The MacNeil/Lehrer NewsHour

MR. LEHRER: Good evening. Leading the news this Thursday, former Pres. Reagan said in videotaped testimony that he never ordered illegal aid to the Contras. The United States set stiffer conditions for normalizing relations with Nicaragua, and a federal judge threw out the new flag burning law. We'll have the details in our News Summary in a moment. Robin.

MR. MacNeil: After the News Summary, we focus first on President Reagan's court testimony [FOCUS - ON THE STAND] for the Iran- Contra trial of John Poindexter. We have comments from reporter Nina Totenberg and analysts Constantine Menges and Scott Armstrong. Next is a report [FOCUS - ROAD CHECK] on the state of the American auto industry, followed by an interview with Chrysler Chairman Lee Iacocca. NEWS SUMMARY

MR. LEHRER: Former Pres. Reagan's version of the Iran-Contra affair was released today. He recorded it on videotape last week for use in the upcoming trial of his former National Security Adviser John Poindexter. Mr. Reagan said, as he has said before, that he never sanctioned the diversion of money from the Iran arms sales to the Nicaraguan Contras. Poindexter is claiming his actions were sanctioned by Mr. Reagan. Reporters were allowed to view the tapes at the federal courthouse in Washington. Written transcripts were also released. We will have excerpts plus some analysis right after this News Summary. Robin.

MR. MacNeil: An Iranian newspaper today called for the release of all foreign hostages in Lebanon. The English language Tehran Times said, "Regardless of the West's propaganda ploys, Moslem forces, out of Islamic and humanitarian considerations, should work to get the hostages free with no precondition." Eighteen Westerners are being held by various Shiite Moslem factions in Lebanon and believed to be loyal to Iran. In the Persian Gulf today, there was an explosion aboard a U.S. flag Kuwaiti oil tanker called the Search City. Most of the 25 crewmen were American. The ship's captain and first mate are believed to have been killed. The other 23 were rescued by a U.S. Navy frigate patrolling nearby. The cause of the explosion is not yet known. But the Navy said it does not appear to have been caused by a mine.

MR. LEHRER: Secretary of State Baker upped the ante on Nicaragua today. He said free and fair elections there this weekend would not necessarily lead to normalized relations. He told a House Committee, the U.S. would need more evidence than certification of those elections by international observers.

JAMES BAKER, Secretary of State: The United States must reserve unto itself the right to make a judgment about whether that election is free and fair. After all, if you're going to assume that there is a Sandinista victory, then I think it's very important that before we talk about normalizing relations with that government that we see a sustained period of good behavior in terms of refraining from subverting their neighbors by shipping arms and weapons to the insurgency in El Salvador.

MR. LEHRER: The Chinese government today protested the U.S. State Department's human rights report. The report, which was released yesterday, accused China of widely abusing the rights of its citizens. A foreign ministry spokesman in Beijing said the report was based on rumor and lies and he charged the United States with interfering in China's internal affairs.

MR. MacNeil: South Africa's President, F.W. DeKlerk, today accepted a proposal by the African National Congress to hold their first formal talks ever. The ANC, which has been fighting white minority rule in South Africa for 30 years, will send a delegation to South Africa from its headquarters in Zambia. Today DeKlerk had this comment about the talks.

F.W. DE KLERK, President, South Africa: We will basically discuss impediments in the way of negotiation. This is not negotiation. This is a preliminary discussion in order to improve the climate for negotiations and in order to address inasmuch as there might be valid problems.

MR. MacNeil: In Washington, a bipartisan group of Senators introduced a resolution praising DeKlerk as courageous for unbanning the ANC and releasing Nelson Mandela. However, the resolution also said U.S. sanctions should remain in place until further steps were taken to end apartheid. Sen. Edward Kennedy, the Massachusetts Democrat, explained the purpose of the measure.

SEN. EDWARD KENNEDY, [D] Massachusetts: We are here today to emphasize that the United States still has a role to play in hastening the earliest possible end to the abhorrent system of apartheid. America is not neutral in the battle against apartheid. We in Congress did not override Pres. Reagan's veto of U.S. economic sanctions in 1986 only to relax the pressure in 1990 at the first hopeful sign of progress.

MR. MacNeil: Assistant Secretary of State for African Affairs, Henry Cohen, testified today on Capitol Hill. He said South Africa was making progress toward ending apartheid. He said, "The end of officially sanctioned oppression is on the horizon." In other foreign news, an agreement has been reached for the withdrawal of Soviet troops from Czechoslovakia. The official Czech news agency reported the accord but gave no details. The Soviets have more than 73,000 troops in Czechoslovakia. An official announcement could come on Monday when Czech President Vaclav Havel is due to visit Moscow.

MR. LEHRER: The new flag burning law has been declared unconstitutional by a federal judge. It involved a case against four people who burned a U.S. flag in front of a Seattle post office. The federal law was enacted by Congress last fall after the Supreme Court struck down a Texas anti-flag burning law. Seattle prosecutors have not said whether they will appeal yesterday's decision directly to the U.S. Supreme Court.

