Disastrous decisions erode leadership
The last AMC Pacer rolled off the line at American Motors’ Lakefront Assmebly in Kenosha, Wisconsin, on December 3, 1979. The 44th anniversary this week seemed a fitting time to revisit the lessons learned from AMC’s Chairman and Chief Executive Officer, Roy Chapin, Jr.
If the name Roy Chapin, Jr. rings a bell to you, I’d be shocked. Even so, it’s very likely that Chapin has shaped a part of your daily life.
Whether you follow the automotive business obsessively, casually, or not at all, you may have read, heard, or just noticed that fewer and fewer auto manufacturers are building and selling the sedans and coupes that once dominated the American market. That’s because the market has shifted - drastically.
Sure, Honda is still selling Civics, and Toyota is selling lots of Camrys. However, the American brand nameplates that once ruled the market are gone. Your only hope of buying an Oldsmobile Cutlass or Ford Taurus today is in the used market. Even the best-selling full-size car in history, the Chevrolet Impala, is gone.
Import brands are also adding more and more SUVs and crossovers (smaller, car-based utility vehicles like Honda’s CRV and Toyota’s RAV4) for the American market. Peruse the websites of Honda, Kia, and Toyota for the US market. You’ll see what I mean.
We can trace this shift toward SUVs and crossovers back more than 50 years to the leadership of Roy Chapin, Jr. Chapin grew up in the car business. His dad, Roy Sr., was a co-founder of Hudson Motor Company. A variety of mergers and acquisitions resulted in Hudson becoming American Motors Corporation. Roy Jr. would eventually become chairman and CEO of American Motors.
In 1970, Chapin Jr. negotiated the purchase of Kaiser Jeep from Kaiser Industries. While other top brass at American Motors thought it was a mistake, Chapin insisted. That critical decision gave AMC dealers the earliest SUVs on their lots. With SUVs so common today, it may be hard to appreciate just how significant it was for these smaller dealers to have Jeep CJ5s and Wagoneers to sell.
The acquisition of the Jeep brand was critical not only for American Motors’ dealers but also for their shareholders. The Jeep brand was the treasure that prompted Chrysler to buy struggling American Motors in 1987 at a premium of 50 cents a share over the market.
Yet for all the foresight and vision of Roy Chapin, Jr. demonstrated with the acquisition of Kaiser Jeep, he also made a critical mistake. Remember the AMC Pacer? No? I’m not surprised. It was a thoroughly forgettable car. And Chapin was sure it was a winner.
When AMC first introduced the Pacer, the automotive press was positive. You can read an example from a June 1975 issue of Car and Driver linked below. They hailed it for its fresh approach to styling. AMC marketed the Pacer as a “wide small car.” Journalists and consumers alike marveled at the excellent visibility of the Pacer.
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Chapin expected the company to sell about 150,000 Pacers annually. The development costs for American Motors to design and build the Pacer from scratch amounted to $40 million. That would be nearly $300 million today. It was a high-stakes gamble for the smallest American auto manufacturer. And that bad bet is the primary reason American Motors first turned to French automaker Renault for an infusion of cash. Renault’s stake in AMC left their dealers with an odd assortment of cars to sell. They had the mildly Americanized Renault Alliance sitting next to the 4WD Eagle sedan, essentially an aging Hornet with a facelift.
While there is an extensive list of critical mistakes Chapin and AMC made in the design and development of the Pacer, one that caught my attention about a year ago was news to me. Engineers designed and developed it around the rotary engine AMC planned to buy from General Motors. The problem is that GM was still developing its rotary engine and pulled the plug on it before putting it into production. GM's decision left AMC scrambling to adjust its design to accommodate its old-school inline six-cylinder engines. The compromise severely affected the car’s handling and weight distribution.
With the Kaiser Jeep purchase, Chapin demonstrated great foresight. With the Pacer, he acted like the proverbial drunken sailor on the first night in a new port. The Pacer debacle was so great it cost Chapin his leadership of AMC. He gave up the CEO title just two years after the Pacer’s introduction. He stepped down as Chairman of the Board in October 1978, about 14 months before the last Pacer was built, orphaned without its original advocate.
Chapin’s leadership of American Motors is a cautionary tale for anyone leading a volunteer team, a local church, a small business, or a nonprofit. We can’t let yesterday’s big win lead us to overconfidence. The wise judgment we exercised in that win should influence, inform, and even shape our assessment of the current need. It is the difference between a rare win and a lifetime of effective leadership.
What about you? Have you learned the lesson of Roy Chapin, Jr. the hard way? Have you let one big win lead you to believe you can’t miss? Do you have big decisions to make today or just over the horizon? How can you avoid a Pacer moment that can harm your leadership and hinder the mission? Who can help you think through elements of your good judgment of the past and how to apply that to the current situation?
Enjoy your weekend!
This piece was initially published on April 27, 2023. It has been updated with a few new details.
Through the remainder of 2023, I will rerun previous Thursday Thoughts on Leadership pieces while I work on fresh content for the coming year.
The views and opinions expressed in my Thursday Thoughts on Leadership are my own. They do not necessarily reflect the views, opinions, or policies of the Baptist State Convention of North Carolina or any affiliated churches.