The Birth of AM General

M35A2, M813, M151A2, M915, HMMWV – these are but a few of the scores of types of wheeled tactical vehicles that have been produced by AM General Corporation.

For decades the press – and vehicle enthusiasts – have broadly referred to the US auto industry as “Detroit.” Headlines often have cited “Detroit says….,” or “Word from Detroit..." or as an alternative, “The Big Three.”

But within the world of wheeled military vehicles, that market for the last half of the 20th century was dominated by a “Big Two” – Kaiser-Jeep and its successor, AM General, and rather than referencing Detroit, instead the hub of activity was Toledo, Ohio, and South Bend, Indiana.

Of course, there is a connection between these two firms, but that connection is often misunderstood, and urban myths replace the truth. To appreciate the history of AM General, and the vehicles that they produced, we first look at their ancestors.

In 1852, two Studebaker brothers, Henry and Clement, opened for business in South Bend, building wheelbarrows. In time, they were joined by three other brothers, and expanded into the wagon business. Interestingly, their great-grandfather had built wagons in the mid-1700s.

Fast-forward almost a century, and as the U.S. becomes involved in WWII Studebaker receives numerous war contracts. Among them are contracts for US6 2½-ton trucks and Weasels, both of which would be built in Studebaker’s sprawling downtown South Bend facility, and Wright Cyclone aircraft engines, which were to be produced in a government-owned, contractor-operated (GOCO) facility on Chippewa in south South Bend.

When the war ended, or shortly thereafter, all of these contracts were terminated. In 1948, Studebaker bought from the government the Chippewa plant, intending to use it for civilian truck production.

In 1950 there were concerns that the war in Korea would evolve into a world war. On June 28, Studebaker was contracted to produce duplicates of the Reo-designed M34/M35 (G-742) series trucks. Once again, these trucks were built in the downtown plant. Successive contracts were awarded for additional quantities, until July 1953. At that time a number of changes were made in defense acquisitions. Fear of the Korean War becoming a global conflict had largely abated, a new administration was in the White House, and the new Secretary of Defense, Charles E. Wilson, felt that having parallel production at multiple plants was wasteful. Accordingly, many such contracts were terminated – among them the Studebaker 2 ½-ton trucks contracts.

In 1961, Studebaker-Packard, as the company was known after 1954, was the successful bidder on a contract to build a Multifuel version of the cargo truck, the LDS-427 powered M35A1. These trucks would be built in the Chippewa plant.

In the mid-1960s Studebaker (the name had reverted to Studebaker Corporation in 1962) bid on, and won, a contract to build 5-ton 6x6 (G-744-series) trucks. However, before production began, the Defense Products Division, and the Chippewa plant, were bought on Feb. 24, 1964 by another firm.

That firm was Kaiser Jeep Corporation. Kaiser-Jeep was formed as a result of the 1953 purchase of Willys Motors assets by Kaiser Industries on March 23, 1953. Willys, of course, came to fame during WWII due to its production of the Willys MB – known far and wide as “the army Jeep.”

Thus, it came to pass that after the 1964 purchase, Kaiser, in the form of Kaiser-Jeep, owned both Jeep and the former Defense Products Division of Studebaker. Following a contract novation, whereby the government transferred the contract awards to Kaiser-Jeep, production of the five-ton trucks in the Chippewa plant began.

However, by 1969, Edgar Kaiser was interested in divesting the firm of its automotive operations, and American Motors, in a strong financial position as a result of selling its Kelvinator Division, was seeking to expand. Kaiser-Jeep’s network of 1600 dealers, as well as the profitable defense operations in Toledo and South Bend, seemed like a good investment.

An announcement was made at the Detroit Hilton on Dec. 2, 1969, revealing the outcome of the negotiations. Roy D. Chapin, Jr. said, “The reason we are gathering here today is to announce the signing of an agreement for purchase by American Motors of the Kaiser Jeep Corporation, which is, as most of you know, a wholly-owned subsidiary of Kaiser Industries. Now this agreement, which is subject to certain conditions, one of which includes approval of American Motors stockholders, is being announced today jointly by us and on the West Coast by Edgar Kaiser, the chairman of Kaiser Industries.”

On Wednesday, Feb. 4, 1970 American Motors stockholders overwhelmingly approved the agreement, with a vote of 10,695,335 shares in favor and 297,242 shares opposed. In addition to the Toledo facility, the purchase included the 1.4 million-square foot Chippewa facility (the Main Plant), and the adjacent Plant 8, a 200,000-square foot stamping plant in Indianapolis, and a recently acquired 300,000-square foot plant in Mishawaka, a short distance from South Bend. One week later, on Feb. 11, 1970, American Motors announced the formation of a new division to take over the operations of the Defense and Government Products Division of Kaiser Jeep. The new division was named the General Products Division of American Motors.