MR. MacNeil: The Federal Aviation Administration today said it would issue new warnings on what pilots should say when a plane is running out of fuel. The move was prompted by last month's Avianca Airlines crash in New York. The Avianca pilots told controllers four times that they were running out of fuel, but federal safety officials said the pilots should have used the words "fuel emergency", which is the official terminology for such a serious fuel shortage. The FAA said it would also warn air traffic controllers to ask pilots clarifying questions if it sounds as though there's a possible emergency.

MR. LEHRER: The Senate Ethics Committee today announced an investigation of another Senator. He is David Durenberger, Republican of Minnesota. The Committee said there was substantial credible evidence that Durenberger may have violated Senate rules on payments for speeches, campaign contributions and gifts. The decision to proceed with a formal investigation followed a year long review of the case.

MR. MacNeil: That's our summary of the news. Now it's on to the Reagan testimony, the auto industry and Lee Iacocca. FOCUS - ON THE STAND

MR. LEHRER: The Reagan testimony is our primary story tonight. The former President gave videotaped testimony last week on the Iran-Contra affair. Transcripts of what he said in eight hours of testifying were released today. Reporters were also allowed to view the videotape, itself. It will be used in the trial of his former National Security Adviser, John Poindexter, who is charged with obstructing Congress and making false statements under oath about secret aid to the Nicaraguan Contras despite a congressional ban on such aid. Poindexter claims the President authorized his activities. Nina Totenberg of National Public Radio, our legal correspondent, was one of the reporters who saw the videotape. She will give us her impressions of what she saw and heard, and then she will be joined for analysis by two Iran-Contra watchers with different views, Scott Armstrong, a professor at American University, author of a book about the Iran-Contra affair, and Constantine Menges, a former National Security Council official, now a fellow at the American Enterprise Institute. They follow a presentation of what Mr. Reagan said in his testimony. We have asked professional announcer Paul Anthony to read pertinent excerpts. They begin with a section when Mr. Reagan was questioned by Richard Beckler, the attorney for Mr. Poindexter. He was asked about the problems the administration had getting funds for the Contras because of a congressional opposition to further military aid.

PAUL ANTHONY: [Reagan Transcript] Mr. Beckler said, "Now, did there come a time, Mr. President, in 1984, early 1984, when it looked like funds that Congress had provided for Contra support were running out? Do you recall that time frame?" The President said, "Yes." "Do you recall what your instructions were to your top people at that time as to what ought to be done about this?" The President responded, "Yes. My instructions were that whatever we did in trying to maintain the existence of the Contras should be done within the law. I emphasized that at every time and I knew that there were groups of citizens who were on the side of the Contras and who were soliciting funds to be of help to the Contras. And I told them that maybe some of these citizens, these people, would know who to contact or how to contact the people, proper people, to deliver the aid that they had raised for them and that I did not believe it was violating the law if our people who knew, had the answer to those questions, would tell them, inform them as how they could make contact. But, again, I emphasize no solicitation. We were not going to go out and try to solicit groups to do this. And I suggested at the time that it wouldn't be against the law if we had an opportunity to mention to some of our Democratic allies that they should have the same interest that we had with regard to the Freedom Fighters. But, again, as I say, always emphasized within the law. But from the very beginning, we all had to battle and fight to get any funding from Congress for the Freedom Fighters, and finally then, they shut it off entirely." Later, Attorney Webb of the Independent Counsel's Office asked, "And now you never, to the best of your knowledge, is it fair to say that you never authorized or approved any member of your administration to assist the Contras in any manner that would be illegal, is that a fair statement?" The President responded, "That was the thing that I kept, that I said that we must, whatever we do, that we must continue helping the Contras, but we must do it within the law." Webb said, "And you would never have authorized anyone in your administration to do anything that you knowingly believe to be against the law regarding the Contras, is that a fair statement?" The President responded, "That is a fair statement." Webb went on, "And at the time that the Iran initiative was ongoing, were you aware that money was being diverted away from the Iranian arms sales and diverted over to aid the Contras, were you aware of that?" The President said, "No, I wasn't. I was only aware finally that we got our twelve million two." Mr. Webb said, "And when the attorney general told you about these residual proceeds, was that the first time that you knew about it?" The President responded, "This is when we had found that out, when we set out to see if there was a smoking gun somewhere after that paper in Lebanon had published the false story that we were trading with the Khomeini, and the rest of the media took it up and went with it. And then that is when I appointed a Tower Commission to see if they could find out where, what the source of the other money, was any of it diverted. All I knew was the figure that was given me of the money that was in that separate bank account." Webb responded, "My question to you is, sir, had you approved or authorized that diversion while you were President of the United States?" Reagan responded, "May I simply point out that I had no knowledge then or now that there had been a diversion, and I never used the term, and all I knew was that there was some money that came from someplace in another account and that the appearance was that it might have been a part of the negotiated sale. And to this day, I don't have any information or knowledge that that wasn't the total amount, that or that there was a diversion." Mr. Webb went on, "My question only to you, sir, is to the extent that there was, in fact, a diversion of proceeds, did you in any way approve or authorize that while you were President of the United States?" The President again responded, "For heaven sake, no. And when I was once asked about that extra money and said that if it was an added sum to the purchase price what would I do, I said I would have given it back." Webb said, "So the answer to my question is that you did not authorize or approve it, is that correct?" The President said, "That's right." Webb went on, "At any time, sir, while you were President, did you ever approve or give authority to John Poindexter to obstruct or impede any congressional committee inquiry into events relating to the Iran-Contra controversy?" The President said, "No, I don't." Question: "And at any time did you ever approve or give authority to John Poindexter to make any false or misleading statements to any congressional committee regarding events related to the Iran-Contra controversy?" The President said, "No. And I don't think any false statements were made." Mr. Webb asked, "Mr. President, at any time did John Poindexter ever tell you that he had plans to make or cause others to make any false or misleading statements to any congressional committees regarding events related to the Iran-Contra affair?" The President said, "There was never any such thing that he had ever said to me that was false or misleading." Webb: "Did John Poindexter ever tell you that he had any plans to in any way obstruct or impede any congressional committee inquiry into events relating to the Iran-Contra affair?" The President said, "No." Webb then asked, "At any time did John Poindexter ever tell you that he had, in fact, made any false or misleading statements to any congressional committee regarding events relating to the Iran- Contra controversy?" The President responded, "No." Mr. Webb then went on and asked, "I will repeat that question to you, Mr. President. At any time, did John Poindexter ever tell you that he had, in fact, obstructed or impeded any congressional inquiry into events relating to the Iran-Contra affair?" The President said, "No." Webb: "At any time, did you ever approve or give authority to John Poindexter to destroy any documents or records that related to the Iran-Contra affair?" The President said, "No." Webb: "At any time did John Poindexter ever tell you that he planned on destroying any documents or records that related to the Iran-Contra affair?" The President again said, "No." Webb went on, "At any time did you ever tell, did he ever tell you that he had actually destroyed any records or documents related to the Iran-Contra affair?" The President again said, "No." Webb said, "Did John Poindexter at any time ever tell you that he had learned that Oliver North in November of 1986 had altered or destroyed records that related to the Iran-Contra affair?" The President said, "No."

