Iacocca: GM, Chrysler should repay loans fast

updated 10:28 a.m. ET June 22, 2009

DETROIT - 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 recent 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.

MORE FROM AUTOS

Autos Section Front

VW buys 49.9 percent stake in Porsche Latest Toyota setback: Claims engines stall Auto industry shows a pulse at L.A. show Whitacre steers GM onto new path Pontiac hits end of the road   Los Angeles Auto Show 2009 Automakers to reconsider dealer closings ‘Green Car of the Year’ at L.A. show is an Audi Now Whitacre can drive GM where he wants Ford gets small with Fiesta subcompact Autos Section Front   Add Autos headlines to your news reader: