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Who You Gonna Call?

Robert S. “Steve” Miller, 66, gained a reputation for fixing ailing companies, something that became an unantici – pated career …

Robert S. “Steve” Miller, 66, gained a reputation for fixing ailing companies, something that became an unantici – pated career for the Oregon-born executive who worked at Ford and was recruited by Lee Iacocca as part of the team that saved Chrysler from ruin in the late 1970s. Miller counts his former boss as one of his biggest influences on his management style. “Lee could speak plainly to people about things they cared most about,” he says. “Communication skill is critical to any senior executive.” Today he cites Carlos Ghosn, the Brazilian-born, French-educated architect of Nissan’s revival, as the CEO he most admires. Initially trained in finance and accounting, Miller went on to salvage many faltering companies, including Aetna, Morrison- Knudson, Waste Management, Bethlehem Steel and Delphi Corp, where he serves as its non-executive chairman having turned over the CEO reins to his former second-incommand, Rodney O’Neal.

In Miller’s recently published memoir, The Turnaround Kid: What I Learned Rescuing America’s Most Troubled Companies, he candidly recounts moves that went wrong as well as those that succeeded. “The one thing I bring to a company that’s lost its way is I don’t have to spend any time apologizing for how I got here. I don’t have any natural loyalty to any particular group within the company,” he says.

During the dark days at Delphi, he was genuinely taken aback by UAW president Ron Gettelfinger’s personal attacks on him. It started with name calling (“pig at the trough”) and graduated to accusing Miller of “destroying the middle class in America and having no respect for the worker,” a tall order for an executive serving at $1 a year. Miller soon realized that the union leader’s disdain for Delphi was not confined to him.

Having hung up his turnaround spurs, Miller sits on two boards, Symantec, the software outfit that makes the Norton AntiVirus that’s on most computers, and United Airlines, whose industry has hit extreme turbulence with skyrocketing fuel costs. He hasn’t decided whether to join the private equity parade or enter some form of public service. “Not that anyone’s asking,” he adds hastily.

Recently CE’s J.P. Donlon caught up with Miller between rescue attempts. 

Given your extensive turnaround experience you must have built-in radar that lights up on your mental dashboard when you detect certain signals.

There are several. One is persistently missing the quarterly earnings. After four or five missed quarters in a row, it says one of two things. Either the CEO doesn’t know something is fundamentally wrong, or knows it, but refuses to acknowledge it. One can forgive a quarter or two, but not four or five. Second, watch for turmoil at the top. Some CEOs will come to board meetings and tell you how great Joe is. At the next meeting he says, “Oh, I fired Joe.” If this happens more than once, then maybe Joe wasn’t the problem, maybe top leadership is the problem. Third, ask yourself if the CEO is way too optimistic. “Hey, we have no problems. We’re gonna do this.” This shows no sense of proportion. I prefer a CEO to acknowledge the risk he’s about to take and explain how he’ll manage it. If all of the senior team say the same thing, that’s a problem. You need to hear from the skeptic. A director needs to know a healthy debate took place, not an autocratic decision. 

When Immelt recently missed a quarter his predecessor hammered him-then retracted.

I know Jeff. He’s a talented CEO. I’m sure he is going about fixing whatever internal forecasting issues that led to it. I bet you will never see another miss like that coming from Jeff again. I was stunned by Jack Welch’s comment. It would have been better if Jack quietly visited Jeff and asked what happened. Can’t imagine what he was thinking. 

In your book you vividly describe how later in his career Lee Iacocca succumbed to the “CEO disease.” How widespread is the affliction today?

The CEO disease is an inherent part of human nature. Often people who have achieved success, think, “I have earned my place. This company wouldn’t be here or wouldn’t be as great as it is, without my leadership, and therefore I am entitled.”

What has changed in the last 10 years is how boards perceive their role. In the 1990s, board members felt they were friends and advisors to the CEO. One would seldom get in the way of something the CEO wanted. Since Enron and WorldCom, all that’s changed. One major outcome has been that every board now has an executive session without the CEO. These allow boards to flush out concerns before they become fatal flaws.

