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FIRinG Line GUEST:

SUBJECT:

#868 9/20/90

T. BOONE PICKENS

110IL GOUGING AND JAPANESE SKULDUGGERY"

SOUTHERN EDUCATIONAL COMMUNICATIONS ASSOCIATION

\

The FIRING LINE television series is a production of the Southern Educational

Communications Association, PO Box 5966, Columbia, SC 29250 and is

transmitted through the facilities of the Public Broadcasting Service. FIRING

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time in your area.

SECA PRESENTS @)

FIRinG Line

HOST: WILLIAM F. BUCKLEY JR.

MODERATOR: MICHAEL KINSLEY

GUEST: T. BOONE PICKENS

SUBJECT: "OIL GOUGING AND JAPANESE SKULDUGGERY"

FI RING LINE is produced and directec/IJV WARREN STEIBEL

This is a transcript of the Firing Line program taped September 20, 1990, at KERA-TV in Dallas, Texas, and telecast later by PBS.

SOUTHERN EDUCATIONAL COMMUNICATIONS ASSOCIATION

©Board of Trustees of the L land Stanford Jr. University.

© 1990 SOUTHERN EDUCATIONAL COMMUNICATIONS ASSOCIATION

MR . . KINSLEY: From public stati on KERA in Dallas, Texas, welcome to Firing Line. I'm Mi chael Kinsley of The New Republic magazine .

Of all the capitalist buccaneers who became celebrities during the 1980s, T. Boone Pickens is one of the few whose reputation is still intact. He is rieither bankrupt nor in prison. Mr. Pickens is the founder of Mesa Petroleum, one of the largest independent oil producers in the United States . In the ' 80s he became better known as a corporate raider, one of those men who use borrowed money to attempt takeovers of larger corporations. Mr. Pickens' major t akeover efforts did not succeed , al though he made many millions in the process. He a l so became a leading proponent of the view that America's corporate management has become l ax, incompetent and disrespectful of the interests of the shareholders. In 198 6 he founded the United Sharehol ders Association, dedicated t o protecting shareholders against bad management .

More recently Mr. Pickens has waded into the controversy over America's trade relations with Japan. Las t year he bought a 26 percent interest in a company called Koito , which manufactures automobil e parts. Since then he has been involved in a noisy dispute with Koito's management, which r efuses t o give him a seat on the b oard of directors. Mr. Pickens asserts that Koito and Toyota, its major customer, are part of a Japanese arrangement know as a keiretsu , essentially a corporate conspiracy that allows Toyota to buy parts on the cheap. Mr. Pickens warns that Toyota and other Japanese firms are in the process of' importing this kind of corporate col l ectivism i nto the United States.

Mr. Buckley, we choose to practice competitive free e nterprise as opposed to keiretsus in this country, not for moral reasons, but for practical ones. We think it's the best recipe for economic success. Now if, as Mr. Pickens seems to believe, Japan 's enormous economic success is due to some different kind of system that is better than ours i n producing prosperity, why should we mind if they import it into our country? Why shouldn't we be imitating them instead of i nsisting that they imitate us?

MR. BUCKLEY: Well , it ' s a good point, but of course some institutions tend to meld with cultural traditions and to the extent that I am qualified to speak about it, in Japan there is a kind of fraternal consanguinity of a kind that makes logical arrangements here that would be indictable under our trade laws . However, there are these similarities between the Japanese situation and our own, and that is that they don't l ike greenmail. They don't like peop l e who get a minority position in the company intending to build up the price of the stock and permitting them therefore in order to avoid a nuisance hostile

1 ©Board of Trustees of the L land Stanford Jr. University.

threatened takeover to benefit from that .increment. Now, as I understand it, your complaint is that although you own 26 percent of the stock in this company, they won't give you a seat. But no American company has ever given you a seat, has it?

