“The cover art was from a Mick Rock photograph that fortuitously went out of focus as he was printing it in the darkroom. Rock noticed the flaw but decided he liked the effect, so he submitted the image for the album cover.” — Wikipedia
The type is purposefully out of focus, too. It’s possible these stuttering letters were custom made for the album, but the repeating ‘E’ and ‘R’ match and I feel pretty certain I’ve seen the typeface before. Maybe I’m thinking of Double Vision (or whatever earlier design inspired it), which isn’t quite it. In any event, the letterforms are way ahead of their time. Very similar ideas were explored more than 20 years later in the digital grunge era.
Art direction and design by Ernst Thormahlen who was responsible for many album covers in the 1970s.
Update: Thanks to a find by Folker Gorter, I think we can identify this typeface as Electus. Chermayeff & Geismar’s advertising for The Electric Circus used a very similar typeface (though with a few differences including an ‘R’ with a vertical leg). The use of the style for Transformer is perhaps a tribute to that groundbreaking nightclub which closed in 1971, the year before this album was released.
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Also found this single, related cover and type.