Lee Iacocca and an America that's back on its feet.
He was also asking consumers to take a risk, for Chrysler was an auto maker on the skids. Between 1978 and 1981 the company lost nearly $3.5 billion, the bloodiest financial hemorrhage in American corporate history. Rapidly losing sales to cheaper Japanese cars, Chrysler--the third-largest U.S. car maker, after General Motors and Ford--came virtually bumper-to-bumper with bankruptcy.
The mood in all of Detroit was morbid at best, as foreign-made automobiles captured a good quarter of the U.S. market. Moreover, by the close of the 1970s, the morale of the entire American nation had begun a rapid descent. The country's heavy industries--the very heart of the economy--were losing out to foreign competition. The cheaper labor and modern plants of Japan, Korea and the like were clobbering America's aging factories. A deep recession put some 12 million U.S. workers on unemployment.
Interest rates and inflation kept increasing. And as if business weren't bad enough, the nation was forced by oil-exporting nations to pay higher energy prices; as crude-oil supply had fallen behind the demand for it, and the price of gasoline and heating oil had soared to new heights, no peak apparently in sight. These developments created serious personal hardhsip for millions. But the country reached its collective nadir over an incident that had nothing to do with energy, autos or economics.
On November 4,1979, legions of shrieking Iranian "students" overran the American embassy in Teheran. For more than 14 months this country had to endure the spectacle of 52 U.S. citizens held hostage. We watched, helpless and humiliated, whil masses of Iranians snarled at TV cameras and chanted, "Death to America." We mourned, and felt impotent, when in April 1980 a hostage-rescue effort ended in flames and death before it even reached Teheran. Worse, Iranians played no part in the debacle; on an empty, desert staging area, two American aircraft simply crashed into each other and killed eight servicemen.
The United States was a country that had started to believe in its own ineptitude--politically, militarily and economically. We skipped the Summer olympics in Moscow, and it shamed not one Soviet soldier out of Afghanistan. Diplomats of many small nations rudely taunted America as a hapless giant. Although U.S. consumers had once scorned any product labeled "Made in Japan," imported stereos, automobiles and cameras came to denote quality far superior to what was produced here. American executives expressed envy at the way their Japanese counterparts managed a business.
At the start of 1980s we were, simply, a nation in despair. But then there was this pugnacious Iacocca fellow, briskly striding through Chrysler commercials as if, as the columnist Russell Baker suggested, he were on his way to the radiator department to show the workers how to bolt 'em in so they wouldn't rattle. He looked like a man just this side of desperation, as if he could barely spare the 30 seconds to deliver a sales pitch. And Lee Iacocca probably couldn't.
In 32 years at Ford Motor Company, where he rose from management trainee to president and CEO by age 46, Lido Anthony Iacocca had never faced anything quite like the mess he inherited at Chrysler. Fired by Henry Ford II, he left that company on October 30, 1978, and joined Chrysler on November 2. That same day Chrysler announced that is had lost a record $158.5 million in the third quarter. Welcome aboard, Captain Iacocca.
It took federal loan guarantees--a government bailout--to keep Chrysler from bankruptcy. And even then the $1.5 billion in loans barely held the auto maker afloat. Pushing almost 24 hours a day, Iacocca at one point began to seriously question his sanity, if not the impact of the strain on his physical health. Even for a dedicated workaholic, the crumbling Chrysler seemed too much. "I wish to h---- I'd stayed retired," he grumbled.
But this willful, often arrogant and decisive executive began redesigning Chrysler from the tires up. He begged, badgered and threatened the United Auto Workers union and eventually won about $1 billion in wage and fringe-benefit concessions. He forced bankers and suppliers to give Chrysler better terms. And by August 1981 he had reduced the company's work force by roughly half, closed many inefficient manufacturing plants and slashed the whitecollar payroll.
Iacocca also showed a talent for the bold, personal gestures that can make or break crisis leadership. He took a well-publicized salary reduction: from $360,000 a year to $1, of which he sardonically said, "I intend to spend it very carefully."
The symbolism of the pay cut (Iacocca was already a millionaire from his Ford days) and the respect it engendered clearly meant much more than its corporate fiduciary influence. And although Chrysler's new front-wheel-drive "K" car fizzled when it was first introduced, the car eventually won over enough consumers to get the auto maker rolling. In the second quarter of 1981, Chrysler made a modest profit--$11.6 million on sales of $3.1 billion.
It wasn't that much; not after all the red ink. And yet it came during a period of double-digit inflation and one of the most depressed car sales markets in 50 years. Iacocca called it "a little miracle."
Other "miracles," big and small, followed. In one of the largest, Chrysler paid off all the federally backed loans it had received--seven years ahead of schedule. "We borrow money the old-fashioned way," Iacocca said with delight. "We pay it back." And in the first quarter of 1984, the company's net earnings totaled $705.8 million, more than Chrysler had ever earned in a single year in its history. Moreover, the record was topped in the second quarter of 1984, when Chrysler announced profits of $803 million. it soon will be out of its $3.5 billion hole.