How has CEO leadership changed or improved overall?

The basics haven’t changed. We still need visionary leadership skills and leaders to attract qualified subordinates. I am very concerned, how ever, that the increasing regulatory scrutiny over the work of public company boards is creating a huge opportunity for private equity to take over a larger share of our economy. Private equity can do things that public companies can’t. For one, they aren’t a prisoner of GAAP accounting. They are not locked into how the current quarter is going to look. A public company is pretty much a slave to the accountant view of the world.

Second, there’s more outrage over executive compensation. Baseball players and entertainers are totally forgiven how much they make. They’re celebrated for it and whatever excesses that flow from it. I’m not mad at them, but the one class of people we have singled out for envy is the public company chief executive. A private equity firm can ignore this. When Cerberus hired Bob Nardelli and Jim Crest, whom they stole from Toyota, they got sizable compensation packages and nobody could complain. I worry that boards’ time is now spent on complaints rather than strategy. We’ve made them into policemen.  

It’s evident that direct and indirect labor costs were at the center of your turnaround challenges at Bethlehem and Delphi. In fact they continue to plague the domestic auto industry. So what’s the solution?

Something that amazes a lot of the reporters who look at the industry is that Toyota and Honda and others pay their workers in assembly plants the same wage per hour pretty much as GM, or Ford or Chrysler do. Therefore, Ford, GM and Chrysler must be stupid, because Toyota pays the same wage. What they miss is the benefit structure. At Delphi we were paying $27 an hour for production labor, but we were paying $75 an hour all-in for every hour of work. That cost includes vacations, health care, retirement eligibility, etc. Start work at 18, retire at age 48, and have pension and health care for the rest of your life. People were starting to be on retirement longer than they were actively working. So even though the wages are the same, the total cost per hour is radically different. And then there’s productivity. The Big Three plants are creatures of a long history of rigid job classifications.

Transferring the health care liability over to the union is a huge sea change in the way they operate. They’ve got a tier-two system so that non-production workers around the plant are paid a very different rate and benefit level. It’s taking a lot of capital to do the buy-out and everything else that’s required, but they are making good progress. It’s just not going to be easy.   

Are you more sanguine about the Big Three now that they are beginning to offer electric hybrids?

Electric cars are not free from environmental impact, they just move the impact someplace else. There’s a power plant somewhere that’s sending the electricity, and then in order to utilize it, you’ve got to carry around a ton of batteries, which takes up space and presents its own energy consumption problem just to get the battery. As the price of gas goes through the roof, attitudes will change and we will come up with a lot of creative solutions, but there was no market signal about a year ago that we should have known.

I wish we had stuck a big gas tax on four or five years ago, because this would have changed consumer behavior and sent signals to producers to change theirs. We’ve got these absurd rules telling manufacturers to sell 30 mile-a-gallon cars when people weren’t willing to pay for them. This is like dealing with national obesity by telling the clothing manufacturers to make smaller sizes. Putting the manufacturer at war with the consumers is not an answer. 

Looking back on your career, what decision are you most proud of and, in hindsight, what decision would you most like to do over?

The best deal, the one that I remember most fondly, is Chrysler’s acquisition of American Motors, a maker of quirky cars to be sure but it had one product line that had real value- Jeep. Even with AMC’s liabilities we were cash-flow positive in the very first month. I remember Chrysler executives complaining at the time saying, “We’ve got our hands full just trying to build and sell what we’ve got.” About a month after we acquired American Motors, I went down into our executive garage and found that all the Chrysler New Yorkers had disappeared. Everybody had a Jeep.

My worst decision was hiring Ronald LeMay to run Waste Management. I should have read the situation better. When someone is so reluctant to be hired that you have to offer the earth and the moon to take the job, it almost never works out. LeMay returned to Sprint less than six months later.

About Jennifer Pellet

As editor-at-large at Chief Executive magazine, Jennifer Pellet writes feature stories and CEO roundtable coverage and also edits various sections of the publication.