MR. LEHRER: On the second day of President Reagan's deposition, Attorney Dan Webb of the Independent Counsel's Office returned to the diversion of funds from the arms sale to Iran. Once again, Professional Announcer Paul Anthony reads from the transcripts of the Reagan deposition. Mr. Reagan was asked about the Tower Commission report first.

PAUL ANTHONY: [Reagan Transcript] Webb said, "Based on the testimony that you gave yesterday that you as the President relied upon your national security adviser to keep -- ", the President interjected "Yes." " -- to keep you advised," Webb went on, "I take it that it would be fair to say that it is your belief that Mr. Poindexter should have told you about the diversion if, in fact, it turns out that he knew about it, is that a fair statement, Mr. President?" The President said, "Well, if I knew about it. I don't know about, and very possible that he didn't. But as I say this, I can't explain." Question: "I understand. I'm only asking -- " The President interjected, "This report, this is the first time that I have ever seen a reference that actually specified there was a diversion." Webb said, "My question is if he knew about it, you would have expected him to tell you about, is that correct?" And the President said, "Yes, unless maybe he thought he was protecting me from something. But, no, I don't understand. This is very confusing to me about this. I have to say, if I might, on behalf of all of this and the many times that I have had to say 'I don't recollect', this whole thing was given an impression that the whole government or the Presidential area of the government, the administration, the only problem was this particular thing and this development in this Iranian issue, and it ignores the fact that that was just one of the many things that were going on and that the government was involved in things of great import not only having to do with domestic problems, but with the cold war and things of that kind and trying to arrive at treaties with regard to nuclear weapons and so forth. And I, I don't think it is fair to allow that impression to stand."

MR. LEHRER: Now to Nina Totenberg, Legal Affairs Correspondent for National Public Radio, and one of the reporters allowed to see the videotape of the testimony today. Nina, is there a difference in the impact, watching Mr. Reagan say it himself?

NINA TOTENBERG, National Public Radio: There is. The black and white transcript shows a President who remembers very little, is rambling his answers, and the questions are often like ships passing in the night. I would call it sometimes remarkably inarticulate, to be candid. In person, when you see him on the stand in the video, and you notice I said in person because you really do feel like he's talking to you. He's that good still on television.

MR. LEHRER: Describe the shot. What do you actually see on the videotape?

MS. TOTENBERG: You see several different shots. There were three cameras, and so you will at times see the lawyers, or you may see the judge. But most of the time you will see a shot of the President sitting in the witness chair.

MR. LEHRER: Like in a courtroom? Like the Perry Mason case kind of thing?

MS. TOTENBERG: Exactly.

MR. LEHRER: And the judge is sitting to his left or right on the bench?

MS. TOTENBERG: Right, on the bench, and it's in the courtroom. It was in Courtroom 8 of the Federal Courthouse in Los Angeles.

