American Motors - Formation

Formation

In January 1954, Nash-Kelvinator Corporation began acquisition of the Hudson Motor Car Company (in what was called a merger) to form American Motors. The deal was a straight stock transfer (three shares of Hudson listed at 11⅛, for two shares of AMC and one share of Nash-Kelvinator listed at 17⅜, for one share of AMC) and finalized in the spring of 1954, forming the fourth-biggest auto company in the U.S. with assets of US$355 million (US$3,072,267,658 in 2012 dollars) and more than $100 million in working capital. The new company retained Hudson CEO A.E. Barit as a consultant and he took a seat on the Board of Directors. Nash's George W. Mason became President and CEO.

Mason, the architect of the merger, believed that the survival of America's remaining independent automakers depended on their joining in one multibrand company capable of challenging the "Big Three" – General Motors, Ford, and Chrysler – as an equal. The "frantic 1953–54 Ford/GM price war" had a devastating impact on the remaining "independent" automakers. The reasons for the merger between Nash and Hudson included helping cut costs and strengthen their sales organizations to meet the intense competition expected from autos' Big Three.

One quick result from the merger was the doubling up with Nash on purchasing and production allowing Hudson to cut prices an average of $155 on the Wasp line, up to $204 on the more expensive Hornet models. After the merger, AMC had its first profitable quarter during second three months in 1955, earning $1,592,307 (US$13,814,499 in 2012 dollars) compared to a loss of $3,848,667 (US$33,307,423 in 2012 dollars) during the same period in the previous year. Mason also entered into informal discussions with James J. Nance of Packard to outline his strategic vision. Interim plans were made for AMC to buy Packard Ultramatic automatic transmissions and Packard V8 engines for certain AMC products.

In 1954, Packard acquired Studebaker. The new Studebaker-Packard Corporation (S-P) made the new 320 cu in (5.2 L) Packard V8 engine and Packard's Ultramatic automatic transmission available to AMC for its 1955 Nash Ambassador and Hudson Hornet models. When Mason died in 1954, George W. Romney succeeded him. Ironically, Romney had once been offered Nance's job. In 1948, Romney received offers from Packard for the post of chief operating officer and from Nash for the number two position in the company. Although the Packard offer would have paid more, Romney decided to work under Mason because he thought Nash had a brighter future. S-P President James Nance refused to consider merging with AMC unless he could take the top command position (Mason and Nance were former competitors as heads of the Kelvinator and Hotpoint appliance companies respectively), and a week after Mason's death Romney announced, "there are no mergers under way either directly or indirectly." Romney agreed with Mason's commitment to buy S-P products. Mason and Nance had agreed that in return S-P would endeavor to purchase parts from American Motors, but S-P did not do so. As the Packard engines and transmissions were comparatively expensive, AMC began development of its own V8 engine. In mid-1956, the 352 cu in (5.8 L) Packard V8 and TwinUltramatic transmission was phased out and replaced by AMC's new V8 engine, as well as GM's Hydra-Matic and Borg-Warner transmissions.

By 1964, Studebaker production in the United States had ended, and its Canadian operations ceased in 1966. The "Big Three", plus the smaller AMC, Kaiser Jeep, International Harvester, Avanti, and Checker companies were the remaining North American auto manufacturers.