by Lee Iacocca
In his 2006 State of the Union address, Bush said, “America is addicted to oil.” You want to yell, “It just hit you that we’re addicted to oil?” An oilman accusing the American people of being “addicted to oil” is like a drug dealer accusing junkies of being addicted to drugs.
What is this administration doing to help us break our addiction? Well, it started by presenting a budget that cuts spending for projects that improve energy efficiency. And its blind determination to ignore the environmental consequences of our energy expenditure is sheer lunacy. In spite of the unequivocal report by the Intergovernmental Panel on Climate Change in February 2007, the Bush administration has continued to suggest that the jury is still out on global warming. What jury is that—the O.J. jury? The facts are getting pretty hard to ignore.
Since I spent my life in an industry that helped pollute the environment, it’s probably no surprise that I came late to enlightenment on this subject. One of the reasons I didn’t support Al Gore for President in 2000 was that I thought he was a little nuts on the subject of global warming. But then I saw Gore’s movie, An Inconvenient Truth. I never thought I’d pay eight dollars to watch a PowerPoint presentation given by Al Gore, but I have to say it opened my eyes. The glaciers are melting, the sea levels are rising, and it’s all happening soon, like in the next twenty-five to fifty years. It reminds me of Bill Cosby’s old routine on Noah. When Noah ignored God’s command that he build an ark, God boomed, “How long can you tread water?”
As I thought about it, I realized that I didn’t really need to see Gore’s movie to know that something was off-kilter with the climate. During a trip to Boston in December 2006, I found everyone walking around in light sweaters, enjoying temperatures in the sixties. Who could complain—right? To tell you the truth, I was a little nervous about the price we might be paying for the balmy weather. Then in February 2007, the Midwest and Northeast got slammed with record snowfalls (over 100 inches in some places) and ice storms. These weather extremes are a warning. Who’s listening?
SHOWING LEADERSHIP ON ENERGY
It’s the job of a leader to make tough decisions—to look ahead and say, “What can we do right now to help solve the energy crisis?” There just has to be more to a long-term energy strategy than finding ways to get our hands on additional oil. We’ve got to take the long view. Will the oil that currently exists on this planet—including that which remains undiscovered—supply the earth for the next one hundred years? How about the next one thousand years? With the rapid development in China and India, demand for oil and gas is doubling right now. Even if there were enough oil, it isn’t going to come from our own shores, which means we’ll continue to be dependent on foreign oil. And when you’re dependent on people whose goal in life is to wipe you out, that’s a pretty sorry state of affairs.
So, we have to get creative. Start thinking about another way of approaching the energy problem. If I were in charge of energy, my policy would go something like this:
1. I’d ask for sacrifice. I’ll admit that I spent nearly fifty years convincing people to buy more cars, but maybe it’s time to take another look at that. During my time in the auto industry the average family went from one car to two cars, and in some cases three cars. And that doesn’t even count the huge car rental industry. Americans love the convenience of being able to get up and go whenever they want and with whoever they want. The carpool lanes haven’t really worked so well. People don’t like to ride-share. But what if people carpooled two days a week? Or even one day a week. Surely we can take a little bit of sacrifice, can’t we?
We’re a nation at war. Why can’t our Commander in Chief call for sacrifice? During World War II, people grew their own vegetables, saved tinfoil, and submitted to gas rationing without complaint. Where’s the spirit of national purpose?
2. I’d push for a gas tax. When Ronald Reagan was President, and my friend Tip O’Neill was Speaker of the House, I proposed to them that we could dramatically cut the deficit if we increased the gas tax by fifty cents a gallon. I figured we could raise $50 billion just like that. Reagan laughed. He said, “Lee, you’re a smart guy, but my pollster tells me I’d commit political suicide if I raised the gas tax. You know why? Because once a week when they were filling up their tanks, people would be reminded that I raised their taxes.” He added, just in case I didn’t get the point, “That’s why you’re sitting on that side of the desk, and I’m the President.”
Nobody ever wants to raise taxes, especially on gas. But we’re already paying tax every time they spike the price at the pump. The only difference is, we’re paying it to the oil cartel, not to ourselves. And don’t kid yourselves. Some of this money is being turned into weapons to fight our troops.
If you look at the world at large, we’re behind the eight ball when it comes to taxing and using gas. The United States has the cheapest gas in the world because of our low gas taxes, which, combining federal and state taxes, average about forty-seven cents per gallon. In Great Britain, the tax is around $4.25 per gallon. In Germany, France, and Italy, the tax is close to $4. Now, remember, the tax is on top of the price of gas. So, when I was in Italy in the fall of 2006, we paid a whop-ping $6.70 for a gallon of gas. Can you imagine the howls in the United States if we had to pay anything close to that price? The Italians didn’t seem so upset about it. Maybe that’s because they’re driving fuel-efficient cars, and they don’t drive as much as we do.
3. I’d use the gas tax to develop alternatives. Let’s have an Energy Summit to explore the development and use of alternatives—solar power, wind power, electricity, ethanol, natural gas, biodiesel, and others. We might have to wait until Cheney and his friends are out of office. Don’t want to risk another energy task force. But then we should get aggressive.
Another obvious way to free up a few bucks for research and development would be to take it out of the hides of the grossly overpaid oil executives. Last year the chief executives of the five largest oil companies earned almost a billion dollars in compensation. Imagine what that kind of money could buy if it were invested in research and development. I hope that’s something the new Democratic majority sinks its teeth into.
4. I’d break the oil cartel. If we want to stand for something in the Middle East, we should forget about establishing democracy, and pressure our friends and enemies alike to get rid of the oil cartel. The way it works now, we have no control over the price or distribution of oil. Is that acceptable? OPEC, which has been around for thirty-six years, controls the oil spigot at the whim of the cartel, and we’ve all been suckered in. I’m not naïve that it will be easy to break the cartel, but right now we’re not even trying. What’s the best way to start? Bring down the demand by vigorously exploring alternative energy sources.
5. I’d demand higher standards from Detroit. In 1975, after the first Arab oil embargo, our government enacted something called the Corporate Average Fuel Economy (CAFE) standards. These standards have helped to more than double the fuel economy of cars in the last thirty years. There are plans in place to increase CAFE standards on light trucks. The car companies have become pretty good at figuring out ways to increase fuel economy. The technology is there. But we need a higher bar to reach for.
One way you increase fuel economy is to make cars lighter. Now, I know that people get all hot and bothered about lighter cars. They think they’re less safe. Is that true? No. For the most part, safety is a product of design, not weight. Instead of building heavier cars to protect ourselves from other people in heavy cars, let’s put the focus on building lighter, more fuel-efficient cars. Even the larger vehicles, like SUVs and minivans, can be built lighter.
6. I’d consider restoring the nuclear option. I’d push for a reactivation of nuclear power as a viable option. It’s time to stop running scared from Chernobyl and start realizing that we now have the systems and technology to build fail-safe nuclear power plants. All over the European Union, they’re investing in building cleaner, safer nuclear p
ower plants. Europe derives about one third of its electricity from nuclear power. France is the leader, at 78 percent. Even Russia is planning a major expansion of nuclear energy. This renewable source of energy is not only environmentally friendly, it’s efficient. Our problem is that when we got worried about nuclear plant safety, we turned it over to the lawyers to fight for safeguards. Here’s a tip: Never turn the future of your country over to the lawyers! The Europeans did it right. They turned the problem over to the engineers. The United States is lagging far behind in nuclear energy, when we should be on the leading edge.
Of course, you can’t fuel a car with nuclear energy, but you can run a car on electricity generated by nuclear power. In December 2006, I attended the Alternative Energy Show in Los Angeles, and the big news for cars was plug-in hybrids. They were being touted as the wave of the future, and I agree. That will happen much faster if we restore our investment in nuclear power. I can imagine a scene in the not too distant future when one spouse will turn to the other at bedtime and say, “Honey, did you remember to turn off the lights, bring in the cat, and plug in the car?”
