CVS Automake assumes that, as soon as per-target compile flags are used, AM_PROG_CC_C_O is necessary. Strictly speaking, this assumption is correct: automake can't tell that there won't be a clash in object file names. And the user shouldn't be able to know, since the mapping of source file names to object file names is an undocumented internal.
However, in practice there are many Makefile.am's out there that use target_CFLAGS and such, and will definitely never have name conflicts and/or never possibly be used by a losing compiler. And as such I think it is too harsh to have Automake fail hard in this case; giving a warning would be sufficient IMVHO. For example, the modular Xorg tree would need hundreds of changes to get working, most of them actually in Makefile.am's that build only one object. A failure due to Automake upgrade will be perceived as an Automake regression. (Nevertheless, I intend to bring this issue to their attention, after hearing your opinion about it.) Cheers, Ralf