Feb. 5, 2021 and updated on March 9, 2023.

Share your reactions to this post with a comment below or a note to the editor.

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RE:SOURCES

• Hyde, Charles K; 2009. Storied Independent Automakers: Nash, Hudson, and American Motors. Wayne State University Press, Detroit, MI.
• Lehman, Paul; 2011. “George Romney at the Nationals, July 7-10-1994: Part 2.” YouTube. Posted July 7.
• Lotus Rebel; 2021. Commentator in “High, Wide, and Handsome: The AMC Pacer.” Ate Up With Motor. Posted 4:45 and 10:05 a.m., Jan. 31.
• Severson, Aaron; 2021. Commentator in “High, Wide, and Handsome: The AMC Pacer.” Ate Up With Motor. Posted 6:35 a.m. and 5:24 p.m., Jan. 31.

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• oldcarbrochures.org: Dodge Demon (1971); Rambler (1963), AMC Concord (1980); AMC Gremlin (1975); AMC Hornet (1971)