Roy Abernethy

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Roy Abernethy (September 29, 1906, Pennsylvania - February 28, 1977, Jupiter, Florida) was an executive in the American automobile industry, serving as CEO of American Motors Corporation (AMC) from February 1962 to January 1967. Prior to his tenure at AMC, Abernethy had been with Packard Motors and Willys-Overland. Abernethy replaced George W. Romney who resigned from AMC to become Governor of Michigan.

[edit] Changing AMC

American Motors hired Abernethy in 1954. He had spent most of his working life with a luxury automaker, Packard. Abernethy devoted himself to building AMC’s distribution network and he achieved sales success. By 1962, Rambler remained number three in sales rank among all the brands of cars sold in the United States. However, Abernethy is now best known for reversing Romney's plans for AMC that involved maximum parts compatibility for all lines of AMC vehicles. During AMC's formative years, the company struggled with costs and sales. Abernethy, as Vice President of Sales, kept many of the dealers allied with AMC, thus helping to keep the corporation afloat until it found its niche under Romney. He had two childen, one boy, Lee Abernethy, and one girl , Phyliss Abernethy Hendry.

The AMC board of directors selected Abernethy to replace Romney. This was also the first time that the company separated the position of president from the chairperson of the board. Abernethy was a big man and had big ideas for the company. He was convinced that with the right marketing AMC could take on the “Big Three” (General Motors, Ford and Chrysler) model for model, if the company could shed its "economy car" reputation. Abernethy also started to move the Ambassador upscale to compete with other manufacturers' full-size models. Moreover, larger cars typically return bigger profits. Offering larger, and often more prestigious or "halo cars", can also help make the firm's smaller models look more attractive to consumers. Thus, as part of this vision, Abernethy put into a motion a total remake of AMC's corporate identity and its marketing mix that would divorce its larger car lines from its Rambler brand and his perceived "negative" compact car image.

The first models with Abernethy’s new corporate strategy were the 1965s. They were billed as the “Sensible Spectaculars”. The 1965 models were a major makeover of the completely new platform that was just introduced in 1963. AMC’s new cars included the stretched and more luxurious Ambassadors, as well as new convertibles for the large models. New styling, the more powerful engines, as well as numerous comfort and sports-type options were now emphasized. The strategy shift seemed to be working because sales of the redesigned 1965 and 1966 Ambassadors improved, even as AMC's overall production decreased from the record level achieved in 1963.^[1] Moreover, a completely new design was also slated for the larger 1967 models. This strategy added $60 million in retooling costs, which was a major stretch for the company.

The objective was to position the 1967 AMC Rebel and Ambassador designs on an equal basis with competitive models marketed by the Big Three. The new 1967 models also came with completely modern "GEN-2" V-8 engines. Furthermore, AMC introduced a revolutionary guarantee. The engine and drivetrain were covered for five years or 50,000 miles (80,465 km). This was much longer than any other automaker at the time. The media was positive in covering the new models, with experts such as Tom McCahill highly praising the new car's performance and ride comfort.

[edit] The results

A 1966 magazine advertisement. "Luxuries you’d expect in Cadillac at a price below Impala, Fury, Galaxie ..."

The evidence suggests that Abernethy was correct in making the Ambassadors more upscale with sales of the new models, that combined luxurious packaging and reasonable size, jumped from 18,647 in 1964 to over 64,000 in 1965 and then in 1966 they went even higher, to more than 71,000.^[2] However, there were serious problems. The company’s manufacturing facilities were ill equipped to take on the job of multiple chassis models. The costs of developing the new cars and engines meant managers now had problems in securing working capital to keep the company going. American Motor's automobile sales dropped twenty percent in the first half of 1966, and the firm reported a fiscal six-month loss of $4,200,000 on sales of $479 million.^[3] The situation was so bad that Robert Beverley Evans invested more than US$2,000,000 because AMC's stock was selling for only 60% of the company's net worth and thus become its largest stockholder and was named its chairman.^[4]

Abernethy was spending so much money that it was difficult for the company to turn a profit and rumors started to have a snowball effect on the company.^[5] With the financial health of the company in question - as well as the future of the company - even an extra long engine warranty appeared to be not enough to instill confidence among consumers. The last quarter sales for AMC (which included the newly introduced 1967 models) were disappointing. AMC recorded a balance sheet loss of $12,648,000 for the year. The 1965 and 1966 Ambassadors represented a crossroad in AMC's history, one at which some historians would say it took the wrong turn.^[6]

The problems facing AMC at this juncture were the result of incorrect assumptions. Abernethy presumed that customers needed more choices among those already available from the Big Three. History had already proven this strategy wrong. For example, the Kaiser-Frazer Corporation tried unsuccessfully to challenge the Big Three market leaders in their existing product segments.

Abernethy’s strategy put AMC in a precarious situation. In the five years of his tenure as president, the company had gone from a profitable operation to a losing one.^[7] Abernethy was released from the company by taking an "early retirement" in January 1967. He was replaced by Roy D. Chapin Jr., son of Hudson Motor Car Company founder Roy D. Chapin.

[edit] Award

In 1971, Abernethy received the "Distinguished Service" citation from the Automotive Hall of Fame.

[edit] References