AP Interview: Iacocca urges fast loan repayments
Posted: Wednesday, June 24, 2009 8:01 pm
DETROIT (AP) — Former Chrysler CEO Lee Iacocca has some advice for the people who are running his old company, and those who will lead the new General Motors: Get the government out of your business as soon as possible.
Iacocca, a slick pitchman who became an American hero in the early 1980s when he used over a $1 billion in government loan guarantees to rescue the nearly defunct Chrysler, said in a rare interview with The Associated Press that government intervention was strong motivation to repay the loan early.
“They’re on you day and night. Their oversight is just too extreme,” said Iacocca, who is promoting a new limited-edition customized Iacocca Ford Mustang. “That’s why our 10-year loan, we paid it back in three years. We couldn’t stand the government. The bureaucracy kills you.”
Now Chrysler and GM, in the midst of a brutal recession and the worst auto sales slump in a quarter-century, each are receiving billions in government loans. Chrysler exited bankruptcy protection in 42 days, while General Motors Corp. remains in Chapter 11.
Already, the Treasury Department’s auto task force, which is overseeing the automakers, has forced out both companies’ chief executives and is remaking their boards. It engineered Fiat’s takeover of Chrysler, which came with a shake-up of top management.
Iacocca, now 84 and living in Bel Air, Calif., seemed appalled that the government is once again involved in Chrysler’s business, but he said without taxpayer money, Chrysler and GM could have collapsed and caused a nationwide unemployment disaster with thousands of additional jobs lost.
He’s optimistic that Detroit automakers can rebound and said he has faith that Fiat Group SpA CEO Sergio Marchionne will rescue Chrysler. He said he’s also impressed with how Ford Motor Co.’s leadership has kept America’s No. 2 automaker free of government loans.
Iacocca said he would invest in Chrysler now if he could, as well as Ford, but he’s apprehensive about GM’s future.
“GM’s got more serious problems,” he said. “They’re just big. They’re huge. They’ve got many more problems than Chrysler has with just sheer size.”
Iacocca, who was fired by Henry Ford II in 1978, took over Chrysler under circumstances very similar to today’s. The company made big, inefficient cars at a time when prices spiked due to the Arab Oil Embargo, and it was unprepared when consumers wanted more thrifty vehicles.
In his 2007 book “Where Have All the Leaders Gone,” Iacocca said Chrysler had only $1 million in cash and was facing a $200 million payroll. Similarly, late last year, Chrysler’s chief financial officer said it couldn’t pay its bills without government help.
Iacocca, though, rolled out new products including smaller, more-efficient K-Car sedans, and went on television to challenge viewers. “If you can find a better car, buy it,” was his famous line in Chrysler’s ads.
Although he doesn’t know Marchionne, he said the Italian CEO may have the charisma to pull off a similar feat. Former Toyota executive Jim Press, now Marchionne’s top lieutenant, also has been an impressive salesman, Iacocca said.
Iacocca, who introduced the Mustang for Ford at the 1964 World’s Fair in New York, said he has contracted with custom car builder Gaffoglio Family Metalcrafters to reshape a 2009 model into a sleek fastback. They’ll build 45 of them in the Mustang’s 45th year, all silver.
Although the car is unmistakably a Mustang, it has unique wheels, racing brakes and suspension, and the interior has been reshaped to include Iacocca’s signature in gold on the dashboard. The car, with a full Ford warranty, will sell for around $60,000 starting in July, only at a Los Angeles-area Ford dealership. There’s only one option, a supercharged 4.6-liter V-8 that pushes the horsepower to 400 — 80 more than the standard engine.
Despite higher gas prices and increased government fuel economy standards, Iacocca said Mustang is still Ford’s most recognizable model, with potential for big sales.
He suggests that Chrysler continue to stick with its best-known vehicles: minivans, Jeeps, the Ram pickup and larger sedans like the Challenger and 300. Fiat, he said, can fill in the smaller end of the lineup with its designs and efficient engines.
Although he likes Marchionne, Iacocca said a marriage to Fiat still faces challenges, including somehow navigating through what he predicts will be another year of recession.
“It’s not a slam dunk,” he cautioned. “You’ll have a cultural clash of some kind in different languages. But they’ll bring people together and hopefully it will work. They have become a pretty good company under this guy Marchionne.”
In the recent telephone interview, Iacocca said the company, when it entered bankruptcy protection, had to take two company cars from him that he had received when he retired. Later, though, it lent him two Chrysler 300C sedans.
He said he wouldn’t have done anything differently while running Chrysler from 1978 to 1992 to help it better compete against the Japanese.
Japan, he said, has advantages over the Detroit automakers, especially with its home country closing its market to foreign competitors.
“I can’t answer you and say there’s one thing that could have made our problem easier,” he said. “They build small cars with fuel efficiency. We were building big cars without fuel efficiency. We were never ready for more than $1 or $2 gas. And we sure as hell weren’t ready for a 40 percent drop in car and truck sales, all in one shot.”
He’s unapologetic for Chrysler selling hundreds of thousands of SUVs led by the Jeep brand, saying the company was merely responding to the market.
“The people wanted them,” Iacocca said. “They felt strong in them. They felt like they were driving a tank. They felt safe. You try to follow the market.”
His advice for Marchionne and new GM CEO Fritz Henderson as they try to weather one of the darkest periods in American automotive history? “Take care of our customers,” Iacocca said. “That’s the only solid thing you have.”
Published in The Messenger 6.24.09