Named to head the new division was Cruse W. Moss, who was previously executive vice-president of the Kaiser Jeep Defense and Government Products Division. Moss, incidentally, was married to actress Virginia Patton, who portrayed Ruth Dakin Bailey in Frank Capra’s “It’s a Wonderful Life”, and also was the niece of General George S. Patton.

Kaiser Jeep, through a novation agreement, transferred to AMC a $212 million contract, DAAE06-69-B-0001 for 13,066 five-ton M809- series 6x6 trucks and DAAE06-69-B-0003 for 2 ½-ton M35A2-series 6x6 trucks. Vehicles under these two contracts were being produced in the Main Plant on Chippewa, while in the adjacent Plant 8, the company was building DJ-5 Postal Jeeps.

Plant 8 also continued to house the Studebaker service parts operation up until 16 June 1972. While Studebaker had ceased building cars in South Bend on Dec. 20, 1963, production had continued at their Hamilton, Ontario plant until March 16, 1966. Because the Studebaker Corporation had not gone out of business, but rather had only exited the business of building automobiles, for a period of time the company continued to supply parts for the cars that they had produced. While many enthusiasts believe that there is a legal requirement to do so, that is simply an urban myth. Only emissions equipment (a non-factor during the Studebaker era) has any legal requirement for ongoing support.

On Feb. 3, 1971 it was announced that the General Products Division had won the contract to produce M151A2, and would be doing so in South Bend.

The base M151 was developed and originally produced by Ford. The vehicle had been built by Willys Motors in Toledo during 1960-62. In December 1963, a new model, the M151A1, began rolling off of the Toledo assembly line, but by that time the sign on the former Willys plant said Kaiser-Jeep. Ford won the next contract in February 1964, and production of the M151A1 began at the Ford Highland Park plant late that year – and continued until General Products won the contract mentioned above.

It is worthwhile to note that while the South Bend firm would build the M151A2, that model, as were the others, was designed by Ford. In fact, nothing that the General Products division was building was designed the firm – the M35-series trucks were a Reo design and although Kaiser-Jeep modified the 5-ton design to incorporate the Cummins NHC-250 engine, the basic truck had been designed by International Harvester 20 years earlier.

Interestingly, while the Postal Jeeps were built in Plant 8, the M151A2 were built in the Main Plant, on an assembly line paralleling those building 6x6 trucks.

American Motors further restructured the operations by creating a wholly owned subsidiary to take over the assets and operations of the General Products Division on March 31, 1971. The new subsidiary, incorporated in Delaware five days earlier, was named AM General Corporation. The directors of the new company, as reported on April 4, 1971, were Roy D. Chapin, Jr., Chairman of AMC; William V. Luneburg, president of AMC; John C. Secrest, vice-president of corporate staff for AMC; and Cruse W. Moss, president of AM General and vice-president of AMC. In an announcement in the April 2, 1971 Detroit Free Press, Chapin stated that, “...the move is intended to increase the flexibility and autonomy of the former General Products Division in meeting government contracting requirements and also in seeking diversification into new types of vehicles.”

Those new types of vehicles included city buses. Most metropolitan transit agencies rely on federal dollars to subsidize up to 80% portion of the purchase price of new buses, and buses bought with such funds have to meet federal specifications and standards. Not surprisingly, AM General felt that their experience in navigating the federal procurement system made this an easy and obvious area for expansion.

American Motors posted a profit of $10.2 million in the 1971 fiscal year (which ended September 30), much of that no doubt attributable to AM General, which had done $261 million in sales during the year, representing 25% of the American Motors sales.

Bus production began in the Mishawaka facility, which had been largely underutilized since it was acquired by Kaiser-Jeep to house production of military cargo and dump bodies in 1969. The buses were built by AM General to designs created by bus manufacturer Flyer Industries of Winnipeg, Manitoba. The bus bodies were produced in a newly leased plant in Marshall, Texas. In time the Texas facility would do final assembly of another series of buses; articulated models designed by the German firm Maschinenfabrik Augsburg-Nürnberg (MAN).

On July 28, 1977 AM General was awarded what was at that time the largest-ever contract for heavy trucks from the Army. That contract was for a new type of vehicles, the M915-series trucks. Industry publication Automotive News reported the arrangement for production of the vehicles like this:

In November, American Motors announced that it had made a profit of $8.3 million in fiscal 1977, compared to a loss for the previous year of $46.3 million. Notably, AM General’s profit in 1977 was $6.8 million, or 82% of the parent company’s profit. AM General’s profit, however, was down from the previous year’s $9.2 million – which meant absent AM General’s contribution, in 1976 American Motors would have lost $55.5 million and in 1977 profit would have been only $1.5 million.

