Lee Iacocca: the man who wouldn't be president
Detroit — Question: Who have Ronald Reagan and Tip O'Neill, Walter Mondale and John Glenn, and Ted Kennedy, Howard Baker, and Bob Dole asked for advice on the major economic issues of the day?
If you answered Paul Volcker, Alan Greenspan, Ann Landers, or Robert Reich, you're wrong.
So here's Question No. 2.
What celebrity advertising endorser has had the second-greatest impact on American readers and viewers - after Bill Cosby, but well ahead of Victoria Principal and Bob Hope?
Answer to both:
Lee Iacocca, the economic-recovery genius from Chrysler - thus proving that the fashion in both Bernard Baruchs (adviser to seven presidents) and celebrities is changing.
In place of a Baruch or a David Rockefeller, President Reagan and his main rivals have turned to the blunt-spoken, hands-on Chrysler chairman for ideas on how to put smokestack America back to work and how to compete successfully in what is increasingly a world market.
They have sought his counsel on budget deficits, military spending, industrial policy, unemployment, job retraining, and foreign trade.
Reagan offered him a Cabinet post (declined). Mr. Mondale and Mr. Glenn have discussed a role for him if either makes it to the White House.
Mr. Iacocca is also, ironically, the man whom a lot of Americans who wear their hearts on their bumper stickers favor for president. He thus fills an avuncular role that has become increasingly fashionable in recent decades - the nonpolitical presidential favorite. A recent example of the genus: Walter Cronkite in the 1970s.
But Iacocca-for-president is an idea whose time has gone, the Chrysler boss insists. He says he's too impatient. You don't get to see results of your policies in your lifetime, he argues. An executive in industry can make decisive moves and see results. During a long interview in his memorabilia-filled office he did relent and admit for the first time that he might be tempted by a Washington job overseeing the economy - if someone else administered foreign and defense policy. And he disclosed that he had talked to both Mondale and Glenn about such a role. But he declined to elaborate on the results of those discussions.
''I've thought a lot about that. Now if somebody said, 'Would you come down (to Washington) for a couple of years?' and you would be the chief operating officer and run the economic side - stay out of the State Department and Defense - and tie together all these area policies and trade or whatever. . . . Well, you'd say as long as the president of the United States says, 'He's my power guy' . . . you could do it.''
Iacocca cites an example of the kind of decisiveness he feels is needed. During Chrysler's federal loan guarantee period, he decided to produce the subsequently very successful Chrysler convertible. A government bureaucrat told him he couldn't do it without approval. ''I said: 'Guess what? I did it already.' ''
Is such blunt activism possible for a leader in Washington? Does he remember the problems that Charles Wilson of General Motors had as President Eisenhower's defense secretary? Well, Iacocca answers, ''Booz Allen (management consultants) came in here, paid by the government, and recommended that I declare Chapter 11 (bankruptcy). They had all their people on hand say there's no way for us to survive. . . . (They were paid) something like a million dollars to come up with a paper that said we can't make it in the car business. I saw in three years we could make it. It wasn't defiance. It was a leader and a good team of 25 top officers who got together and said, 'We'll show them how to do it.' I think that could be done with the United States government.''
Specifically, what would he do with the reins of power in Washington? What advice had he given Mr. Reagan and Speaker O'Neill, Senator Dole, and the Democratic front-runners?
In brief this was his advice:
* The President ought to attack superdeficits by selling the public on a temporary 1 percent sales tax to pay for his defense buildup. The tax would affect all purchases except food, utilities, and medicine.
''We have a great communicator in Ronald Reagan. I say he should go on TV and tell them, 'Hey, nothing's easy. There are no free lunches. And you've gotta sacrifice like they did at Chrysler - equally. . . . If we're all bleeding about the same, we'll enjoy it.' And I said, 'If you need this much defense you've gotta sell it. You gotta show 'em you're as efficient as you can be.' And you're short for defense, let's say $22 billion a year. That's 1 percent. . . . We went to the union to see if we could sell it. They said, 'We'd prefer it was only on yachts for the rich, but we think we could support something like that.' ''
But that defense splurge needs closer monitoring. ''I don't know what the heck we get for $325 billion of defense,'' Iacocca says. ''Every time I bring it up, someone says it's too classified to talk about. I watched what (was paid to Chrysler's former) tank division, and it makes me want to throw up! . . . $490 for a claw hammer. They look like stupes!
