Roy Abernethy

Roy Abernethy
Born	November 29, 1906(1906-11-29) Pennsylvania
Died	February 28, 1977(1977-02-28) (aged 70) Jupiter, Florida
Nationality	United States
Awards	Automotive Hall of Fame

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.

Background

Roy Abernethy began his automotive industry career in 1926 as an apprentice mechanic at luxury automaker, Packard, earning 18 cents per hour. He then moved up establishing success in auto sales reaching US$1,000,000 in Packard vehicles in a single year from his dealership in Hartford, Connecticut. Abernethy also held the post of vice president of sales at Willys.

Changing AMC

American Motors was formed from the merger of Nash Motors and Hudson Motor Car Company and the company hired Abernethy in 1954. During AMC's formative years, the company struggled with costs and sales. Abernethy concentrated on building AMC’s sales and distribution network. Abernethy was the vice president of sales, and kept many of the dealers allied with AMC, thus helping to keep the corporation afloat, until AMC found its compact car niche under Romney's leadership. He was known to fly 50,000 miles (80,000 km) miles a year to make AMC synonymous with the compact car. Abernethy achieved sales successes for the company and by 1962, Rambler was number three in sales rank among all the brands of cars sold in the United States.

On February 12, 1962, the AMC board of directors selected the 56-year old 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 became responsible for day-to-day operations as president, while Richard E. Cross, the automaker's legal counsel and new chairman was now called AMC's Chief Executive Officer.

Both took command of a financially strong company (working capital increased from a low of $46 million in 1957, to $103 million, and the firm eliminated all long-term debt), with sales increasing from $362 million (91,469 automobiles) in 1957, to more than $1 billion (422,273 total units) in 1960. Abernethy was predicting a total of 450,000 Ramblers to be delivered for the 1962 year, despite increasing competition from the new domestic-made compact cars offered by the Big Three.

Roy Abernethy instituted the automaker's prohibition on automobile racing. He was against a renewal of the auto industry's horsepower race by offer ever more powerful engines, as well as corporate sponsorship of activities that glamorize speed and performance. As AMC's market performance reached record levels in 1964 placing the Rambler brand in third place position in the domestic sales race. At the same time AMC publicly disavowed any interest in automobile competition. Corporate advertising answered the question "Why don't we enter high-performance Rambler V-8s in racing?" with "Because the only race Rambler cares about is the human race."

However, Abernethy is now known for reversing Romney's plans for AMC that involved maximum parts compatibility for all lines of AMC vehicles. Abernethy was a big man of 237 pounds (108 kg) — smoking ten corona cigars a day, — 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 said repeatedly that AMC's "main problem was its image lag — the fact that too many people still thought of American Motors as the builder of plain jane compacts." He also started to move the Ambassador upscale to compete with other manufacturers' full-size cars. Moreover, larger models 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 corporate strategy "in the business world's toughest race — the grinding contest against the Big Three automobile makers" were the cars introduced for the 1965 model year. 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. American Motors' 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. Abernethy even switched the automaker's advertising agency to promote "a better luxury and sports car image". However, Abernethy had his critics who contended that AMC "had its great success when it was doing what the Big Three weren't doing".

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

The strategy shift at first 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. However, corporate earnings per share were a meager 27 cents per share, the lowest since AMC made its famous compact car comeback in 1958. 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" AMC V8 engines. Furthermore, AMC introduced a revolutionary guarantee. The engine and drivetrain were covered for five years or 50,000 miles (80,000 km). 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.

The results

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. 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 $4.2 million on sales of $479 million. The situation was so bad that Robert B. Evans invested more than US$2 million because AMC's stock was selling for only 60 percent of the company's net worth, thus becoming its largest stockholder and was named its chairman.

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. 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.

The company changed leaders from the likes of Romney, who defined the compact car segment, to that of Abernethy, "a likeable super salesman who unfortunately landed at the top as the market began to quickly change." The problems facing AMC at this juncture were the result of incorrect assumptions. Abernethy presumed that customers needed more choices among those available from the Big Three with their new models in the compact car market. 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. Abernethy was forced to "drop out of management team" from the company by taking an "early retirement" on January 9, 1967.

After the departure of Abernethy, AMC's management decided to enter motorsports as a method to gain exposure, publicity, and a develop a "performance" image. A new position, Performance Activities Director, with Carl Chamakian, was established to get AMC automobiles in racing that would attract a younger customer base during the height of the muscle car era.

Abernethy had two children, one boy, Lee Roy Abernethy (retired as a senior vice president at the Bank of New York, was a consultant to the Bank of Taiwan), and one girl, Phyliss Abernethy Hendry.

Award

In 1971, Abernethy received the "Distinguished Service" citation from the Automotive Hall of Fame. This citation recognizes individuals currently employed in the industry or recently retired who have significantly improved the industry or their respective organizations.

References

Business positions
Preceded by George W. Romney	President of American Motors 1962–1967	Succeeded by Roy D. Chapin, Jr.