MR. PICKENS: Mr. Buckley, if I could, let's just go back over the companies that I've been involved with, and I am as against greenmail as the Japanese are. And you may be aware of the fact that I did propose a resolution at the stockholders' meeting of Koito in June of this year which would be an anti-greenmail by-law, which was turned down by the management of Koito. But if you go back and look at, say, Gulf Oil, Phillips or Unocal, all companies that we have been involved with-- We didn't try to take over Gulf. It was way too large for us. But we did make offers for Phillips and Unocal. I never asked to be on the board, but if I had-- And one of the . Morgan Stanley people that represented Phillips was in Tokyo the other day when I met before a few members of the American Chamber of Commerce there,. and I asked the question of him, I said, "If I had offered to Gulf, Phillips or Unocal the same thing I offered to Koito, that there is no tender offer, it's a long-term hold for the stock, my stock is not for sale and that I will cooperate with management," I said, "do you think I would have gotten on the boards of those companies?" and he said, "I rather imagine you would."

MR. BUCKLEY: Yes, but suppose I, as a stockholder of Koito, were asked to consider your application and somebody stuck in front of me the federal appeals court finding that Mr. Pickens "had no intention from the outset to honor his repeated statement that he was not interested in greenmail" or Supreme Court of Delaware: "as a corporate raider with a national reputation as a greenmailer," or the Los Angeles court: "a corporate raider with a national reputation" again "as a greenmailer," wouldn't I simply tend to assume that these courts were not in error in designating that as your probable motive, especially in buying a stock for such a crazy multiple?

MR. PICKENS: Let me take you back. Of course, I know where that comes from and what court record it comes from, too, and I don't agree with it.

MR. BUCKLEY: It was three different courts, by the way.

MR. PICKENS: But I have never taken greenmail. Can you give me an example of where I ever took greenmail?

MR. BUCKLEY: No, no, I can't, but I can't imagine--

\ MR. PICKENS: But they call me a greenmailer.

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MR. BUCKLEY: Well, it says a national reputation. Maybe you · got that reputation even though you never engaged in it.

MR. PICKENS: I never took greenmail and I can show you cases where I've turned down greenmail 25 times.

MR. ·BUCKLEY: Well, still have you ever successfully addressed these charges while talking to the board in Japan?

MR. PICKENS: Talking to the board?

MR. BUCKLEY: Either talking to the board of trustees or talking to any tribunal that would give you a hearing.

MR. PI~KENS: No~ody ~ill give me a hearing in Japan. I had ~ 20-m1nute meet1ng w1th the manageiDent of Koito in 1989, early 1n 1989, and I have never been able to have another meeting with them. But Mr. Buckley, remember that I have given an affidavit to the management and board of directors of Koito that I will not accept.greenmail even if it's offered to me. I mean, they have that 1n their records.

MR. BUCKLEY: How binding is such an affidavit? I mean, I don't know.

MR. PICKENS: You understand how greenmail works, I'm sure.

MR. BUCKLEY: Well, I've read about it.

MR. PICKENS: You understand that the only way that greenmail can ever be given is--

MR. BUCKLEY: By selling your stock.

. MR. PICKENS: Pardon?

MR. BUCKLEY: It's by selling your stock.

MR. PICKENS: No, the only way it can ever be given is if the management of the company offers it to you.

MR. BUCKLEY: Yes, sure.

MR. PICKENS: w711, if they don't want me to have greenmail ~nd.they are fr1ghtened by me getting greenmail, how can I get 1t lf they don't offer it to me?

MR. BUCKLEY: Well, presumably people offer greenmail beca~se the alternative is something they want less, which is a host1le takeover or a bid for a general takeover.

MR. PICKENS: But you understand I can't make a hostile

3 ©Board of Trustees of the L land Stanford Jr. University.

offer for a J apanese company , d on't y ou?

MR. BUCKLEY: Why can't you ?

MR. PICKENS: Because 62 pe r cent of the stock of this c ompa ny i s locked up in cross ownership, and I c an't take over the c ompa ny withou t 5 1 per cent. So 62 per cent is locked up with the ma nagement o f the compa ny .