Iacocca and his car company roared back, as indeed had the entire U.S. auto industry. And so, it is evident, has the United States. Unemployment has dropped to some 7 million, still significant, but lower than in many years. Inflation, which throughout the 1970s ravaged savings accounts and made pay raises almost meaningless, has cooled to its lowest rate in decades. Banks may be having some problems, but on the whole the average American family again has financial hope.
The health of the auto industry and the American economy are, of course, inseparable. But there is much more to today's national resurgence than car sales and fatter checking accounts. We are in the midst of a spiritual revival not seen since the 1950s. No longer is expressing patriotism a mark of "social unsophistication" or "warmongering."
Warmonger? For waving a flag? Well, there are millions of young Americans who probably don't realize there was a time--not all that long ago--when being patriotic put a person squarely on one side of a very divisive issue. In the mixed-up moralities that grew out of Vietnam, it seemed that loving America was the same as unequivocal support for that unpopular Southeast Asian war.
Vietnam: it is a long tunnel of darkness that even now casts shadows on many of the survivors who crawled through. But as a country, the United States has finally emerged from that gloomy passageway and has come into the sun. Instead of being ashamed at taking an active role in geopolitics, American citizens seem almost delighted at projections of military power, however small in scale. Compared to Omaha Beach, the invasion of Grenada, while deadly serious, was almost a training exercise. But its symbolism, inside and outside the United States, was what counted.
Symbols are indeed crucial to the rise in national spirit, psychological fulcrums that help swing general trends into focus. And there exist today many symbols of the American resurgence, from the high technology and daring of the space shuttle to the magnificent battleship New Jersey, resurrected, again patrolling the seas and calling to mind America's role in the world 40 years ago. And we still haven't fallen from our Olympic high, a fitting summer celebration for the nation's mood.
And then there was Lee Iacocca, who had his back to the wall, painted into a corner and hanging by his fingernails, among other metaphoric travails--a regular industrial Indiana Jones. But he led Chryler from the Temple of Doom, and his struggle demonstrated what can be achieved with talent and tenacity. Chrylser's battle for survival, moreover, was a microcosm of what was happening all across the country, and Iacocca became a figure admired by citizens across the social and economic spectrum.
Iacocca, to be sure, had plenty of help in reviving Chrysler--from the auto-workers' union to suppliers and dealers. But it's doubtful that anyone else could have led the company out of harm's way. "There might be some other hotshot somewhere in the country who could have done as well," said a former Iacocca colleague at Ford. "But I don't think anybody in the auto industry could have."
It was Iacocca's guts and self-confidence plus help from a number of talented Ford executives that carried Chrysler back. But in the public mind Lee Iacocca is Chrysler, a celebrity who actually has done more than, well, be a celebrity.
As Iacocca stood outside a Denver hotel a couple years ago, a group of tourists recognized Iacocca and began to applaud. On visits to Chrysler factories he's been cheered wildly by workers whose wages he has frozen. "Have you ever heard of a chief executive walking into an American factory in the 1980s and being cheered?" marveled Roger Altman, a former assistant treasury secretary, after going on a plant tour with Iacocca.
Management likes him, too. In a Gallup poll of heads of small and medium-sized businesses, Iacocca was considered the U.S. executive they admired most. Indeed, he got 27 times the number of votes for the runner-up, former IBM chairman Frank Cary. More than a few otherwise sage individuals have openly talked of running Iacocca for the U.S. Presidency, a notion he considers preposterous. For one thing, doesn't have the patience or the give-and-take tolerance demanded by politics. For another, in these times no one can be a politician and a true American folk hero.
"Heroes are created by popular demand, sometimes out of the scantiest materials," wrote Gerald White Johnson in his 1943 book, American Heroes and Hero Worship, "...such as the apple that William Tell never shot, the ride that Paul Revere never finished, the flag that Barbara Frietchie never waved." Oh, America had had its genuine heroes. There were early statesman and President--Washington, Jefferson and Lincoln--who certainly deserved the label. We've had military heroes, from Sergeant York to General Patton. ANd the nation has had heroes who with a single act have inspired millions--the flight of Charles Lindbergh or the icy Potomac rescue swim of Lenny Skutnik.
However, the currency of most heroes in the 1980s has been severely devalued. Our society worships all too many celluloid figures. Though fine actors and actresses who portray great deeds, in reality they do little for society other than to entertain. The same is true for athletic heroes. Sportsmen certainly inspire others, but again the primary role of the home-run hitter or the swift running back is to entertain--a hero created by popular demand.
It is unprecedented that a businessman should engender such attention from average Americans. John D. Rockefeller, Andrew Carnegie, the railroad barons and other larger-than-life business figures of the past were sometimes respected or feared. Rarely, if ever, did the public perceive them with anything resembling affection. The nation was fascinated with Howard Hughes, but it had little to do with his business activities--his aviation exploits, romances and eccentricities generated interest.