7. I would create a sense of urgency. Where’s the sense of urgency about solving this problem? There is none. But all you have to do is look at other times in history when we created a national purpose. We did it with the Manhattan Project when we built the A-bomb. We did it with NASA when we went to the moon. Do you mean to tell me that with all our technological genius and know-how, we can’t figure out a solution to a problem that is so devastating to our economy and the environment?
We’ve got options. This isn’t an unsolvable problem. I’m here to say that we can tackle this and win. And we need some leaders who will show us the way. Let’s hear their ideas. In the coming campaign, energy should be front and center, and we—the voters—can put it there.
IX
Free trade must be fair trade
It was September 1993. I was at my house in Tuscany, where I spend a few weeks every autumn. At about two A.M. the phone rang, waking me out of a sound sleep.
The woman’s voice on the other end of the line was wide awake and chipper. “I have the President on the line,” she said.
“Okay,” I answered, wondering, president of what? Then the familiar voice burst over the line. “Lee, it’s Bill Clinton.”
I sat up a little straighter on the edge of my bed. When the President calls, you listen.
“Listen, Lee, can you come to the White House around ten tomorrow morning? I have something very important to discuss with you.”
“Well, Mr. President, I would be happy to, but I’m not sure it’s physically possible. You know, I’m in Italy.”
“You’re in Italy?” He was genuinely surprised. “They didn’t tell me that.” He paused. “What time is it over there?”
I looked at the clock. “It’s just after two in the morning.”
He laughed. “Sorry. Go back to sleep. But get here as soon as you can.”
A few days later, sitting in the Oval Office, I had to smile as President Clinton attempted to persuade me to join his fight to pass the North American Free Trade Agreement. He especially wanted me to take on Ross Perot, who had launched a loud campaign against the agreement. I have to say it was gutsy of Clinton to call on me. A lot of people said I was a protectionist, but Clinton realized that I’d never been a protectionist. All I’d ever asked for was that trade agreements be fair. Show me a plan that’s fair and beneficial, and I was on board. The protectionist in this debate was Ross Perot, who was appealing to everyone’s fears about losing jobs. Ross said we’d hear a “giant sucking sound” of jobs leaving America for Mexico. He was scaring American workers to death about NAFTA. That’s where I came in, I guess. Clinton figured I was a credible voice on trade issues. The only thing he had to do was convince me.
To a lot of people’s surprise—including mine—Clinton did sell me on NAFTA. When you think about it, what could make more sense than a trade agreement with our closest neighbors that included a common commitment to resolving environmental and labor issues? The goal of NAFTA was to improve economic, environmental, and trade conditions in Canada, the United States, and Mexico. The improved economic conditions and open markets would generate more jobs, not fewer. That was a program I could support, and I helped Clinton sell NAFTA. The bill passed in 1994.
A lot of people have asked me, if I had to do it all over again, would I support NAFTA? While NAFTA has had some positive trade benefits on paper, it’s hard to call the agreement a roaring success. The ideal of NAFTA—to set in motion a collaborative process in our corner of the world, where trade would not only be free, but also fair—was noble enough. But NAFTA has yet to fulfill its goal of attracting other countries to our south, such as Argentina, Brazil, Chile, and, yes, even Venezuela. In the long run, that will need to happen to make NAFTA viable. And it’s hard to ignore the continued decline of U.S. manufacturing, which hasn’t been stemmed by NAFTA.
The big question when it comes to trade is how we acknowledge global realities and move forward, without destroying our competitive edge. Free trade is one of the fundamental principles of our capitalist economy, but America has a bad habit of giving away the store.