MR. BUCKLEY: Wel l, if I were you r adversa r y in this situa tion, I would say , " Well, Mr. P i ckens is bright eno';lgh to maybe crack tha t p robl em. " And b e side s they keep wonder1.ng what is the r e l a tion s hip y ou have with Mr. Ma tsuura who sold that s t ock a t this c r azy mu l tip l e . You' re not the kind of person who p a ys 175 times the earn i ngs f o r f un .

MR. PICKENS: But Mr . Mat s u ura didn't sell me any stock.

MR. BUCKLEY: What was h is role?

MR. PICKENS: He was CEO o f Ko ito .

MR. BUCKLEY: I d on't mean Mr. Matsuura . I' v e got the wrong J apanese h e r e . Wha t ever hi s name is , h e sold you the stock and it i s g e nerall y assumed that h is pu rpose in d oing s o was to get

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l ever a ge on Koi t o .

MR. PICKENS: But i t i sn ' t 1 75 times e a rnings.

MR. BUCKLEY: Ok ay , l e t' s get the exact figures. The interest on ·your s t ock per year would be $9 0 million according to them and--

MR. PICKENS: Acc o r d ing to wh o ?

MR. BUCKLEY: Acc ording to Mr. Mat s uura in the Wall Street Journal .

MR. PICKENS: Oh, Mr. Mat s uu ra . Remembe r, he's the CEO of the c omp a ny.

MR. BUCKLEY: Yes . I h ope h e ' s not f a l s ifying public figures.

MR. PICKENS: Well, I wouldn't d oubt that he was.

MR. BUCKLEY: And h e s ays tha t i f they paid you in div idends, wh a t would c ome t o yqu as 26 percent owner, assuming tha t they p a id out a ll the d i v i dends, 100 p e rcent, you would be making . 63 perc e nt of what you paid for it.

MR. PICKENS: See , that ' s one o f my c omplaints about

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corporate Japan. They pa y no dividends. They pay no · dividends . And the reason they don't, Mr. Buckley, is because

in corporate Japan, y ou see, the y never expected any American to ever get 26 percent of a Japanese company. You understand why, don't you?

MR. BUCKLEY: I think that's a rhetorical question. What is the answer?

MR. PICKENS: Well, the reason is because corporate Japan is locked up, and they never have enough float where if you wanted to take over a Japanese company, the stock is not available. And cr~ss ownership takes place in Japan to protect those compan1.es and they never e xpected an Ame rican to ever become involved in a major Japanese corporation. And the only reason that I'm involved is beca use Ki taro Watanabe had taken a po~ition in Koito from the Koito f amily and they were in the ke1.ret~u of Toyota, a keiretsu being a cartel, similar to what the Un1.ted States had at the turn of the century, Jay Gould and others, when we developed our anti-trust laws in the United States. So we washed out what the Japanese are now being confronted with. And I don't think anybody would argue with me that the breaking up of Standard Oil Company at the turn of the century ~nto eight companies was not healthy, wise and the best for Amer1.ca and the consume rs in Ame rica.

MR. BUCKLEY: Sure.

MR. PICKENS: Nobody will take the other side of that argument. Today that's what you're confronted with in Japan . A~d he7e you've got 60 percent of this company that is locked up Wl.t~ N1.ssan, Toyota, Matsushita and down the list it goes, and I c~n t even get these people to see me. I can't get an audience w1.th another large stockholder i n Koito.

MR. BUCKLEY: Yes, there's either xenophobia working here or else they suspect your motives. Now your motives as a businessman are presumably to make a'profit.

MR. PICKENS: Of course.

MR. ~UCKLEY: And how you are going to make a profit, they re ask1.ng, when you have paid an exaggerated multiple for stock, other than via greenmail they can't understand .

MR. PICKENS: Well, you keep bringing up greenmail, Mr. Buckley. You have to assume--

MR. BUCKLEY: Because they do. Because they do.