MR. LEHRER: And the lawyers are sitting down in front, facing him --

MS. TOTENBERG: Right.

MR. LEHRER: -- and the judge?

MS. TOTENBERG: And standing up at a lectern to ask questions.

MR. LEHRER: Sure. Okay.

MS. TOTENBERG: But in person, as I said, on the video, he's very robust. He looks extremely well. I only hope I look that well when I'm 79. He is very amiable, except for a rather of testy exchanges with the prosecutors. He is very sincere appearing. And I personally found that when I was watching him, a lot of his answers didn't make a lot of sense. I couldn't track them but I didn't blame him for it. I sort of lost the thread, but I didn't feel that he was deceiving me. It's not that when you read the transcript, the cold transcript, that there's deception there, but it's quite a different impression, quite an idea of somebody who's really not, doesn't have a very good grasp of what went on in the one instance, and the other --

MR. LEHRER: For whatever reason.

MS. TOTENBERG: For whatever reason. And when you see it, it's a rather amiable, sincere, well, but older person who really can't remember very much.

MR. LEHRER: Yeah. Is that the most striking thing about the testimony?

MS. TOTENBERG: To me, that was absolutely the most striking thing.

MR. LEHRER: What about a startling development, a news -- if you had to write a lead, what would it be?

MS. TOTENBERG: I couldn't give you --

MR. LEHRER: You had to already, have you not, for NPR? What was it?

MS. TOTENBERG: The lead would be I think that the, really the overriding message of this is not what did the President know and when did he know it, but what did he not know it and when did he not know it. I mean, the list of things that he didn't know you heard in this illustration he didn't know and says he still doesn't know today that there actually was a diversion of funds. He said he didn't --

MR. LEHRER: Which is, of course, just for the record is an issue that is not even at issue anymore, is it not?

MS. TOTENBERG: That's right.

MR. LEHRER: Yeah.

MS. TOTENBERG: He said he didn't know that his former national security adviser, Robert McFarlane, had pleaded guilty to misleading Congress. He said he had no inkling, his words, that his aides in the White House were giving military assistance to the Contras, he had no idea that they had a massive fund-raising operation that they helped set up. He said that when the pilot, Eugene Hassenfuss, was shot down, he didn't know that he worked for a U.S. government operation. He thought he was just a private citizen who was in an accident.

MR. LEHRER: Now that's the -- for non-Iran-Contra junkies -- that operation was an operation that Oliver North was operating at the time --

MS. TOTENBERG: Right.

MR. LEHRER: -- in conjunction with a bunch of other people. There was, in fact, the only person other than North and the government who supposedly knew about it was then CIA Director William Casey, is that right?

MS. TOTENBERG: Although I think Poindexter knew about it.

MR. LEHRER: Okay.

MS. TOTENBERG: Poindexter.

MR. LEHRER: But that was a big thing during the Iran-Contra --

MS. TOTENBERG: The President, the former President didn't know today who Lee Hamilton is, Mr. Hamilton being the chairman of the Foreign Affairs Committee. He said, well, he was one of just four hundred and thirty-five. He didn't remember what the results of the investigation were, the investigation that he ordered his attorney general, Edwin Meese, to conduct. He didn't remember --

MR. LEHRER: Now, remember, that's the investigation when Meese came out and said there had been a diversion of funds.

MS. TOTENBERG: That's right.

MR. LEHRER: And he went on television and announced it as fact, right?

MS. TOTENBERG: And the former President said he remembered something about a piece of paper that Mr. Meese had found, but he was very unclear about it. He didn't remember the visits he got in the hospital from Robert McFarlane, the visits that Robert McFarlane said he paid to the then President to get him to authorize the Iran arms sales. Now he just had an operation for cancer. A lot of people wouldn't remember that. And he said he doesn't remember ever being told by Poindexter that Poindexter tore up the November 1985 official finding that authorized the arms sales.

MR. LEHRER: Okay. Now into the next two additional views of the testimony today. Scott Armstrong is a resident scholar in international journalism at American University in Washington. He is the author of a book about the Iran-Contra affair, called "Chronology," the documented day by day account of the secret military assistance to Iran and the Contras. Constantine Menges is a resident scholar at the American Enterprise Institute. He was special assistant to President Reagan for National Security Affairs from 1983 to '86. He was a Latin American analyst for the CIA before that. Mr. Menges, from a substance standpoint, from a fact standpoint, from an Iran-Contra standpoint, what was the most revealing thing that came out today?

CONSTANTINE MENGES, Former National Security Official: Well, having worked on these issues for five years in the Reagan administration, and having written the book "Inside the National Security Council", that tried to look at the whole issue of the President's authority in foreign policy --

MR. LEHRER: I should have mentioned your book. My apologies. I mentioned Armstrong's; I should have mentioned yours.

MR. MENGES: Well, the President's authority in foreign policy and the whole question of who did what, I did my best, having left the White House in June 1968, to make an assessment. I would say that we see President Reagan, as I had seen him often, telling the truth, being insistent that the law be obeyed. What came through to me is that as I had said in my book, I did not believe he knew about the diversion. Since I knew all the people, Reagan, Bush, Poindexter, Casey, and so forth, my sense was that what Poindexter said to the Congress in 1987 was the truth, that he had not told not told President Reagan when he found out in February 1986 about the diversion and I believe, in fact, in contrast with Nina Totenberg, I would say that what I saw was a man who was very clear and firm on the major policy questions, but as you would expect a busy executive to be, a man who as he told us had 80 meetings a day for eight years, sketchy on the details, and there, as he told us also, he relied on the staff, people like me, people like Admiral Poindexter, to provide the facts, pull it together, and I think that came through in terms of the details.

MR. LEHRER: But you would agree with Nina that there's nothing of substance that was new that came out?

MR. MENGES: Well, I think very importantly of substance also was the view that I always thought was his view that the Boland Amendment did not prohibit, it prohibited the CIA and the Defense Department from helping the Nicaraguan armed resistance, it did not apply to the White House, and very importantly since my formerly top secret memo of the National Security Council decision meeting of June '84 was used by Mr. Beckler in his questioning, it's very important that when this issue of third country help was discussed, President Reagan made clear that he thought it was proper to go and ask third countries to help, but what was improper would be for any member of the Executive Branch to administer that as, in fact, some people, as we now know, did.

MR. LEHRER: That was going on. And Scott Armstrong, what would you lead with today?

SCOTT ARMSTRONG, National Security Analyst: Well, I think there was one small addition to the fact pool today that was significant. The President addressing the question of the so-called "quid pro quos", whether or not we'd given something to foreign countries in return for their getting back aid to the Contras, stated that he'd agreed, they again made reference to one of the minutes of meetings in 1985, that he agreed with the Vice President that a quid pro quo would be wrong, that it would be the same as saying you can't do a quid pro quo, because you can't do something that's illegal. At the same time, when he went through in detail his meetings with the President of Honduras and his phone calls to the President of Honduras, and then with the Security Minister of Costa Rica, he indicated that he, himself, was involved in a number of transactions and there are at least two portions of the transactions that have not been previously disclosed in which he, himself, was offering something in return for aid to the Contras.

MR. LEHRER: To Honduras?

MR. ARMSTRONG: Well, I think it was Costa Rica, where the new information came out in that particular case. And that's, if this had come out three years ago, there would have been a lot of eyebrows raised, the word "impeachment" would have been forming on people's lips. I don't think it's significant at this point, but it would have cast the whole affair in a much different direction. It would have taken it in a different direction. On the way it was originally, the original Iran-Contra scandal, the notion of a diversion of money of arms for hostages over to the Contras, the President still addressing the same question, there was nothing new, except this remarkable sense that somehow he was frozen in time, that he was in a time capsule since the day Ed Meese came to him and told him that, look, there's been some sort of a bank account, there's extra money, and he's still defending the notion of whether or not that money was properly accounted for. It's as if he expects an IRS investigation to come along and he's back somewhere in November 1986, no sense of having learned anything from the Tower Commission, from the hearings, from the trial. It's completely as if it's just washed over him.

MS. TOTENBERG: I had a better sense than I ever had before of how he justified the arms, what we know or believe to be the arms for hostage deal in his own mind as not being an arms for hostage deal. He equated it with having a child kidnapped and somebody, some entirely different person, would come to you and say, I could help you. And these private individuals, which is the way he thought of the second channel in Iran, came and said, we can help you. And so --

MR. LEHRER: And the second channel in Iran was the --

MS. TOTENBERG: Other government officials, the non-Khomeini government officials.

MR. LEHRER: Exactly.

MS. TOTENBERG: And so --

MR. LEHRER: And McFarlane was the one who ended up talking --

MS. TOTENBERG: And so this second private person, this is the way Mr. Reagan put it in his testimony, comes to you and says, I think I can help get your child back, and we say, well, would you do that, and then we reward him when he does. Now we know from the established facts that that is not precisely the way it happened, but it is the way clearly to me anyway the President believes it happened.

MR. LEHRER: You were nodding.

MR. ARMSTRONG: I think that Nina's absolutely right. There's a sense of the President being disconnected from what the real facts of the affair were. Constantine's book, as a matter of fact, is very good establishing that thesis. There's a notion that I don't think we've ever given full credence to that this President was not connected with his Presidency. It's as if the Presidency was told to him by a series of advisers or script writers. He's like a man who read some of his lines, never saw the final movie, really doesn't know what it's all about, and is kind of surprised now to find out it's much different than he'd been told.

MR. LEHRER: Is that too harsh, Mr. Menges?

MR. MENGES: That's not my sense at all. In fact, what my sense from having seen President Reagan for five years and having been in meetings with him for three years is that on the big issues he was always clear, made decisions, and in fact, I think my book establishes clearly that when the issues were brought to him, he made decisions, the top secret NSDD, the decision memoranda written, told the government what to do. The problem that he had with the Executive Branch is that some elements decided they'd carry out their own foreign policy and wouldn't tell him. What I think comes through here applies to any President, to any President in, and that's why I begin my book with a quote from Harry Truman, busy executives whether they're here at MacNeil/Lehrer or whether they're running big corporations are dependent on staff. They're dependent on staff to tell them the facts, to tell them the truth, and I believe that unfortunately some members of the staff let him down, and I believe in any large organization, any of us who work in organizations realize this, that the leadership is dependent, and that's why the quality and honesty and integrity of the National Security Council staff is so critical.

MR. LEHRER: This was also, of course, a major portion of the Tower Commission Report that was really the guts of that report in terms of his not being served well in the National Security Council. Let's go back to the trial. The purpose of this thing today was not for the Mengeses and the Armstrongs of the world to sort through the Iran-Contra thing, but to help or hurt John Poindexter. Now, the purpose, the lawyers for John Poindexter obviously hoped that his case would be helped. Is there anything in here that helps Poindexter?

MS. TOTENBERG: There are some things that Poindexter will make hay out of it that will help him I think. At one point, the former President was shown a letter which is at the heart of one of the obstruction of Congress charges against Mr. Poindexter, and the President said, I agree with everything in that letter, except I probably would have used some profanity. And Prosecutor Webb then came back and tried to focus the former President on what the prosecution believes is the lie in that letter, and the President sort of grudgingly said, well, if it was a lie, which he never really did concede, if it was a lie, he wouldn't have authorized it. So there are moments, and certainly you have the overriding impression that aiding the Contras was a central important policy thing in this administration, so there are things that helped Poindexter, but there are a lot of things that helped the prosecution too.

MR. LEHRER: What's your reading of that, Scott?

MR. ARMSTRONG: I think it's a mixed bag, but I think that Poindexter was done some damage. His lines of retreat are somewhat cut off, not that the defense won't find a way to use the information, but the President's kind of constant notion that I wouldn't want anybody to do anything illegal, we don't want to violate any laws here, he kept talking about it though as if Congress has nothing to do with passing laws, as if laws were something, he was talking about some sort of universal law, not something that Congress was involved in, that it's all right to kind of hold things back from Congress, they're not really involved in this process, but laws are a different matter; they're something that the courts decide, that the courts have to do with. There was a real sense, I think, of delegation to Poindexter, and in some ways, I think that it hurts him the most because the President was basically saying even on things that Constantine wrote all these beautiful memoranda about that he didn't read them, he didn't know what --

MR. LEHRER: The President didn't read them.

MR. ARMSTRONG: Yes, and that Poindexter was in charge, Poindexter was doing things, McFarlane was in charge, everyone but Reagan.

MR. LEHRER: Do you agree?

MR. MENGES: Well, I think it shows the President in charge of policy. I think it shows yes, indeed, that he delegated to his staff, that, in fact, he was therefore dependent on them. He said, I trusted them to do the right thing. I think it shows clearly that he didn't know about the diversion, and I believe that the combination for the jury to hear President Reagan say this himself under oath that yes, he wanted support for the Contras, yes, he asked third countries and thought it was legal, and let's remember, former CIA Director Casey went the day after that meeting, the June '84 meeting, went to the attorney general and got an opinion, yes, it's legal, it's proper, and President Reagan could ask third countries, no violation of the Boland Amendment. So all of that's true, but what he didn't authorize and I think his shock at Meese telling him about the diversion comes through in that first time he mentions it. He says, that's the first time I ever heard about that money going to the Contras and I didn't authorize it. There I would have to agree with Scott Armstrong.

MR. LEHRER: Yes, Nina, go ahead.

MS. TOTENBERG: I don't think that the Poindexter defense ever really expected Ronald Reagan to testify.

MR. LEHRER: Exactly what I was going to ask you.

MS. TOTENBERG: I think they thought he'll never do it, if he's ordered to do it, he'll appeal it, we'll be in limbo.

MR. LEHRER: It was setting up something for reversal.

MS. TOTENBERG: For reversal or mainly for an appeal to hold up the whole trial for a couple of years, and then it would all sort of fade away, and you could actually tell that in the courtroom before, the week before this testimony was taken, Mr. Poindexter's lawyers were all over the map trying to figure out what they wanted, did they want it before or after, to be shown to the press, before or after, in-between the trial, who would pay for it. Suddenly it was going to be terribly expensive and they weren't sure that they could afford it, all kinds of things. I don't think they ever expected it. It was going to be the bogeyman out there to save Poindexter either by appeal or by trial, and by, I think the bogeyman was decimated, because one thing Ronald Reagan doesn't look like is a bogeyman.

MR. LEHRER: Also, did his lawyers, Poindexter's lawyers, think for one moment that Ronald Reagan was going to swear under oath that he authorized all this illegal activity, I mean, particularly what had been said on the record before?

MS. TOTENBERG: No, although they assert that not only that Reagan authorized it, but that both Poindexter and Reagan thought that everything they did was legal, and I think they got some help for that in a few areas.

MR. LEHRER: In other words, they had kind of a general blanket of legality.

MS. TOTENBERG: Right. And I think there are a few corners where they are able to help themselves with that, for example, the letter I mentioned, but by and large, I think in the balance, it's either a wash or they could get hurt by it. They could get hurt by it. Only the jury will know in the end.

