American Motors Corp. today confirmed industry reports that it would begin manufacture of America's first four wheel drive passenger car within six months.
"Our U.S. competitors will have nothing like it," Gerald C. Meyers, AMC's chairman, told shareholders, "and our studies show the market is ready."
But Meyers was very sparing on details about the new model declining to describe any part of it. He said the car has been tested extensively in market research clinics and "the response has been close to overwhelming."
AMC's decision to go with the new model, Meyers said, was based largely on the success of the company's popular four wheel drive Jeep line and on what Meyers termed his feeling that there is "no end" to the world-wide demand for four wheel drive vehicles."
Industry sources have reported the new car will closely resemble AMC's existing Concord, a "luxury" compact model that was introduced in the fall of 1977. "That's pretty good speculation," said an AMC spokesman.
Meyers also announced another major expansion of AMC's Jeep production facilities. He said the corporation would spend $30 million to convert within a year a portion of its Kenosha, Wis., plant -- now used for passenger car production -- to turn out four-door Jeep Wagoneer and Cherokee models.
This expansion follows two others announced last year and has prompted speculation that AMC plans eventually to get out of the passenger car business altogether. Meyers today again denied any such plans.
AMC, the smallest of the nation's big four car makers, has been relying on surging Jeep sales in the U.S. and abroad to keep its automotive division profitable. While Jeep sales have increased six fold (to 180,000) in the eight years since AMC acquired the vehicle from Kaiser Industries, AMC's passenger car sales have shrunk dramatically and its share of the U.S. car market has slipped from six percent a decade ago to 1.7 percent last year.
The company's survival has depended on the manufacture of products other than cars -- on Jeeps, military trucks, mail vehicles, electric trolley buses, lawn tractors and parts of TV sets, appliances and business machines -- which in the face of crumbling car sales now account for about 60 percent of AMC's dollar volume.
In the past two years, AMC has once again begun to show a profit after several years of operating losses. It earned $36.7 million on revenues of $2.6 billion in the fiscal year ended Sept. 30, 1978.
But because of the costly Jeep expansion planned, Meyers told shareholders today they would still have to wait to receive a cash dividend. AMC has not paid a cash dividend since 1974.
"This is a period of high capital demand on your company," Meyers stated, "and frankly we aren't in position just now to pay a dividend. We will just as soon as we can and still meet the growth needs of the business."
Meyers sounded optimistic, saying the company's growth opportunities have "never been better." He cited improved earnings and a new management team, which includes J. Paul Tippett, Jr., a 46-year-old international marketing expert who was named president last year and who complements Meyer's technical bent.
Meyers also highlighted AMC's new working relationship, consummated last month, with Renault, France's largest carmaker. The linkup will permit AMC dealers in the U.S. to sell Renault's increasingly popular and fuel-efficient "Le Car." In turn, Renault dealers in Europe and South America will be pushing AMC Jeep sales. In addition, the pact provides for AMC to build a new Renault car here, beginning as early as 1982, which will help fill some of AMC's underused capacity.
"With the agreement signed last month," Meyers stated, "we have leapfrogged 10 years and maybe $2 billion with the stroke of a pen."
Industry analysts had speculated the agreement with Renault might include some much needed capital for AMC. But the French declined to chip in extra financing for the U.S. auto maker.
Will AMC be able to afford its Jeep expansion plans? "Last month," Meyers said, "we completed new credit agreements with major banks that free us of many past restrictions, give us flexibility to grow and meet our capital needs for the foreseeable future."