SOUTHFIELD, MICH. -- Warren Brown
Boxed files line the walls of American Motors Corp. offices here. Telephones sit quietly on empty desks. Hallways once abuzz with the business of saving a struggling business are silent.
Former AMC executives in some corners of the 25-story building work on resumes or draft plans to start their own companies. Many lower-ranking employes, caretakers of dying projects, speak of less grand ambitions: They simply want another job.
There is some activity related to the production and sale of cars and trucks, notably among people kept by AMC's new owner, Chrysler Corp. But those saved souls decline to celebrate, partly out of concern for colleagues who did not make the cut.
The date is Nov. 12, a little more than three months after Chrysler completed its acquisition of AMC -- maker of the famed Jeep vehicles. The scene is part of the legacy of that merger, a corporate tableau familiar in an era when buying a company often seems more sensible than creating a new one.
The Chrysler-AMC deal was one of 1,495 mergers that have involved U.S. businesses so far this year. And like most of those transactions, the AMC takeover was classified as "friendly" by analysts at W.T. Grimm & Co., a financial-consulting firm in Chicago specializing in mergers and acquisitions.
But "friendly" doesn't mean painless, especially in a globally competitive, high-stakes industry like auto manufacturing. Companies anxious to maximize profits in crowded markets are cutting costs, which often means scrapping jobs. It can also mean using mergers to gain facilities and product lines at bargain prices.
Chrysler, for example, bought AMC for $2 billion. That price included the hot-selling Jeeps, which Chrysler needed to beef up its light-truck offerings. The tab also covered a spanking new, $675 million auto assembly plant built by AMC in Bramlea, Ontario. AMC's old but very usable 1,200-member dealer network came with the package.
Chrysler officials said they would have had to spend at least $2 billion just to develop products to compete with AMC's Jeeps -- without any assurance of success for their new products. It was easier to buy a winner.
"We had to face the fact that we might die or retire before we could ever establish a name with even half the image of the name Jeep," said Gerald Greenwald, chairman of Chrysler Motors, the vehicle-manufacturing arm of Chrysler Corp.
Such corporate marriages of convenience are bound to continue, said Barbara Morgenstern, a McLean consultant to companies and federal agencies engaged in layoffs.
The reason is the changing nature of industrial competition, she said. "You have an international game of musical chairs going on out there, and that situation is here to stay. The result will be more mergers, more takeovers and more displacement of workers." Merged companies "don't need two of everything," Morgenstern said.
And it means that people who want to stay in business should learn how to cope with change, she said.
If corporations can no longer achieve success "by doing only one thing," workers hired by those companies can no longer believe that they will have lifetime employment "by having only one skill or assignment," Morgenstern said. "People are going to have to be prepared, not only to change jobs within a corporation, but to change companies, and perhaps careers as well," she said.
Anthony P. St. John, Chrysler's vice president of human resources, agreed. "The era when you can leave college, join a corporation, work for 30 years and leave with a gold watch is gone," St. John said.
"Today, in order to have job security, you've got to have a broader range of knowledge that enables you to handle a broader range of assignments and to work for more than one company," St. John said.
St. John described himself as a product of that change. "I started my career at Bethlehem Steel in 1965, when that company had 135,000 employes," he said. By 1985, when he resigned as Bethlehem's vice president for union relations, the company had 45,000 employes.
"Today, Bethlehem has 37,000," St. John said. The reduction is a result of rising global competition in the steel industry and the effects of it on the U.S. market.
The U.S. auto market is being buffeted by similar winds.
Every major auto manufacturer has a presence in the United States, through products exported here, built here in foreign-owned factories and in U.S.-foreign joint ventures, or distributed here through U.S. partners.
That is far different from several decades ago, when the only significant auto makers on U.S. soil were American car companies: General Motors Corp., Ford Motor Co., Chrysler and AMC.
With the onslaught of foreign competition in the 1970s, the market shares of the traditional U.S. auto companies began to shrink. GM, for example, is holding on to about 37.2 percent of the U.S. passenger car market, considerably below what the 50 percent share it had in the mid-1950s. AMC, always afflicted with marginal car-market shares, held less than 1 percent of that market at the time it was bought by Chrysler.
The shrinking market share destabilized employment in the U.S. auto industry. It also changed the meaning of being an "American" company. Until it was bought by Chrysler, for instances, AMC jokingly had been called Franco-American Motors because it was 46.4 percent owned by French auto maker Renault.
Renault had hoped to use AMC to carve out a niche for its products in the United States, the world's biggest auto market. And to that end, the French company put $645 million into its American partner between 1979 and 1986. But AMC kept losing money, racking up a net loss of $838.6 million from 1980 through 1986.
By the end of the fourth quarter of 1986, when AMC reported the first of three modest quarterly profits in a row, time had run out. Renault -- exasperated by its losses in the United States and in France, where it dropped the U.S. equivalent of $2.7 billion last year -- was looking for a buyer for AMC.
Something else had changed in the interim: Georges Besse, the Renault president who said he was willing to keep AMC going, was assassinated by terrorists on Nov. 17, 1986. Chrysler had been trying to get Besse to sell AMC since the spring of 1986.
"But Besse's last position was that he wasn't going to do it," said Robert S. Miller Jr., vice chairman of Chrysler Corp. and a principal in the negotiations with Renault.
Besse had a personal stake in making the Renault-AMC merger work, Miller said. "He had been there for three years investing in and pursuing a strategy of development in America. For him, it would have been a personal reversal of strategy" to sell AMC, Miller said.
