Talking Points

 A conversation with Lee Iacocca, chief spokesman and a member of the board of directors of The Online Asset Exchange (onlineassetexchange.com), a service for buyers and sellers of machine tools. Iacocca also is involved with a company that produces electric bicycles. The former president of Ford Motor Co. and of Chrysler Corp. was at WESTEC 2000, where he met with CUTTING TOOL ENGINEERING to discuss manufacturing’s role in the economy, his perceptions of the machine tool industry and business-to-business e-commerce.

Interviewed by ALAN RICHTER, ASSOCIATE Editor

CUTTING TOOL ENGINEERING: As more manufacturing moves overseas and south of the border, what are your feelings about manufacturing’s importance to the U.S. economy?

Lee Iacocca: A lot of manufacturing has gone offshore, and that’s still happening, of course. When I was younger, I used to say that we’re all going to end up flipping hamburgers or being in a service position, and there would be no more manufacturing. That was the talk when Japan was sort of knocking everybody off the field. First in cars. I used to say that one day we wouldn’t make cars. We’d rent them, we’d lease them, we’d wash them, we’d gas them and Wall Street would run things. Bullshit! Now I know it doesn’t work that way. You just can’t say we’re not going to produce anything—that we’re only going to sell products. You’ve got to build good stuff. U.S. [manufacturing] was considered bad at one time, but we got better. We turned it around.

CTE: How did the U.S. become more productive with its manufacturing processes?

Iacocca: By using good capital equipment and spending lots on capital equipment. Of course, you also have to know what the hell you’re doing. You have to know the manufacturing process.

CTE: What are your perceptions of the machine tool industry compared to the auto industry?

Iacocca: Well, the auto industry is a big user of machine tools. There was a time at Chrysler when I couldn’t afford to use old equipment because it was always breaking down. It was lousy. When I got money, I put it into capital expenditures. I built a $1.5 billion research center that included a pilot plant. Forget the wind tunnels and everything else; the pilot plant was to see if we could make a car a minute. That’s where the bulk of the money went—to the manufacturing side. And that’s why our lead time [for new models] was cut from five years to three.

CTE: Why did you join The Online Asset Exchange?

Iacocca: They’re good people. They’re well-capitalized and they offer full service. When a guy clicks in looking for a piece of equipment, he wants it appraised, he wants it authenticated, he wants it rigged, he wants it moved and he wants it financed. What OAE really has is a fully integrated, total marketing system for what is rather esoteric equipment, in most people’s eyes.

“You don’t want to take anything away from distributors. You want to teach them how to use the Internet.”

CTE: What is OAE’s strategy for distinguishing itself from other business-to-business sites?

Iacocca: From the technical side, they have a great Web site and they know what they’re doing. All Internet companies are looking for marketing people because there’s going to be a lot of competition. I’m going to try to help them distinguish themselves. I know the machine tool business fairly well, and I know the biggest used market in the world very well—used cars and trucks.

CTE: How does selling equipment online differ from the traditional methods?

Iacocca: In the old days, how did you sell a piece of equipment? Call an auctioneer, go through the Yellow Pages or by word of mouth in Detroit, where all the machine shops know each other. That’s what the Internet does well; it disseminates information.

CTE: Do you feel that traditional equipment brokers and dealers will disappear?

Iacocca: Oh, no. I think they’ll get integrated into the system. You don’t want to take anything away from distributors. You want to teach them how to use the Internet. You want to get them in the fold rather than fighting them all the time. Of course, if e-commerce sites took all the ancillary business, it would erode dealers’ business over time.

CTE: How will OAE work on a global scale?

Iacocca: Other countries that haven’t had the prosperity the U.S. has experienced in the last decade still need equipment. They have to get it at half price or a third of the price. Of course, there’s a ready market out there, because U.S. manufacturers always look for the newest and best equipment, whether it’s Boeing or Chrysler. At Chrysler, we would just dump our used assets. We used to say that if we got 20 cents on the dollar we were lucky. That’s what this exchange is about. It brings buyers and sellers together all over the world. So now if a guy in Mexico with a small plant needs an affordable lathe, he can get it.

CTE: What are your thoughts on younger people generating large market valuations via Internet startups?

“I’m against the get-rich-quick guys who have a concept, go peddle it to Wall Street, have an IPO and cash in.”

Iacocca: I’m not against young people. I’m just against the get-rich-quick guys who have a concept, go peddle it to Wall Street, have an IPO and cash in. One time I talked to a bunch of young Internet guys and told them, “I know what you’re worth on paper, but I’ve gone through life hustling for cash. If you’re worth a billion, make sure you keep a couple hundred in cash at all times.” They looked at me like I was nuts. I said, “What goes up comes down.”

CTE: What are you driving these days?

Iacocca: I have a Viper. I also have a Mustang that’s 37-years old, but it only has about 3,000 miles on it. It’s in mint condition. In a practical sense, wherever I have a house, I have a minivan. Not because I’m biased, but because it’s a great vehicle. And I’m in the electric-vehicle business, so I have a couple of little electric cars.