MR. PICKENS: I know, but surely you're not a spokesman for the Japanese.

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©Board of Trustees of the L land Stanford Jr. University.

MR. BUCKLEY: I'm a spokesman for the other point of view so that we can have some contention here.

MR. PICKENS: But Mr. Buckley, in looking at it where I have signed an affidavit and I wi ll give a sworn testimony that I will not take greenmail.

MR. BUCKLEY: What's the sanction if you break that? Do you go to jail or something?

MR. PICKENS: Well, I'll give that too. Sure, I'll go to jail. I've said I'm a long-term shareholder. I don't see how you can continue to doubt what I am saying, because I am not--! have never been known as a liar. I've always been honest in my business transactions or anything else. I'm telling you that ­the stock is not for sale. So there can't be a greenmail transaction. It's impossible to have one.

MR. BUCKLEY: Well, we must assume that they are nevertheless afraid of it, right?

MR. PICKENS: I know they're not-afraid of it, because they are the ones that have to offer it is the point. Are they--

MR. BUCKLEY: We traversed that ground--

MR. PICKENS: --afraid of themselves?

MR. BUCKLEY: We traversed that ground and we agreed that they would only offer it if the alternative was less desirable--

MR. PICKENS: Which is a hostile takeover.

MR. BUCKLEY: Yes--

MR. PICKENS: I can't make an offer for the company.

MR. BUCKLEY: I know, but suppose little by little with little eat's feet you accumulated more stock the way you did this block of stock. If you can get 26, why can't you get another 26?

MR. PICKENS: Oh, you can't because it's not available. That's what I'm telling you. By cross-ownership it is not--

MR. BUCKLEY: Suppose somebody dies and you get it by a different route?

MR. PICKENS: It doesn't make any difference, Mr. Buckley. The companies that own it in cross-ownership are not individuals. It doesn't make any difference who dies. They are

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other companies. They are other corporations in Japan and it's designed to control each other. That's a part of the keiretsu.

MR. BUCKLEY: Well, suppose I were to say to you, "What is the purpose of your devoting this much energy to the acquisition of a company, towards 26 percent interest in a company which works in a nation that is governed by such intolerable arrangements? 11 •

MR. PICKENS: Well, I told you that I bought it expecting to make a profit, right?

MR. BUCKLEY: Sure.

MR. PICKENS: I am also in the oil business and have been for 40 years and I'm a geologist. I've drilled a number of dry holes and I may be drilling a dry hole here. I'm not sure. But the point is, is that I have been given an opportunity to see some part of corporate Japan from the inside and I want to see more of it. I want to become a member of the board of directors, I want to participate in the management of the company. I'm not trying to take it over, and with their vote of 62 percent, they can get me off the board any time they want to. They can call a special stockholders' meeting and take me off.

MR. BUCKLEY: But they don't want you on the board, so why should they let you on for the purpose of taking you off?

MR. PICKENS: Because I want to be given a chance and in America you get a chance and I don't understand why in Japan you don't get a chance. I have made a big investment, I want to be represented and I want a chance .. That's what I'm asking for. That's all I'm asking for.

MR. BUCKLEY: But I don't know what rule there is that governs that forces them to give you a chance.

MR. PICKENS: Oh, there isn't one. There is no law that says they have to give me a c hance .

MR. BUCKLEY: Nor would there be a law here, would there?

MR. PICKENS: Oh, but here in America, for instance, the Japanese are on board after board after board.

MR. BUCKLEY: Because apparently the other directors don't object to it.

MR. PICKENS: You're being naive if you believe that. You're naive if you believe that-- The Japanese do not want an American on a Japanese board. They do not want me to see what

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©Board of Trustees of the L land Stanford Jr. University.

goes on in Japan from the inside. They won't give me the tax return of the company. They will give me no financial data on the company, which by law I am entitled to.

MR. BUCKLEY: By what law?

MR. PICKENS: Oh, by the law in Japan.

