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                             EMPLOYMENT AGREEMENT
                                   (CAFIERO)


     AGREEMENT effective as of May 1, 1997, between AM GENERAL CORPORATION 
("Employer"), and PAUL CAFIERO ("Employee").

                             W I T N E S S E T H:

     WHEREAS Employer desires to employ Employee on the terms hereof, and 
Employee desires to accept employment on such terms;

     In consideration of the mutual covenants herein contained, the parties 
hereto hereby agree as follows:

     1.   TERMS AND DUTIES.

     Commencing on the date hereof and continuing until October 31, 1998, and 
thereafter from year to year unless sooner terminated as herein provided (the 
"Employment Term"), the Employer hereby employs the Employee as its Vice 
President and Chief Financial officer. The Employee hereby accepts such 
employment and agrees to devote all of his business time and his best efforts to
the business of Employer and as may be necessary to perform his duties in
accordance with the policies and budgets established from time to time by
Employer and its Board of Directors and President. During the Employment Term,
the Employee will not have any other employment, except for part time employment
at the University of Notre Dame as an accounting instructor.

     2.   COMPENSATION.

     For Employee's services hereunder Employer shall pay to Employee

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     (a)  a salary at the rate of One Hundred Twenty-Five Thousand ($125,000)
Dollars per year (or such greater amount as Employer may from time to time
determine), payable periodically in accordance with Employer's usual executive
payroll payment procedures; plus

     (b)  the opportunity to earn an annual bonus of up to Twenty-Five Thousand
($25,000) Dollars for each fiscal year (ending October 31,) provided that

     (i)    Employee achieves Employer's performance objectives to the
            satisfaction of Employer.

     (ii)   Employee is in the active employment of Employer, and actually
            engaged in performing duties, at the close of such fiscal year, and

     (iii)  Employer's financial statements for such year, as prepared by its
            independent public accountants, show a positive net income available
            for common stock, as determined in accordance with generally
            accepted accounting principles consistently applied, but after
            adding back any non-cash charges for post-employment benefits and
            before this bonus and bonuses provided for in all other executive
            employment agreements.

Such annual bonus for each year shall be payable within 15 days after the 
Employer's accountants have completed preparation of the Employer's financial 
statement for such year. The determination of such accountants as to the amount 
of the net income, as shown in such statements shall be conclusive on the 
parties. Eligibility for this executive performance based bonus plan does not 
detract from Employee's participation in the Profit Sharing Plan available to
all salaried employees.

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     3.   AUTOMOBILE.

     Employer shall provide Employee with the use of a vehicle leased by
Employer at a cost equivalent to the lease of a Ford Crown Victoria. All
expenses associated with the use of said vehicle, including insurance, fuel and
maintenance shall be paid, or reimbursed to Employee, by the Employer.

     4.   PLACE OF EMPLOYMENT.

     The Employee's regular place of employment during the Employment Term shall
be at the principal executive office of the Employer in South Bend, Indiana.

     5.   TRAVEL; EXPENSES.

     The employee shall engage in such travel as may reasonably be required in 
connection with the performance of his duties.

     All reasonable travel and other expenses incurred by the Employee (in 
accordance with the policies and the budget of the Employer established from 
time to time) in carrying out his duties hereunder will be reimbursed by the 
Employer on presentation to it of expense accounts and appropriate documentation
in accordance with the customary procedures of the Employer for reimbursement of
executive expenses.

     6.   EARLY TERMINATION OF EMPLOYMENT
          TERM ON DISABILITY OR DEATH.

     (a)  If during the Employment term, the Employee fails because of illness 
or other incapacity (including incapacity because of substance abuse) to render 
to the Employer the services required of him hereunder for a period of two 
months (during which the Employer shall continue the Employee's compensation at 
the rates herein provided), the Employer may, in its

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discretion, give one month notice of termination of the Employment Term (during 
which the Employee's compensation shall likewise be continued), and if the 
Employee shall not resume full performance of his duties within such one month 
period, the Employment Term shall terminate at the expiration thereof, provided 
that any such termination shall not affect the right of the Employee (or his 
estate) to continue to receive benefits under any disability insurance plan 
covering the Employee which is in effect at the date of termination.

