American Motors Corp. and French auto maker Renault today announced completion of a plan for "a joining of forces" and disclosed they will design a car which AMC will produce at its Kenosha, Wisc., plant as early as 1982.
Under the terms of a unique arrangement, AMC dealers soon will be selling Renault cars in North America and Renault dealers will be stocking AMC Jeeps abroad.
The French-American linkup, which was nine months in the making, is a precedent-setting combination of talents and troops in the auto industry. Officials of both companies weren't even sure how to describe the relationship, shying away from conventional tems such as joint venture or partnership and preferring instead the words "alliance" and "combination."
For AMC, the smallest of America's Big Four car makers, the agreement provides a life-saving boost. With its share of the U.S. passenger car market dwindling steadily in recent years to 1.8 percent in 1978, AMC has been battling just to stay in the business.
Its new French connection will quickly give AMC dealers some badly needed fuel-efficient small cars to sell and will provide the corporation with sorely needed product development help. It also will help expand international sales of AMC's already successful Jeep line.
For Regie Nationale des Usines Renault -- the formal name of France's government-owned and largest auto manufacturer -- the arrangement means a major foothold in the lucrative American car market, something which has eluded Renault since the ill-fated experience here of its Dauphin model in the early 1960s. Renault initially will more than double its number of outlets in the U.S. and Canada from 440 to about 1,000 and eventually will include most of AMC's 2,300 showrooms.
The agreement between the two companies calls for immediate delivery of Renault's "Le Car" to AMC dealerships, followed in 1980 by the introduction in North America of the new Renault 18, a sedan car with front wheel drive that was introduced in Europe last year.
Renault officials originally had hoped to have AMC produce the 18 in the U.S., an arrangement that would have allowed the French to avoid the export cost of a sliding dollar and at the same time help AMC fill some underused production capacity.
But in the end, the companies decided in the interest of time and convenience to forego gearing up for U.S. production of existing Renault models and instead to design a new car for AMC to produce, probably beginning in 1982.
"We decided that if we're going to tool a car, let's tool the latest one off the shelf," Gerald Meyers, AMC chairman, said at a press conference. "We wanted a brand new spanking baby when we begin production."
Also never realized in the final deal were AMC's early hopes of obtaining special financing from the French auto giant.
Bernard Hanon, president of Renault-France, said his company has no plans either to invest directly in the financially strapped AMC or to make any special financial allowances for the car maker. Spokesmen for both companies said the idea of a merger never was discussed.
Many observers, however, think that Renault's ambitious U.S. plans will require much more than an armslength financial arrangement, and they also have expressed doubts about AMC's survival without a generous transfusion of cash.
For their part, AMC officials bristle at the suggestion they can't hold up their end of the bargain. The company's 1978 performance was strong. Earnings for the year ended Sept. 30 on sales of $2.6 billion were $36.7 million, a fourfold leap over 1977.
The gains were due in part to stringent economies in AMC's moribond car production operation. Even so, the operation remained a money loser, and fortunately was offset by a rich showing in AMC's noncar businesses -- its Jeep line, mail and military truck sales, bus division, lawn and garden tractor operation, and industrial machinery business. Fully 60 percent of AMC's sales volume now comes from businesses other than passenger cars.
Though back in the black, AMC remains short of cash. It still can't afford to pay dividends to shareholders or full-scale industry wages and benefits to workers.
Meyer claimed his company will need no additional financing to import Renault cars. But with plans now to expand Jeep sales (first through Renault dealerships in France and Colombia and later in foreign markets yet to be decided upon), AMC almost certainly will require additional plant capacity -- and funds.