MR. BUCKLEY: Well, why don't you sue them?

MR. PICKENS: I have.

MR. BUCKLEY: Well, what do you predict will be the outcome of that suit?

MR. PICKENS: I can't get it moved through the courts.

MR. BUCKLEY: Gee whiz, if I were you, I would get out of Japan in a hurry. [laughter) I mean, you must be trying to make some platonic point about--

MR. PICKENS: I' ve made a lot of points. I've made a lot of points in this case.

MR. BUCKLEY: Which will lead to what changes in public policy?

MR. PICKENS: Well, I think what you're going to have happen is that-- Listen, I've got a great number of friends in Congress on this very issue, both Republicans and Democrats, but we have been able to expose a system that you've suspected but now you're involved in and you can tell about it because you're in it. You've seen it. You've paid to get the experience. And I have shared that with them, but at the same time I have made it very clear to Congress, "I don't want you to fight my battle for me. That's not necessary. But I do want to share my experience with you," and I . have done that before a number of congressional hearings, and it's-- I mean, there's no doubt about what I am talking about, and the United States is making a terrible mistake if we continue to deal with the Japanese like we're dealing with them.

MR. BUCKLEY: Oh, well, now we are therefore talking about changes in public policy towards Japan. So the burden of your testimony to the congressional committees is that we should do what?

MR. PICKENS: Oh, that we should have reciprocity in our trade relations with the Japanese and that we should force their markets to be open as our markets are to them and we should get on a level playing. field with the Japanese. We're not on one. I mean, it's like two different worlds. They have two legs.

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One is standing still in a distant Japan with a walled off economy and the other one is running very hard in the United States to acquire companies, to acquire real estate, to acquire ranches, to do whatever they want to do, and we don't have that same access to the Japanese economy.

MR. BUCKLEY: No, I think everybody acknowledges that it is very hard to crack the Japanese corporate world. On the other hand, my figures tell me that the average Japanese consumer buys $361 worth of our products and we buy, the average American consumer, $378 worth of theirs. I don't see much difference there, do you?

MR. PICKENS: Well, I am telling you, you don't have access to the Japanese markets. Now, I don't know where your figures are corning from. I've never seen those before.

MR. BUCKLEY: They carne from the us News and world Report in an article by David Gergen--

MR. PICKENS: I know David and I have had conversations with him, but I have never seen those figures before.

MR. BUCKLEY: Well, are you illuminated by these figures?

MR. PICKENS: Well, I know, Mr. Buckley, that we don't have access to their markets. When you look at over 400 Japanese auto parts manufacturers doing business in the United States and have plants in the United States and we have one in Japan, that's 400-plus to one, there is something fishy about the auto parts business.

MR. BUCKLEY: Yes, but it's also true that their import of American goods has risen 54 percent since 1984, so they are presumably moving--

MR. PICKENS: Fifty-four percent from where, though?

MR. BUCKLEY: Well, from whatever it was.

MR. PICKENS: It was very low.

MR. BUCKLEY: We know that per capita they are buying as much from us as we are buying from them.

MR. PICKENS: Well, I don't--

MR. BUCKLEY: Of course there are two-and-a-half times as many of us as them. So obviously there is going to be an unfriendly trade balance which is made up by the capital outflow.

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© Board of Trustees of the L land Stanford Jr. University.

MR. PICKENS: Well, you ' ve given me one figure that I have not had opportunity to look at before I came here today or investigate or anything e l se . I know that we cannot get into the Japanese economy. I know I have sat in hearing after hearing before Congress and heard other businessmen say the same things.

MR. BUCKLEY: We ll, wh e n you say that we should have a level playing field, are you asking the Japa nese to alter arrangements in what way?