The company’s venture into bus production was not meeting expectations, and on May 31, 1978 it was announced that the Mishawaka bus plant would be shuttered at the end of June, but bus production in conjunction with MAN in Texas would continue a bit longer.

In 1975, the Army began evaluating what changes would be desirable in an improved M809, especially in the area of transmission, transfer case and brakes. In April 1978, AM General was awarded a contract to develop a Product Improvement Package for the M809-series trucks which would address these, as well as other areas needing improvement. The result of this effort was the M923. Following testing in 1978, the new vehicle was type classified as Standard in August 1979.

Cruse W. Moss, a former Willys Motors executive who to that point had been the only president of AM General and had led the organization since its formation, resigned in early August 1979. The 53-year-old Moss left AM General to take a position of president and CEO of White Motor Co.

On April 7, 1981 it was announced that AM General was the apparent low bidder to produce an initial order of 11,394 of the new M923-series vehicles. The next low bidder was White Motor Company, which filed a protest with the General Accounting Office (GAO). In all likelihood, White, which had filed bankruptcy in September 1980, had counted on the Army waiting on the conclusion of the GAO review before awarding the contract. If that review took longer than 60 days (and it probably would), the Army would have had to have the contract re-bid.

Assistant Secretary of the Army Arthur Daoulis, in a move that defeated the White strategy, awarded the contract to AM General, confident that the GAO findings would justify this decision. On April 24, 1981, Cruse W. Moss resigned as chairman and chief executive of White.

The M923 was not the only new vehicle that AM General was to produce during this time. In 1969, as a private venture, the FMC Corp. developed a new High Mobility Combat Vehicle, which they designated the XR311. FMC built two prototypes in 1970 and, after testing, the Army decided to order 10 more for more extensive trials. Those trials were completed in 1972, and were followed by service trials with the 2nd Armored Division. The hoped-for quantity orders for the XR311 did not materialize for FMC, and in 1974 the company sold the design and manufacturing rights for the XR311 to AM General.

AM General modified the XR311 design, and in 1977 submitted the improved vehicle for consideration for the Army’s XM966 combat support vehicle program. However, before that program was completed the Army cancelled it in favor of a new program.

The Army began circulating specifications for that new program, which it called the High Mobility Multipurpose Wheeled Vehicle (HMMWV), in May 1979. In April 1982, the government began testing the AM General prototypes for the HMMWV alongside prototypes from competitors Teledyne Continental and Chrysler.

After extensive testing, on March 22, 1983, the Pentagon announced that AM General had won the 5-year, $1.2 billion contract to build 55,000 examples of the HMMWV, the largest contract the firm had ever received. The contract also included an option to double the quantity of trucks on the contract. The company had previously assured Indiana leaders that should the company be the winning bidder, the vehicles would be built in the then-vacant Mishawaka bus plant, despite overtures from other cities hoping to lure AM General away.

Incredibly, the next day AMC agreed to sell AM General to LTV for $170 million in cash and short-term notes, along with a $20 million dividend from AM General – in other words, $20 million of the purchase price would be paid by AM General itself!

The deal, which was finally executed on July 24, 1983, ultimately called for a lump-sum payment of $120 million and two short-term notes. The first for $29.75 million was due on the first anniversary of the closing date, and the second, for $28.75 million on the second anniversary of the closing date.

This was not a sudden move, but it was one that to this writer seemed truly bizarre. On Nov. 19, 1982, American Motors entered into a brokerage agreement with Lazard Freres & Co. for the latter to locate a buyer and negotiate the sale of AMC’s profitable AM General Division.

The reason for this: AMC desired to concentrate on its core business of building cars and Jeeps for its dealer network. AMC’s civilian and commercial business had lost $136.6 million in 1981 following a $200.8 million loss in 1980, and the company lacked the capital to finance the cost of launching the next model year cars. To infuse the capital to continue in the money-losing car business for one more year, AMC’s Board desired to sell the money-making AM General, whose annual profits were equal to 25% of what AMC hoped to raise through the sale.

Four years later American Motors was gone, the failing automaker bought by Chrysler, which openly declared it was buying the company to acquire the Jeep brand, a new assembly plant in Canada, and increase its dealer network. Yet 40 years later, AM General, sacrificed by parent AMC for one more year of civil auto production, and having been through a succession of owners since, continues to operate. J

For additional reading, see “AM General: The First Fifty Years”, available at DavidDoyleBooks.com

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