     (b)  The Employment Term shall end upon the death of the Employee.

     (c)  In the event of termination for disability or death, the Employer 
shall pay the Employee the $25,000 annual bonus provided for in Section 2(b) 
prorated for the period from the start of the fiscal year to date of 
termination, provided that the requirement of Sub-Sections 2(b)(i) and (ii) have
been met for such fiscal year.

     7.   CONFIDENTIALITY; COMPETITION.

     (a)  For the purposes hereof, all confidential information about the 
business and affairs of the Employer (including, without limitation, business 
plans, product design and specifications, financial, engineering and marketing 
information and information about costs, manufacturing methods, suppliers and 
customers) constitute "Employer Confidential Information." Employee acknowledges
that he will have access to and knowledge of Employer Confidential Information, 
and that improper use or revelation of same by the Employee during or after the 
termination of his employment by the Employer could cause serious injury to the 
business of the Employer. Accordingly, the Employee agrees that he will forever 
keep secret and inviolate all Employer Confidential Information which comes into
his possession, and that he will not use the same for

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his own private benefit, or directly or indirectly for the benefit of others, 
and that he will not disclose such Employer Confidential Information to any 
other person except as necessary in pursuance of his duties.

     (b)  The Employee agrees that during the Employment Term as extended, if 
extended, and for two years after the end of the Employment Term (the 
"Non-Competition Period"), the Employee will not (whether as an officer, 
director, partner, proprietor, investor, associate, employee, consultant, 
adviser, public relations or advertising representative or otherwise), directly 
or indirectly, be engaged in the business of manufacturing high mobility 
multipurpose wheeled vehicles (all models now manufactured by Employer and all 
models which may be manufactured or planned for manufacture by Employer during 
Employee's employment) in any part of the United States (which the parties 
acknowledge is the Employer's trading area). For purposes of the preceding 
sentence, the Employee shall be deemed to be engaged in any business which any 
person for whom he shall perform services is engaged. Nothing herein contained 
shall be deemed to prohibit the Employee from owning, as a passive investment, a
security of any issuer which is not a supplier, vendor, customer or competitor 
of the Employer.

     (c)  Within the terms of this Agreement, it is intended to limit disclosure
and competition by the Employee to the maximum extent permitted by law. If it 
shall be finally determined by any court of competent jurisdiction ruling on 
this Agreement that the scope or duration of any limitation contained in this 
paragraph 6 is too extensive to be legally enforceable, then the parties hereby 
agree that the scope and duration (not greater than that provided for herein) of
such limitation shall be the maximum scope and duration which shall be legally

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enforceable and the Employee hereby consents to the enforcement of such 
limitation as so modified.

     (d)  The Employee acknowledges that any violation by him of the provisions
of this paragraph 6 could cause serious and irreparable damages to the Employer.
He further acknowledges that it might not be possible to measure such damages in
money. Accordingly, the Employee further acknowledges, that in the event of a
breach or threatened breach by him of the provisions of this paragraph 6, the
Employer may seek, in addition to any other rights or remedies, including money
damages, an injunction or restraining order, restraining the Employee from doing
or continuing to do or perform any acts constituting such breach or threatened
breach.

     8.   BENEFITS.

     The Employer agrees to provide to the Employee the benefits listed in 
Schedule A hereto.
    
     9.   EMPLOYEE'S REPRESENTATION.

     Employee hereby represents to the Employer that he has full lawful right 
and power to enter into this Agreement and carry out his duties hereunder, and 
that same will not constitute a breach of or default under any employment, 
confidentiality, non-competition or other agreement by which he may be bound.

     10.  DEFAULT BY EMPLOYEE.

     If the Employee shall:

     (i)  commit an act of dishonesty against the Employer or fraud upon the 
Employer; or

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     (ii)  breach his obligations under this Agreement and fail to cure such 
           breach within five (5) days after written notice thereof; or

     (iii) be convicted of a crime involving moral turpitude; or

     (iv)  fail or neglect diligently to perform his duties hereunder and 
           continue in his failure after written notice;

then, and in any such case, the Employer may terminate the employment of the 
Employee hereunder and, in the event of any such termination, the Employee shall
no longer have any right to any of the benefits (including future salary 
payments) which would otherwise have accrued such termination.