MR. PICKENS: I am asking us to al ter arrangements with the Japanese if they don't open up to us, that we can't go in. Now, Mr . Morita, the chairma n of Sony, says, "Well, your products are inferior, so they won 't sell in Japan," and I say, "That's not it. Let us have the opportunity, then if they don't sell, we either make a better product tha t will sell or it dies on the shelf." I can stand all those kinds of things. That doesn't bother me. But I want an opportunity to see anything go into Japan that they have access t o in the United States, and that is not the case. We can 't put rice into Japan. I mean, they come up with a ll kinds of crazy things . I mean, you've seen the one about we can't have our skis over there because their snow is different than ours so our skis wouldn't run on their snow. You've also seen the one about--

MR. BUCKLEY: Oh, it's phoney baloney.

MR. PICKENS: Sure. Our beef can't go in over there, and I'm a beef producer, but our beef can't go in over there because their digestive s ystem is longer a nd it won 't fit beef, it fits chicken. [laughter ] You know, I mean that kind of stuff. Or fish.

MR. BUCKLEY: But you know something, I hav e a kind of mischievous satisfaction I take out of that, because it has the effect of impoverishing Japan. If they have to pay $7 per pound of steak as they did 20 years ago, stuff that they could import for 25 cents from Argentina, that's hurting them. And if that hurts them, that's got to be a form of· discipline which will pay us economic dividends, won't it?

MR. PICKENS: Well, but that's fine. They can have whatever they want to keep us out, but we're going to have to develop something to protect ourselves and the United states and if we don't--

MR. BUCKLEY: Protect ourselves from what ?

MR. PICKENS: Protect ourselves from the Japanese who have total access to us. Now, they come in, they dump . into our

\ markets and there has been case after case on dumping, and they

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dump into our markets. They're interested in two things first. One, our technology; s econd, our marketing. Once they get the market share, watch what happens to the price. They are very patient people, they are planners. A fool with a plan can beat a genius with no plan, and they 've got a real plan and they are not fools. They know exactly what they're doing and they are at it and they are diligently at it every day.

MR. BUCKLEY: Maybe I should confess my philosophical biases on this point because they become relevant. I don't believe in tariffs, but I--

MR. PICKENS: I don't either .

MR. BUCKLEY: But I believe in embargoes. In other words, I believe that if Japan were to say, "We're going to offer automobiles for $1,000," and then when Detroit collapses they go up to $25,000, that's an act of economic warfare.

MR. PICKENS: It is .

MR. BUCKLEY: And if I thought they were up to that, I would simply not permit the importation of any Japanese automobiles.

MR. PICKENS: You and I are basically in agreement.

MR. BUCKLEY: But I am not going to try to fine-tune them. I don't want to try to fine-tune the price at which it is appropriate for them to try to sell automobiles here, do you?

MR. PICKENS: No--

MR. BUCKLEY: Via tariffs.

MR. PICKENS: I mean, you know that I am a free-trader.

MR. BUCKLEY: Yes.

MR. PICKENS: And I am also a fair trader. And I am saying that the United States, our workers, our technicians, our managements can compete with the Japanese any day anywhere on any field, as long as it's level. That's it. And so we can play in that arena, but they have to get it where it's fair for both of us. So I am for fair trade and I am a free trader. And I am not opposed to the Japa nese, because I will compete with anybody anywhere if I get a fair break with them.

MR. BUCKLEY: Well, presumably during the 1980s we didn't have a fair break, as you are suggesting, and yet our GNP, that is to say our productiv ity, increased by 38 percent more than during any other decade since Wor ld War II. And a lot of people say the reason for this was the pressure to compete with the

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Japanese. Detroit is much tighter and more efficient than it was 10, 12 years ago. Now, cars are also much more expensive, but that may very well be because we only permitted x number of Japanese cars to come in. So--

MR. PICKENS: Well, there is no doubt that we see a better car out of GM and Ford because of the Japanese and the Germans. There is no doubt about that. I mean, if you go back and think about it, what we were up against at one point-- Well, you remember the Oldsmobile diesel. Well, that car, you know, was a horrible specimen to come out of anybody's shop.

MR. BUCKLEY: Yes.