''Japan puts up about $80 per head for defense, and we put up about $880. So it's a little over 10 to 1.''
Something has to be done about that imbalance, Iacocca argues. And that ties directly to the US trade imbalance with Japan. But he's not for local-content laws (Japanese cars with US-made parts). They only invite retaliation.
A 25-cent gas tax - with rebates for needy drivers - would help both with deficits and with conservation to avert future fuel crises.
An overall strategy on deficit reduction that Iacocca recommended to Reagan called for matching concessions from the White House and congressional Democrats. ''I said, 'The way you do it is you market it. You're a good marketer. You ask for half revenue and half cost (reductions). You do your half. The Democrats do their half. You won't like theirs. They won't like yours. But you strike a deal. And you could announce that the deficit was cut by 50 percent overnight.' '' He says he tried the plan on ''the top guys that I know in Wall Street . . . and they said confidence would turn on'' in the country.
* New policies are needed to create jobs. ''Among the Fortune 500 companies total employment is down. That includes IBM. It's DOWN!,'' Iacocca says in incredulous tones. ''Sure there was inefficiency. We're more productive now. But you mean a country this size . . . hasn't created a job?'' (Except, he says, in the small business and venture capital sectors.) Unless there is more cooperative national planning among management, labor, and government, the US will soon see unemployment climb again, he warns. Some 25,000 of 40,000 laid-off workers have been recalled at Chrysler. But if all restraints are off in the world market, they will probably be laid off again by 1986 or '87. ''If you don't do some planning you're going to be back in the soup. . . . Where did that The first thing you do is amalgamate jobs, just by the nature of the marriage. So what is the job creation mechanism in the country in the next five or 10 years? You might have some social problems with 10 percent unemployment forever.'' One curb on conglomerate buying, he suggested, would be to eliminate the tax deductibility of loans for such leveraged deals. ''If you have cash to buy, of course, more power to you.''
* The current great debate over whether the US should have an ''industrial policy'' (joint government-industry planning, government loan guarantees, etc.) is outdated. ''We already have an industrial policy,'' he says, ''but it's all messed up.'' It's composed of a chaotic mix including the giant military-industrial complex, widely varied corporate tax burdens, and ''50 years of fooling around with investment tax credits.'' This creates, he says, ''industrial policy at its worst.'' So something should be done to make this jerry-built structure more rational and efficient. ''We don't need a MITI, like the Japanese, or a Five-Year Plan, like the Russians. But we don't have any plan. When you want to discuss trade policy you go to eight different people in Washington. If you live long enough to get through that maze, you're a hero.''
But don't call it ''industrial policy''; that's a red flag. And don't set it up to ''pick winners and losers'' - as some economists and 'Atari Democrats' have urged. Silicon Valley high-tech industries are intertwined with older smokestack industries. Autos and steel are the biggest consumer of computer, laser, CAD/CAM, and robot industry products.
Instead, Iacocca says, one way to approach industrial policy would be to have an independent industry-labor-government board look at the five industries that are the biggest job producers - auto, steel, electronics, aircraft, and textiles. And, in a nonpartisan way, ''see if they bring something to the party.'' For example, he said, discover whether a troubled company in one of these industries would use loan guarantees to increase productivity, introduce an efficient new process, or improve the environment.
Under existing federal industrial policy, he said, the government may give the steel industry favorable treatment, such as trigger prices, to counter foreign steel dumping. But it doesn't get anything in return. He would have a nonpartisan federal board decide not to aid a steel company that diverts funds into buying Marathon Oil. Instead, he said the board should aid steel companies that install oxygen furnaces to become more competitive with foreign producers.
Properly focused government policy can also influence labor costs. Iacocca cites a case where Felix Rohatyn (Wall Street investment banker, financial rescuer of New York City, and advocate of industrial policy) was helping Eastern Airlines chief Frank Borman weather his company's recent crisis. Mr. Rohatyn told Iacocca that if Eastern had only been able to borrow another $50 million to million in wage concessions from his unions, instead of the $300 million he did get. Union leaders simply weren't willing to give up more unless they felt Eastern could invest in new facilities and equipment that would pay off in future for all concerned.