One can speculate on the role the media has played in the heroic coronation of Lee Iacocca. Although he was known as the man behind the popular Mustang while at Ford and his early activities at Chrysler were frequently reported in the business pages, TV commercials made his mug familiar throughout America. And the power that TV commercials carry these days in frightening.
The late William Miller, a forgotten vice-presidential candidate, achieved star status through American Express ads. A couple of dozen retired athletes, only memories to fans, have become cult figures through beer commercials. Iacocca is a natural-born salesman. (In fact, at Ford he once left engineering to sell the cars and spent ten years in face-to-face sales.) As he hustles through his Chrysler commercials, he does have the look of a man too busy to go to a studio. But as Russell Baker pointed out, it is possible that this dynamic look is exactly what an advertising man ordered--and set up.
Still, the edgy, impatient, cocky and demanding persona that comes across may well be pure Iacocca. When he first pitched Chrysler cars, people rooted for him. "I saw him on TV and I like the guy," said a New York cab driver. "He's turning around a company that was down the drain." And plenty of people in the United States admit that they bought Chryslers because they wanted Iacocca to make it, to see the underdog turn into the Comeback Kid.
The second child and only son of Italian-immigrant parents, Lido Iacocca was born in Allentown, Pennsylvania. His father ran a hotdog restaurant and then opened one of the first car-rental firms in the country, sporting 33 cars, mostly Fords (one of the reasons young Iacocca yearned to work for the auto maker). His father also went into the real estate business, built a small fortune and lost everything in 1929, when Lido was five.
Nicola Iacocca started over with a restaurant, got back into real estate and prospered. But his son grew up understanding the meaning of perseverance in the face of adversity. He also learned patience when at age 15 he was confined to his bed for six months, the result of rheumatic fever.
Pushed by a demanding father, Iacocca was an honor student at Allentown High. He attended Lehigh University, received a degree in industrial engineering and earned a master's degree at Princeton. He was hired by Ford in 1946. By 1970 only Henry Ford II, grandson of the company's founder, outranked him.
It's said that when Ford fired Iacocca he told his CEO, "Let's just say I don't like you." The two haven't spoken since. And even now the mention of Ford can spark Iacocca. "I should have punched him in the mouth and quit," he once said. And perhaps it's the betrayal by Ford that in part drives Iacocca. "I can look Henry Ford right in the eye and say I put together a better car company with better products than his," he now boasts.
The company does have some exceptional automobiles, in particular its Dodge Caravan and Plymouth Voyager minivans, vehicles that may be the hottest new-car sellers since the Mustang. It is offering a five-year, 50,000-mile warranty on its cars, a measure of its confidence in quality control. At this point, Chrysler no longer can be considered the underdog of the American auto industry.
Curiously enough, Iacocca now rarely appears in commercials--his identity is so strong it's not required. When the voice of the actor James Earl Jones simply intones, "Lee Iaccoca asked his engineers to come up with. . ." in an ad for the new Laser, the image of the man is as clear as if it had really appeared on the tube.
Lee Iacocca turns 60 this month. His wife of 27 years, Mary, died a year and a half ago. And though he has considered retirement, it appears as if he will stay with Chrysler a few more years. (He's getting paid once more, slihgtly less than $500,000, but stock options can take that figure much higher. In terms of the earnings he has generated, Chrysler stockholders are probably getting the best bang for the executive-compensation buck in America.) Along with selling cars. Iacocca is going to use his prominence to do some lecturing. First, when it's pointed out that Japanese cars are chepaer than comparable American models, Iacocca tells anyone who will listen about how the Japanese have held down the value of the yen in comparison to the dollar. He explains that Japan's value-added tax is rebated to auto manufacturers on exorted cars. "The advantage is about $2,000 per car," he explains. And he thinks it only fair that the United States should continue to pressure the Japanese to hold down levels of exports to America.
Iacocca sees the nation's economic recovery threated by federal budget deficits and has laid his personal plan for reducing it on President Reagan. He suggests Reagan should go on television and announce a 5 percent cut in the defense budget. "That would save $15 billion a year on a $300 billion budget," explains Iacocca. "That's chicken feed. Any chief executive can get 5 percent out of anything."
He says the President should then challenge the Democrats to match the $15 billion dollar for dollar with cuts in entitlement programs. Iacocca also says an imported oil surtax and a gasoline tax can generate $30 billion in revenues. Together, that $60 billion will go a long way toward reducing the deficits.
Articulating a plan is one thing; pulling it off politically is another. It's a chore for which Lee Iacocca is probably not suited. "In politics," he says, "everyone tells me you just can't get people in a room like you do at Chrysler and knock heads."
Ah, the essential Iacocca; flippant, brash, a bit arrogant, confident even when the walls are crashing down. And so essentially American.
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|Publication:||Saturday Evening Post|
|Date:||Oct 1, 1984|
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