MR. LEHRER: Do you believe that, Scott, that it's possible the lawyers never expected this to happen today?

MR. ARMSTRONG: Well, I think they had to have some idea where he was coming from. I think what they wanted, and they got a little bit of it, was a sympathetic explanation for why a man who was delegated these enormous responsibilities that Poindexter had might go to Congress and tell them something that wasn't true. They're not going to get in the trial, they're not going to be able to deny that he made false statements, and he made false statements, and they're going to try and justify some of them, but basically they're going to have to acknowledge that. I think what they did here was try and get a President who showed that he was confused about it too, that he was sympathetic, he didn't want certain things to come out, he certainly didn't want people to know about this aid to Honduras, or this aid to Costa Rica, and so forth. The only thing they proved for sure though was that Ronald Reagan would have made the ideal witness in the Oliver North trial. He knew nothing from the hearings. He had not been tainted by any previous testimony, hadn't read the Tower Commission Report. I mean, it was really quite remarkable.

MR. LEHRER: Mr. Menges, there was much going into this about whether or not it would hurt the Presidency for former President Reagan to do what he did, which was to agree to do this, give this videotaped testimony. Did you feel the Presidency being hurt today as you heard about all of this?

MR. MENGES: No. I think given all the questions and the amount of, the three major investigations and the questions, I think it's good that the American people through you, through the videotape, will have the chance to hear Ronald Reagan offer his honest judgment under oath. As a person who worked for him, saw him close up, I reached in my book the conclusion that he had been misled, that he was telling the truth during the Iran-Contra investigation, and that Poindexter told the truth when he testified that he'd never told the President --

MR. LEHRER: Originally, when he first testified.

MR. MENGES: Yes, when he told, during the Iran-Contra testimony, when he said he had never told the President, knowing the individuals as I did, and looking at the record and completing my book, I felt, and I think it's good that President Reagan, himself, has clarified the record.

MR. ARMSTRONG: In other words, there was kind of an intellectual coup des tas in the White House?

MR. MENGES: There was a serious problem of Presidential authority being taken by subordinates.

MR. LEHRER: We have to go. Nina, gentlemen, thank you.

MR. MacNeil: Still ahead on the Newshour, the perils of the auto industry and an interview with Lee Iacocca. FOCUS - ROAD CHECK

MR. MacNeil: Next tonight we look at the troubles in Detroit. Late last week the American auto industry reported more bad news. Chrysler lost 664 million dollars in the fourth quarter of last year. It's biggest loss ever. Profits at Ford for the same period were off 50 percent and at General Motors profits were down by 73 percent. In a moment Judy Woodruff talks to Chrysler Chairman Lee Iacocca. But first we have this report from Fred De Sam Lazaro of Public Station KCTA Minneapolis, who recently visited the Detroit Auto Show to get a look at what the future holds for American car makers.

MR. LAZARO: Just a decade ago the very concept of a super luxury Japanese car barely existed. Yet this newly introduced $40,000 Lexus is one of the best selling cars in its class. It has lured buyers away from Mercedes. Lincoln and Cadillac. Lexus is made by Toyota, other Japanese Firms known historically for economy cars.

MR. BROWN: The Japanese have been just miraculous marketers at being able to bring out cars quickly responding to taste.

MR. LAZARO: Peter Brown is Editor of the trade magazine Automotive News.

PETER BROWN, Automotive News: Their cars are still by and large better in terms of quality defining quality as lack of problems. That gap has closed. The Big Three make very fine automobiles.

MR. LAZARO: The Japanese competition has pushed Detroit quality higher it has also pushed the Big Three's market share lower. Ten years ago GM, Ford and Chrysler sold 84 percent of all cars in North America. That is down to 69 percent today. To prevent a further slide in market share analysts say Detroit is being forced to collaborate with its competitors buying Japanese know-how it can not keep up with.

CSABA CSERE, Car and Driver Magazine: Not that there is a gap in technology. It is the gap in the application of technology.

MR. LAZARO: Csaba Csere is a Director of Testing for Car and Drive. A typical example Csere points too is Ford's very successful seller the Taurus. This $20,000 top of the line Taurus incorporates most of today's advanced technology. lighter aluminum engines that get better milage, four values per cylinder for extra power and efficiency , and anti lock brakes. They prevent skidding in hard breaking situations. The problem is each of these features is either an expensive or imported option. Typically Csere says the technology in American cars lags behind that of Japanese competitors. The Ford Taurus for example was first introduced in 1985 and isn't scheduled for a redesign until the mid 90s. In the same period the competing Honda Accord will have redesigned twice. For their part Ford Officials say they are working to reduce the time that it takes them to develop new products. But at the same time they note that an unchanged Ford Taurus is still a runaway success. Analysts like the University of Michigan's David Cole say the moral is don't tinker with success.

DAVID COLE, University of Michigan: I would really hope that we don't get caught up with the idea that we just have to make change for change.

