American Motors Corp. yesterday reported $70.4 million in second-quarter losses, a worse-than-expected performance that will complicate the small auto maker's attempts to return to prosperity.
AMC's losses for the period compared with a profit of $4.7 million (2 cents a share) in the second quarter of 1984. The latest results mean that AMC lost $99.4 million for the first six months of this year.
Reasons for the decline include dwindling sales for the AMC/Renault Alliance and Encore car lines, the company's only U.S.-assembled new-car fleet; two costly labor agreements -- both of which were renegotiated but too late to have a significant effect on second-quarter earnings; and the expense of scrapping a proposed new line of compact cars that AMC had hoped to sell in Belgium.
But company officials predicted yesterday that AMC, led by strong sales of its Jeep products, will operate close to break-even for the rest of the year.
"If the Jeep sales can continue, we can improve our bottom line," an AMC spokesman said. The spokesman said that about $35.2 million of his company's second-quarter loss "was due to operating losses caused by scrapping the compact car" that was targeted for Belgium.
AMC, 46.4 percent owned and controlled by French auto maker Regie Nationale des Usines Renault, has been walking a financial tightrope since 1984 -- its first year of profitability after four years of losses that amounted to $622.5 million.
The underlying problem has been that AMC is "very vulnerable" in the U.S. market because it essentially has only one line of passenger cars, said Jose Dedeurwaerder, AMC's president and chief executive officer.
AMC has taken drastic measures to right itself. The company earlier this year instituted a 25 percent across-the-board cut in operating expenses.
Also, under the threat of closing its car manufacturing operations in Kenosha and Milwaukee, Wis., the company this month forced two United Auto Workers union locals to bring their wages and benefits in line with those paid to comparable employes at General Motors Corp.
Before the renegotiation of their contracts, union-represented workers at AMC's Wisconsin plants had received the highest hourly wages in the domestic auto industry.
Dedeurwaerder said last May that he expected his company's second-quarter and first-quarter losses this year to be equal. But worse-than-expected car sales and the collapse of the Belgium car project changed that picture, AMC officials said yesterday.
AMC was the only major domestic automotive company to show a loss for the quarter, although the three larger makers reported declines in profits compared with a year ago.
Industry leader General Motors Corp. reported its second-quarter earnings were down 28 percent from the 1984 period; Ford Motor Co. profits were down 23 percent, and Chrysler Corp. earnings were down 25 percent.