Iacocca Warns Public of Danger in GM-Toyota Deal

Washington, DC — Two automobile company bosses came to town last week to speak and never were their messages more different from one another.

First there was Roger Smith, the head of General Motors, addressing the National Press Club. In his entire speech text of 16 pages, not once did he refer to his company’s products. Mr. Smith spoke only of dollar matters — sales, profits and profit-sharing. Sitting in the audience filled with prosperous auto dealers, and auto lobbyists, I wondered whether he was the company’s chief accountant instead of Its chief executive officer.
I remembered a previous Press Club address by Philip Caldwell, chairman of Ford, last September which covered at length new engines, fuel economy, quality control, car maintenance and bumper protection levels. You got an idea about what Ford makes besides dollars. ‘Not so with GM’s Smith.

Even during the question period, he managed to declare his technically mistaken opposition to air bags and to shrug off a question dealing with his company’s largest lemon grove — the diesel engine fiasco. Smith then took his monetized mind back to Michigan, having declined to testify the next day at the House of Representatives on the controversial GM-Toyota joint production venture. But Lee Iacocca, chairman of Chrysler, did testify and no wonder Roger Smith did riot want to be there.

In cogent, candid and colloquial style, Iacocca leveled a public broadside against GM that exceeded that of American Motors’ George Romney in his celebrated Senate testimony during the late Fifties.

Specifically, the feisty Chrysler chief charged that the GM-Toyota venture to assemble, with many Japanese built parts, 250,000 small cars a year in California would lead to a rise in everybody’s car prices, reduce product choice and promote collusion between the two largest domestic and foreign car manufacturers. excerpts from turbo-charged Iacocca’s testimony that left more than one person in the hearing room gasping:

“GM is the domestic price leader and Toyota is the import price leader. Ford and Chrysler target their domestic prices on GM. I it’s been the head-to-head competition between Toyota and GM that sets the pricing pattern for the entire industry. Do you think that pattern is going to stay the same when GM and Toyota sit down together and set prices, as they already have? Arid when this competition disappears, do you think the American consumer will have lower prices? I don’t.”

“If GM and Toyota can meet every day…to discuss prices, products, marketing strategies, advertising, dealer networks, suppliers, research and development, manufacturing techniques, labor relations and any other subject…, do you think they won’t? Do you think they’ll be able to resist that kind of temptation? How can that be good for competition? How can it be good for consumers?”

Iacocca heaped ridicule on the Federal Trade Commission, which by a vote of three to two, approved the joint venture saying,in effect, that a giant with a net profit of $10 million every day, needs Toyota’s help to compete effectively. He accused GM of trying to weaken the fuel economy standards “so it can continue to build large cars and make even more money.” He charged that GM lobbied for an increase in import quotas so that “it could pick up 300,000 small cars from Suzuki and Isuzu, and — in the real world — lay off its small car production base to Japan.” He said that GM “wants to get rid of the Chevette, which contains 95 percent domestic content, and substitute a car that has 40 to 50 percent domestic content.”

In a nutshell, Iacocca was exposing GM’s clever plan of abandoning its small car production in America to its overseas affiliates’ factories for re-import or re-assembly into this country.

Iacocca was not just warning; he was promising that this GM shift overseas would force Ford and Chrysler to shift more of their production abroad. He said if the GM-Toyota deal is not judged unlawful under the antitrust laws (Chrysler has already sued), he will look for still more Japanese partners. “By the time the rest of us get through following GM’s lead just to stay alive, U.S. auto plants are going to fall like dominoes,” along, he added, with several mid-western cities. He estimated a net loss of 300,000 American jobs as a result of the repercussions from the anti-competitive GM-Toyota deal.

On that day, February 3, 1984, before the House Committee on Energy and Commerce, Lee Iacocca was a true public advocate. (Chrysler Corporation ..Detroit, Michigan, will send you a copy of his testimony.)