American Motors Corp., in an effort to finance an expensive future product development program, announced today an offering of 15 million shares of stock and put its defense subsidiary, AM General, up for sale.
The announcement came one day after AM General secured a $1.2 billion contract to build a Jeep-like vehicle nicknamed the Hummer for the Army, and a year after Chrysler Corp. sold its profitable defense subsidiary to General Dynamics Inc.
AMC spokesman Jerry Sloan said the automaker filed papers with the Securities and Exchange Commission to sell 15 million shares of common stock. Of the shares, 5 million will be offered to the public, 3 million will be purchased by AMC's pension program and 7 million by the French automaker Renault. The purchase by Renault will maintain its 46 percent stake in AMC.
The shares could go up for sale within a month. AMC stock closed yesterday at 6 5/8, down 1/2, on the New York Stock Exchange. At this price, the sale of the 15 million shares would bring in $99.37 million.
AMC said it is offering AM General for sale "in order to concentrate its resources on its planned product strategy and to obtain funds to invest in the development of its new products after 1983."
Sloan would not disclose an asking price. But he added, "this is not a fire sale, this is not a distress sale."
AMC last fall introduced the Renault Alliance, a car that has helped its sales to triple. AMC said it will introduce two new models based on the Alliance this fall.
AMC will continue to offer the Eagle and SX4 four-wheel drive vehicles but will phase out its rear-wheel drive Spirit and Concord. It will import several models from France in addition to the models built here.
AMC also said today it faces lawsuits seeking $2.5 billion in damages stemming from crashes of its Jeep CJ vehicles.
The lawsuits, which allege design defects causing the vehicles to go out of control and roll over, ask for about $700 million in compensatory and $1.5 billion in punitive damages, AMC said in a prospectus outlining the company's finances. Of the punitive damages, one claim asks for $1 billion, the report said.
In addition, AMC has heard about other accident claims "which have not yet resulted in lawsuits," the prospectus said. It did not specify how many claims the company knows of but said there are "a large number of lawsuits."
The prospectus said the automaker, expecting heavy losses because of the litigation, has set aside money for the cases but did not specify an amount.
The Federal Trade Commission last year ordered that stickers be placed on Jeep CJ four-wheel-drive vehicles warning that drivers can lose control on sudden, sharp turns.
The prospectus also said AMC expects to lose money in 1983, although it will be less than the $153 million it lost last year. The forecast is based on the assumption that AM General will be sold.