FREE TRADE HAS TO BE FAIR TRADE
For more than twenty years, I have been preaching the primary rule of free trade: It must be fair. For the most part, my words have fallen on deaf ears, because the trade imbalance is just getting worse. It’s currently at around $800 billion—over three quarters of a trillion dollars. That’s how much more we’re importing than we’re exporting. This is happening because the United States has thrown our market wide open to anyone who wants to set up a booth. We worship at the altar of free trade, and it’s killing us. At the very least, it’s time we started charging admission to the American market. And the price of a ticket has to be a little fairness and reciprocity.
It might interest you to know that President Bush says there’s no reason to be alarmed about the trade deficit. He says other countries will always be happy to lend us the money to finance our deficit. Is this our trade policy? If so, we are, to quote Bush’s father, in deep doo-doo. Because the bill will come due, you can bet on it. As the trade imbalance grows, our influence in the world shrinks.
Bush’s father took the trade imbalance a lot more seriously when he was President. Near the end of his term, I was part of a team accompanying him on a high-profile trip to Japan. Our mission was to urge the Japanese to open up their markets to American products and balance the trade deficit—most of which was accounted for by cars and parts. The previous year American car companies had sold a measly 32,000 cars in Japan, while Japan had sold more than 2.5 million cars in America. Furthermore, for all their talk about building plants in the United States and providing jobs for Americans, Japanese car companies were still shipping most of their parts and components from Japan.
We visited a new Toys “R” Us store that had just opened in Osaka. The Japanese were trying to show us how receptive they were to American products. While we toured the store, Bush held up a toy bank in the shape of a Chrysler minivan. “Hey, Lee,” he said excitedly, “what do you think of this?”
I stared at the toy and said, “Great. But I thought we were here to talk about the big seven-passenger minivans, not the nickel-and-dime kind.”
The trip went downhill from there. I flew with the President to Tokyo on Air Force One, where we met with Japanese business leaders. Basically, they told us—always politely and with a smile—that the reason more Japanese weren’t buying American cars was because our cars were inferior. That was a load of crap.
The reason we weren’t selling cars in Japan was that the deck was stacked against us. Japan wasn’t practicing free trade. Japan was practicing predatory trade, and it still is. This little island with a big ego does everything in its power to keep the trade imbalance great. It doesn’t have to bother with the rules of the free enterprise system. The Bank of Tokyo and the Ministry of Internati
onal Trade and Industry (MITI) make sure that the yen is manipulated (they called it “managed trade”) so that it’s cheaper for Americans to buy Japanese cars and more expensive for the Japanese to buy American cars.
Bush senior’s mission to Japan didn’t go well—to say the least. It didn’t help that Bush ended the trip by vomiting on the Prime Minister at a state dinner. On our way home, we stopped for fuel in Anchorage. I went inside the building, and there was a TV on the wall, tuned into Johnny Carson. I walked in just in time to hear Carson joke, “If you had to eat raw fish, and sit across from Lee Iacocca, you’d throw up, too.”
THE NEW PLAYERS
While we’re taking a pounding on trade, the competition keeps growing. Our annual trade deficit with China is already more than $200 billion. China is insinuating itself into areas that were once dominated by our own production lines. It makes parts for Boeing 757s, and the two largest American auto parts makers have factories in China. And that doesn’t even begin to account for China’s clear dominance in other areas, like textiles. Some economists predict that China is poised to replace the United States as the number one economic superpower within ten years. That’s a scary thought.
China doesn’t even try to play fair. The corruption is rampant. They don’t think twice about stealing technology or infringing on copyrights. And anyone who has ever done business in China has encountered the blatant system of payoffs and special deals. I made several trips to China after Chrysler bought American Motors in 1987. AMC had made a deal in 1983 to build Jeeps in China, and Jeep had a factory in Beijing. The mid-level managers asked for kickbacks right up front. A guy would say, “Mr. Iacocca, I have a son who wants to go to UCLA. Who is going to pay for that?” I was surprised at how overt the pitches were. I kept replying, “Uh, we don’t do things that way,” but I don’t think they believed me because plenty of our companies did play the favors game.
