Battling for Survival

Tiny American Motors Corp. quietly became the first U. S. auto company to seek formally to reopen its labor contracts in November, when it asked its 16,000 hourly workers to make wage concessions that would save the company $150 million. The automaker, which has only 2% of the domestic market, has lost some $300 million over the past two years. While cuts in wages and benefits are important to restore General Motors and Ford to financial health, they could mean the survival of American Motors.

France's state-owned Regie Nationale des Usines Renault has put $350 million into AMC since 1979, and now controls 46% of the company. Having paid the piper, Renault seems determined to call the tune. Two weeks ago, Gerald C. Meyers stepped down from his post as AMC's chairman and chief executive officer. Former AMC President W. Paul Tippett Jr., 49, will become chairman, and Jose J. Dedeurwaerder, who formerly ran one of Renault's major plants in France, is the new president. Wags in Detroit are already referring to AMC as Franco-American Motors.

The firm's fortunes are continuing to worsen. Daily sales dwindled to only 286 cars during the first ten days of the year, compared with the already depressed level of 350 a year ago. The drop in AMC's sales for all of 1981 was the sharpest of any American carmaker.

The company has embarked on a series of dramatic moves to meet its financial crisis. Last November it copied a tactic used by Chrysler and delayed payments to some two dozen major suppliers. AMC executives also completed negotiations with bankers to keep open the company's vital $250 million line of credit. The automaker must raise $1 billion over the next four years to keep its car-and engine-development program rolling.

The financial moves and wage concessions should enable AMC to stay on track with plans to introduce this fall a make-or-break American version of the highly successful Renault 9. That subcompact made its debut last year in Europe under the direction of Dedeurwaerder.

Renault is unlikely to back away now from its commitment to AMC. Renault needs the American firm's manufacturing and distribution facilities to compete in the U.S., which has become the key theater in an automotive battle that carmakers are waging around the world. Says Arvid Jouppi, a Detroit-based automobile industry analyst: "The great prize for Renault is to become one of the surviving world companies. If they lost North America, they would immediately be out of the big league. They realize, as do the Japanese, that the American market is a pearl without price."

But unless AMC sales pick up dramatically, the company may be forced to go back to Renault and ask for still more money. The French company is likely to grant such a request only in return for more control over the American company, whose name seems increasingly appropriate.

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