MR. PICKENS: But if you think back--let's go back 40 or 50 years ago--and wouldn't it have been nice if GM had broken up into Chevrolet, Pontiac, Oldsmobile, Cadillac and the rest of them and formed our own competition within this country. But what happened to us over a long period of time is we didn't have any competition. And so we ended up with the Oldsmobile diesel, the Japanese and Germans carne in and they put the pressure on and we do get a better car. But that doesn't mean that we should go over and pat the Japanese on the back. I mean, there is a question here-- We're sitting here with a $55 billion trade deficit with the Japanese. I mean, that's got to bother you .

MR. BUCKLEY: Well, I'm not so sure that it does really, because that deficit is simply one side of a page, the other side of which is a capital outflow and maybe that capital is much more useful to us than an equal trade balance.

MR. PICKENS: That capital going into Japan? With that kind of--

MR. BUCKLEY: No, their capital corning to America.

MR. PICKENS: Then you must like the trade imbalance as far as the deficit that's being developed on foreign crude oil too, then.

MR. BUCKLEY: They own nine percent of corporate America--! mean, all foreigners do--

MR. PICKENS: They own what?

MR. BUCKLEY: Nine percent. Fourteen percent of the UK is owned by foreigners, 17 percent of West Germany. So we're doing rather well on--

MR. KINSLEY: On that statistical waterfall I have to cut \ you off. But maybe ·you could explain something to me that I

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don't understand. Mr. Pickens is very upset about these keiretsus. If they enable Toyota to make cars cheaper and sell them for less, why is that unfair? How does that hurt Americans who get to buy them? On the other hand--

MR. BUCKLEY: Well, let's let him answer that.

MR. KINSLEY: --is there just a cozy-- Well, I've tried to get him to answer in the past, but I' 11 try once rno·re.

MR. PICKENS: I've answered that for y.ou.

MR. KINSLEY: All right, if on the other hand, it's just a cozy arrangement that's actually very inefficient, as you seem to say, how is that a threat to us? We ought to be able to get in there and undercut them.

MR. PICKENS: Tell me when I told you it was inefficient.

MR. BUCKLEY: No, he's saying either or.

MR. KINSLEY: Either it's very efficient, in which case it enables us to buy cars for less, or it's very inefficient, in which case it's no threat to General Motors. It can't be both. Which is it?

MR. PICKENS: I think it's in violation of the Japanese Fair Trade Commission, and we have a case going there. I think it's in violation of our Federal Trade Commission--

MR. KINSLEY: But is it bad or good for consumers?

MR. PICKENS: I'm going to tell you in just a second.

MR. BUCKLEY: You have to tell him pretty fast.

MR. PICKENS: Yes, I understand the question. What you have in a keiretsu is somewhat like a pyramid and Toyota has theirs, Nissan has theirs, Honda has theirs. There's one light manufacturer for instance which is-- The company that I have is Koito in the Toyota keiretsu. We can't sell outside that. We deal only with Toyota, over 50 percent--some small amount--but well over 50 percent of our sales go to Toyota. We don't know what our margins are. I can't get them to tell me what the margins are. I'm going to make the point here in just a second.

MR. BUCKLEY: You've got 15 seconds, sorry.

MR. PICKENS: Fifteen seconds? All right. Well, you've got Toyota sales, revenues, going up and profits for three years, and Koito's sales, revenues, going up and profits down 30 percent, and it's a cramdown within the system, and the US auto

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FIRING LINE NATIONAL UNDERWRITERS

parts manufacturers and lights makers cannot participate in this.

MR. BUCKLEY: Thank you, Mr. Boone Pickens; thank you, Mr. Kinsley; ladies and gentlemen of the 500 Club.

14

©Board of Trustees of the Leland Stanford Jr. University.

John M. Olin Foundation

Mobil Oil Corporation

Farley Industries

May Foundation

Monarch Financial Services, Inc.

Paine Webber

Dow Chemical

Estee Lauder Foundation

Irby Construction