* Inflation and wage levels that priced older American industries out of the world market were caused by annual productivity rises of 3 percent and wage rises of 11 percent over the last 30 years. Iacocca would like to see upper limits on wage and price rises tied to the annual growth in the gross national product.
But, he says, Washington is wrong to think the well-paid auto or steel worker is a lazy, absentee-prone ne'er-do-well. All but about 5 percent are hardworking. And trying to cut wages suddenly to compete with Japanese pay would be counterproductive. Iacocca chides the White House: ''I say, 'Why are you wishing away the middle class?' '' If these workers who were making $18 an hour are retrained to work at McDonald's for $3 an hour, ''they ain't going to buy any cars or houses.''
The wage problem isn't take-home pay. ''That's only $10 out of $20. The other world market, Iacocca states, he expected to narrow the $1,200 gap between Japanese and American per-car production costs. ''We have $600 a car that we think we will get (reduced) through productivity improvements - robots and the like. About $300 is direct labor. We can get a piece of that by attacking these millionaire doctors we're breeding. We're not trying to reduce health care. We're trying to get at competitive (health care) rates, and there's no competition.''
* Reform antitrust laws. US firms can't compete in the world market if the Justice Department requires each auto manufacturer to conduct separate research on, for instance, pollution-control devices. US industry groups should be able to share research and development costs on projects that are public benefits and don't essentially affect competition.
* Bright young business-school graduates are flocking to Chrysler since its turnaround (''more than we can handle''). Our society should do all it can to encourage the brightest of the new generation to seek fulfillment in rescuing problem industries. Some factors are already moving in this direction. ''The most brilliant engineers,'' Iacocca said, ''go into manufacturing processing because of what computers, lasers, and the like are doing. There was no glamour in that, but now there is. A young guy comes in and saves the company millions and millions of dollars (with a new process).''
The self-confident supersalesman of Chrysler's TV ads is visible as these and many other ideas spew forth at machine-gun pace. But the off-camera Iacocca, who alternately sprawls in his easy chair and then leans forward intently, elbows on knees, comes through as a more philosophical, deeply thoughtful man. The last three years of raising the near-dead have left him, as he says, ''fulfilled.'' He doesn't need the jobs and honors offered him. He signed a three-year contract in December (his first ever) because ''it calms everybody down - investors, employees, people who want my job.''
He's a registered Republican who often votes Democratic. He's a sometimes profane hard-driver who interrupts a conference to take a call from his daughter and talk to her in unabashedly soft and gentle phrases. He's a tough capitalist who so admires former United Automobile Workers president Douglas Fraser that he recommended him to Reagan as a negotiator. (''He'd be a top negotiator on anything - missiles, warheads, oil.'')
And he's a man on the run to Washington and New York who can still take time out to cook northern Italian gourmet meals, ''with either red or white sauces.'' He and his daughters spent a week in cooking classes in Italy last year.
His office walls are cluttered with signs of his celebrity: inscribed photos of the President, House Speaker, et al.; cartoons; the framed check for $813,487 ,500 with which Iacocca dramatically repaid the last of Chrysler's federally guaranteed notes. But outside his window lies what obviously means even more: The flatlands of Highland Park and Hamtramck, a grid of mid-American houses outlined in grime-edged snow where men and women have gone back to work thanks to Chrysler's revival. And kids who were pulled out of college when the layoffs started now are back in class.
Looking over that scene, Iacocca muses about his friend and predecessor at Ford, Robert McNamara, who left Detroit for a Washington Cabinet post in 1960. ''A super guy. . . . He's lonesome, he's brilliant. If he were in Japan and 65, he'd just be starting a new career.''
''I've given a lot of thought to this,'' Iacocca says, his voice quieter, slower. ''Life is life. You turn a chapter and move on. After I was fired at Ford, I thought maybe the Lord had a hand in this. I came here and learned more in three years than I had learned in 32 at Ford.''