American Motors Corp. and French auto maker Renault have announced a plan to join forces in a move that could lead to combined manufacturing and distribution efforts both here and abroad.
A tentative agreement has been signed for the unprecedented venture which is expected to be made firm in the next few months, according to a statement released by the two companies yesterday.
The deal should provide a major boost for AMC. The nation's fourth largest auto maker has seen a 25 percent drop in car sales in the past year alone, while the auto industry in general has done well. Some AMC dealers had threatened to quit because of low sales.
At the same time the proposal will allow still another foreign firm to increase its manufacturing presence in the United States - a continuing trend. In 10 days, for example, another foreign carmaker, Volkswagen, begins producing its Rabbit in Pennsylvania for the first time.
The proposed "combination," which apparently falls short of an actual merger and for the present does not involve any cash changing hands, will include:
Combination of respective distribution efforts in the United States and Canada.
Consideration of eventual manufacture of one or more Renault cars in AMC's assembly plants.
Development of future product plans regarding Renault and AMC passenger cars to be sold in the United States and Canada.
Sale of Jeep vehicles through the Renault dealer network in selected international markets.
Shipment by Renault of increased quantities of "Le Car" - a subcompact economy car - to America as soon as possible for sale through AMC and Renault dealer networks in the United States and Canada.
The announcement comes at a time when AMC auto sales have slumped to below 2 percent of the U.S. market after a 25 percent drop in volume in one year. There have been rumors for months that AMC either would link up with a foreign car maker or drop out of the auto industry. Speculation had centered on Peugeot, another French automobile firm.
AMC managed a slim profit in fiscal 1977, but only because of excellent sales in its Jeep and specialty vehicle divisions. Car sales now account for 40percent of AMC's revenue.
AMC showed a $3.5 million profit last year on sales of $2.2 billion, while Renault showed a $120 million profit on sales on $9.35 billion in 1976, the last year from which figures are availbale.
The French car maker has been owned by the French government since World War II, when it was nationalized because its management had collaborated with German occupiers.
Renault has a history of cooperation with AMC, having assembled and sold AMC Ramblers in Europe until 1965. But there has never been a joint assembly program in the United States that involved domestic and foreign firms. Some American firms now have joint agreements with Japanese firms for vehicles imported into the United States.
Auto industry analysts hailed the move, calling the agreement a "perfect marriage!" AMC has 1,612 dealers in the United States, compared to Renault's 276. The French firm sold 13,000 cars here last year, twice the number it had sold the year before. It has been looking for a way to distribute its economical "Le Car," which has been selling well around the world since its debut in 1972.
Of the 1.7 million vehicles sold by Renault in 1977, 350,000 were the tiny "Le Car," which industry experts say would sell well here with adequate distribition.
AMC was formed in 1954 in a merger of two smaller motor companies. In the late 1950s. AMC's then president George Romney ended production of full-sized cars and gambled on the compact Rambler. That move was successful until the 1960s, when the Japanese and eventually other American car makers began mass-producing economy compacts.
In 1970, AMC purchased Kaiser-Jeep Corp., and took sales of Jeeps to record levels. Jeep and specially vehicle sales have kept thenfirm above water in recent years, Jeep sales have been particularly high abroad.
The huge French auto-maker employs 240,000 people worldwide, compared to AMC's employment roll of 27,000. Although Renault is one of the largest car manufacturers in the world, it has never been able to crack the U.S. market.
"Renault urgently needs better sales here," said one industry analyst. "You need 100,000 [in annual sales] to make it in this country."
Renault spokesman Pierre Gazarian said that present discussions deal with the possibility of Renault assembling some cars in AMC plants.
"We are only early discussions," he stressed in a telephone interview from Renault's U.S. headquarters in Englewood Cliffs, N.J.
One of the major problems with Renault sales in the United States has been a fear on the part of consumers that servicing would not be available, Gazarian said. "Before there are sales you must offer service" he said. Under the new arrangement servicing of Renaults would be done by AMC dealers.
A spokesman at the Justice Department said that "either we or the Federal Trade Commission will look into this arrangement." He added that it is routine for any agreement between firms of this size to be investigated.