Iacocca: Sweetened, AMC Still A Good Deal
May. 21, 1987
SAVANNAH, Ga. (AP) _ Although Chrysler Corp. was forced to sweeten its offer for American Motors Corp., the purchase will still be a good deal, Chrysler chairman Lee Iacocca told shareholders Thursday.
''The negotiations took a little longer than expected for one simple reason - it's called money,'' Iacocca said at Chrysler's annual shareholders meeting here.
Chrysler will pay $73 million more than it initially offered for all outstanding AMC shares in March. Chrysler sweetened its offer from $4 worth of Chrysler stock for each AMC share to $4.25 and then to $4.50 before AMC's directors approved it, Iacocca said.
The higher stock price means Chrysler will pay $595 million instead of $522 million for the AMC stock.
But with the AMC purchase, Chrysler will be able to aim for 20 percent of the U.S. car market and 15 percent of the U.S. truck market, Iacocca said.
The $830 million buyout, under which Chrysler will also purchase the 46.1 percent interest in AMC held by the French government-owned automaker Renault, still requires approval of the French, Canadian and U.S. governments and AMC's shareholders but could be closed by Aug. 15, Chrysler vice chairman Robert S. Miller told reporters after the shareholders meeting.
The deal has been approved by the boards of all three companies.
Miller said he expects approval from the three governments before AMC's shareholders vote on the deal in about three months.
Chrysler officials told shareholders they plan to look closely at the AMC plants their company will be acquiring.
While the future of AMC's aging Kenosha, Wis., assembly plant appears somewhat secure, Chrysler executives said only that AMC's other U.S. assembly plant, in Toledo, Ohio, will continue to make Jeep vehicles for at least one or two years.
The Kenosha plant already makes Chrysler's large rear-wheel-drive Fifth Avenue. Chrysler expects to put its homeless Omni-Horizon small cars there as well.
''We've produced over 20,000 high-quality vehicles there. They've done very well,'' said Richard Dauch, Chrysler executive vice president for manufacturing.
Because of strong Fifth Avenue sales, Chrysler is adding a second shift at Kenosha in late June or early July instead of late September as originally planned, Dauch said, adding that Kenosha's success is coupled with that of AMC's stamping plant in Milwaukee, Wis.
Chrysler will ask AMC's hourly workers for changes in their local union contracts to increase productivity and quality, said Chrysler vice chairman Bennett Bidwell.
Unlike Chrysler's workers, AMC workers do not have a national United Auto Workers contract but negotiate contracts on a plant-by-plant basis. Those contracts expire next year.
The executives said they did not know whether any AMC plants would be closed or how many white collar AMC employes might be laid off when the two companies are combined.
Bidwell said AMC President Joseph Cappy will be offered a ''responsible'' job with Chrysler.
AMC has lost nearly $8.5 million in the past six years and its sales of U.S.-made cars have nearly disappeared.
However, Iacocca said, ''nobody knows more about turning a company around than we do.''
Besides the profitable Jeep line, Chrysler also will get out of the deal a brand-new assembly plant which AMC and Renault built in Bramalea, Ontario. The plant will begin building Premier mid-size cars in the fall.
''Premier could turn out to be the sleeper in this whole deal,'' Iacocca said.
However, Chrysler has scrapped AMC's plans to import the Renault Alpine, a $30,000 luxury sports car, which was to be introduced in the United States this summer, Bidwell said.
Chrysler also will gain more than 1,400 AMC dealers, which Iacocca said will increase distribution of Chrysler products.
Savannah is the headquarters for Gulfstream Aerospace Corp., a maker of private aircraft, which Chrysler purchased in 1985. Chrysler holds its annual meeting in a different location every year.