Besse was replaced at state-controlled Renault by Raymond Levy, a Frenchman of no known previous address in the world auto industry, but who won attention for his administration of Cockerill-Sambre, the Belgian state-controlled steel company.
After a decent interval, and without the knowledge of AMC's top U.S. officials, Chrysler resumed negotiations to buy out Renault's stock in the American company.
The negotiations were so furtive that Chrysler and AMC officials visited Renault in France simultaneously this year -- unaware of each other's presence. According to some sources familiar with the events, Renault was entertaining Chrysler's buyout offers at the same time it was hearing AMC's appeals for continued support.
A similar scene occurred in the United States in February. Levy traveled to the United States, ostensibly to visit the Chicago auto show and to hear a detailed presentation from AMC officials about why the American company was worth saving. "It was the biggest presentation of our lives," said one former AMC official, now employed by another U.S. auto maker. But two days before meeting his U.S. crew, Levy had stopped in New York to talk with Chrysler Chairman Lee A. Iacocca.
"We didn't know that at the time," said Joseph E. Cappy, former president and chief executive of AMC, who now works for Chrysler as group vice president in charge of marketing for the company's Jeep-Eagle Division, AMC's surviving descendant.
The AMC presentation to Levy was on Saturday, Feb. 7, Cappy recalled. "We put on a full profit presentation to him and a review of the company. We pointed out to him that we thought we had turned the corner, and that we thought we were going to continue to make money.
"Levy was very complimentary. And we thought: 'God! He really liked it.' We thought we really had him on our side."
One month later, at 7:30 a.m. on March 9, Cappy found out differently. He received a letter from Chrysler saying that Renault tentatively had agreed to sell all of its shares in AMC, and that Chrysler was preparing to buy the whole company.
Chrysler officials acknowledged that AMC's U.S. officers were kept in the dark. But they insist that their dealings with Renault were above board.
"AMC was kind of hidden from the negotiations, but this was done in daylight as far as Renault and Chrysler were concerned," said Bennett E. Bidwell, a Chrysler vice chairman who also was involved in the merger talks. Chrysler had no right to tell Renault what it should tell AMC, Bidwell said.
There were other reasons to keep mum, said Miller. Renault's involvement in AMC "was a politically explosive issue in France" and "it was also explosive with Renault's constituents at American Motors," he said. The wrong word at the wrong time could have upset customers and suppliers, undermined the deal and saddled Renault with an expensive property it could no longer afford, Miller said.
Despite his initial disappointment, Cappy said he believes the merger is best for Chrysler and AMC. The thing to do is to make it work. But there will be more pain before it all comes together, he said.
Chrysler is trimming its salaried staff to reduce duplication of operations caused by the merger. About 3,500 people will be laid off before the end of this year. Most of those will be veterans of AMC's 5,700 salaried work force. That's understandable, Cappy said.
"What you've gotta know is that the buyer in a merger is the company that, for all intents and purposes, will give its people the first shot at job opportunities. That's because the buyer knows its own people better," Cappy said.
Chrysler also plans to close at least one plant by year's end. But some auto industry analysts believe that, to reduce overcapacity, much of it in older facilities, Chrysler will have to close at least two more plants by 1990. And the analysts' speculation is that the Chrysler assembly facility in Newark, Del., where the company employs nearly 4,000 people, is a candidate for shutdown.
The Plymouth Reliant and Dodge Aries passenger cars produced in Newark are slow sellers. "And they can easily be produced at one of Chrysler's newer facilities," said Chris Cedergren, auto industry analyst for J.D. Power and Associates in Westlake Village, Calif.
Chrysler officials declined comment on possible closings. But the company believes that a recession is just around the bend. Cutbacks are needed both to accommodate the merger and to remain competitive in a market downturn, Bidwell said.
"We're going to hit a downturn at some point, and nobody's fool enough to dispute that," Bidwell said. "Some AMC people who are losing jobs say, 'I thought Chrysler was going to be a savior.' But in order to save the core, you sometimes have to lose a part of the periphery," Bidwell said.
Still, Chrysler officials said -- and Cappy agreed -- that there is a sincere attempt to be fair in allocating the pain. That certainly seems to be the case in executive compensation. Depending on their position and time of service, former AMC executives not hired by Chrysler are getting one to two years of their full salary and help in finding new jobs.
Lower-ranking AMC employes also are receiving severance pay and help in searching for employment. And although there has been much consternation among AMC employes at the company's headquarters here, not everyone is unhappy.
There is, for example, William E. Enockson, former AMC group vice president for North American sales and marketing, and perhaps the only person in recent history to work for three U.S. auto makers in the same year. Enockson, 59, had put in 27 years at GM's Pontiac Division, from where he resigned in February 1987 as assistant general sales manager. He began his job at AMC a few weeks later. He went to Chrysler on Aug. 5, when the AMC sale was closed, as assistant general sales manager.
"Initially, I was supposed to have all 25 Chrysler sales zones reporting to me. But we agreed that if that happened, the sales manager would not have anything to do," Enockson said. Rather than get into a political battle, Enockson chose to leave Chrysler. "I parted on good terms," he said, adding that he has no regrets about any part of his life in the auto business.
"I learned so many things, and can do so many things as a result of my experience," Enockson said. "There are opportunities out there for people who can do a lot of things and who want to work. You'd be amazed at what kinds of job offers are coming out of the woodwork," Enockson said. But he added that before taking another job, he might write a book. "I think I'll call it 'My Years at GM, My Months at AMC, and My Days at Chrysler.' "