     11.  SUCCESSORS.

     The rights, benefits, duties and obligations under this Agreement shall 
inure to and be binding upon the Employer, its successors and assigns and upon 
the Employee and his legal representatives, legatees and heirs. It is 
specifically understood, however, that this Agreement may not be transferred or 
assigned by the Employee. The Employer may assign any of its rights and 
obligations hereunder to any subsidiary or affiliate of the Employer, or to a 
successor or survivor resulting from a merger, consolidation, sale of assets or 
stock or other corporate reorganization, on condition that the assignee shall 
assume all of the Employer's obligations hereunder and it is agreed that such 
successor or surviving corporation shall continue to be obligated to perform the
provisions of this Agreement.

     12.   AUTOMATIC ROLL-OVER.

     This Agreement shall automatically extend for an additional one-year 
period, on each

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expiration date, unless either party shall have theretofore given at least 30 
days prior written notice of termination. Any extension shall be on the terms in
force immediately preceding said extension, unless otherwise agreed in writing.

     13.  NOTICES

     Notices hereunder shall be in writing and shall be sent by telegraph or by 
certified or registered mail, telecopy, or recognized overnight delivery service
(such as Federal Express) prepaid as follows:

TO EMPLOYEE:        TO EMPLOYER:
-----------         -----------

PAUL CAFIERO        AM GENERAL CORPORATION
                    105 North Niles Avenue
                    South Bend, IN 46617
                    Attention: President

     with copy to:  THE RENCO GROUP, INC.
     ------------
                    30 Rockefeller Plaza-42nd Floor
                    New York, NY 10112

and shall be deemed to have been given when telecopied to the addressee or three
days after placed in the mail or the second business day following delivery to a
recognized overnight delivery service (such as Federal Express) or a telegraph 
company, prepaid and properly addressed. Notices to the Employee may also be 
delivered to him personally. Notices of change of address shall be given as 
provided above, but shall be effective only when actually received.

     14.  WAIVER.

     The failure of either party to insist upon the strict performance of any of
the terms, conditions, and provisions of this Agreement shall not be construed
as a waiver or

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relinquishment of future compliance therewith, and said terms, conditions, and
provisions shall remain in full force and effect. No waiver of any term or
condition of this Agreement on the part of the Employer shall be effective for
any purposes whatsoever unless such waiver is in writing and signed by the
Employer.

     15.  ENTIRE AGREEMENT; GOVERNING LAW
          -------------------------------

     There are no oral or written understandings concerning the Employee's
employment by Employer outside of this Agreement. This Agreement may not be
modified except by a writing signed by the parties hereto. This Agreement
supersedes any and all prior employment agreements or understandings. This
Agreement is made under; and shall be construed in accordance with, the laws of
Indiana, applicable to agreements to be performed wholly within that state.

     IN WITNESS WHEREOF, the parties hereto have executed and delivered this 
Agreement as of the day and year first above written.

ATTEST:                     EMPLOYER:
                            AM GENERAL CORPORATION


[SIGNATURE ILLEGIBLE]       BY  [SIGNATURE ILLEGIBLE]
-------------------------      --------------------------

WITNESS:                    EMPLOYEE:


[SIGNATURE ILLEGIBLE]        /s/ Paul Cafiero    
-------------------------   -------------------------- 
                            PAUL CAFIERO

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                                  SCHEDULE A 
                     PAUL CAFIERO/AM GENERAL CORPORATION 
                             EMPLOYMENT AGREEMENT 
                             EFFECTIVE MAY 1, 1997


                               EMPLOYEE BENEFITS
                               -----------------


-AMG Retirement Plan

-AMG Capital/Accumulation Plan

-AMG Profit Sharing Plan

-AMG Salary Continuation Plan

-AMG Medical and Dental Care Plans 

-AMG Educational Reimbursement Plan

-AMG Vacation Plan

-AMG Health Care Plan

-AMG Disability Income Plan

-AMG Cafeteria Plan
 -Life Insurance
 -Benefit Bank
 -Optional Disability Income
 -Optional Vacation

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