MR. LAZARO: Cole said automakers would be wise to concentrate on meaningful uses of new technology instead of talking dash boards for example he said car buyers want air bags and anti lock breaks. They make the car safer and fetch discounts on ever increasing insurance premiums. The message seems to be getting through to car makers. These features are already available in many models. If Detroit is eagerly moving in the demand for safety it has been far less enthusiastic to other demand that are certain to reshape automobiles in the 90s. That is because these demands for cars that burn cleaner and cars that burn less gasoline come from Government.

SPOKESMAN: So Chrysler's answer to this was to create two vehicles in one. One section for urban commuting and a mini van module for family trips.

MR. LAZARO: As part of its commitment to clean air and alternative fuels Chrysler unveiled this futuristic two in one mini van at January's Detroit Auto Show. The three seater micro car is powered by cleaner burning propane in this concept model but Chrysler Officials admit that it will be many years before they are in showrooms. Far beyond the deadlines being proposed in Washington for tighter regulations.

ROBERT LUTZ, President, Chrysler: You want us to get better fuel economy which in of itself would imply smaller lighter cars, however we are also facing every greater safety legislation which in and of itself mandates larger heavier cars. They would like us to do everything at once.

ROBERT STEMPEL: Show me the technology and we'll try it.

MR. LAZARO: For his part General Motors President Robert Stempel pointed to other things this electric prototype as proof of GM's effort to meet tougher environmental standards. The car can reach 75 miles per hour and go 125 miles between battery charges. The problem is that its battery system takes six hours to recharge, lasts only 20,000 miles and costs $1500 to replace.

ROBERT STEMPEL, President, General Motors: I am looking here at plants that may have to close if technology doesn't exist at a given point and time. Sure we've got everyone of our scientists working on it. We've got every college in the United States helping us with it. We are out there with the methanal alternate fuel vehicles. We are looking with the oil companies at different gasolines. We don't have the answers yet. MARYANN KELLER, Automotive Analyst: Where American companies fall short is that they have a tendency when regulation is promogated to say we can't do it, it costs to much.

MR. LAZARO: Mary Ann Keller is a Wall Street automotive analyst.

MS. KELLER: In fact they have met every regulation that the Government offered and forced upon them.

MR. LAZARO: Ironically analysts say because of their experience on meeting standards forced on them in the 70s the Big Three in some areas have actually developed more advanced technology then their rivals.

MR. COLE: We get into emission controls and electronics. We are the best here. We find the areas where Europe is absolutely outstanding. We are at a point in the industry today where there is no clear cut technological leader on the international scene in terms of Japan, Western Europe or here in the United States. Now the Japanese are masters at execution so given a technology, given an idea at this point they are the best in the World putting that concept in to the product.

MR. LAZARO: Cole predicts car companies will increasingly pool their respective strengths to build cars. A big reason for these international partnerships is the cost of developing new models acceptable to Governments and consumers alike. Among the new global cars is Fords newly redesigned Escort. Although its American workmanship is touted here by Joseph Reilly of the United Autoworkers the car was engineered by the Mazda Motor Company of Japan.

JOE REILLY, United Auto Workers We are going to be able to prove to the American public that we don't have to sell a piece of America every time that you buy acar. That you can buy our own products and that it is going to be as good if not better than any car made anywhere in this world.

MR. ELLIOT: It really is a global business and you can't say that this is a Japanese Car versus an American Car versus a German Car.

MR. LAZARO: Yet when he has too Tom Elliot of American Honda clearly prefers to view his top selling Accord model as an American car.

TOM ELLIOT, American Honda: The question was what does it mean when the number one selling car in America may be a Japanese car for the first time. Well first off the Accord local content exceeds 75 percent. We don't exactly see this as being a Japanese car.

MR. LAZARO: Cars may be global but it is clear that automakers want to emphasize their corporate American citizenship. By the mid 90s Japanese car makers will have the capacity to build 3.5 million cars each year in America. Almost a 1/4 of all car making capacity here. And while their emergence has helped preserve car making capacity it hasn't necessarily preserved auto worker jobs. Hundreds of thousands of them have been laid off at the Big Three since the early 80s.

PETER BROWN, Automotive News: One of the terrible social cost of the shifting of auto production to transplants. They are built out in nice beautiful fields in Kentucky or Tennessee. Where does the job loss come from? That comes from some where and it comes from all the Big Three, may be more General Motors than the others. Those plants have tended to be largely urban plants, more northern plants then otherwise. The auto industry has been the largest employer of black people in America. You close down a plant in Detroit and open up a plant in Tennessee. There is a big amount of economic dislocation going on there.

MR. LAZARO: So far Japanese car makers have opened eight assembly plants in the United States. Honda's Marysville, Ohio facility was the first eight years ago. By contrast the Big Three have closed precisely that number of plants just in the last three years.

MR. MacNeil: Yesterday Chrysler Chairman Lee Iacocca kicked off a high profile campaign to try to turn the tide for his product. Judy Woodruff spoke to him in Washington.

MS. WOODRUFF: It seems that almost everywhere we look these days, there's bad news about the auto industry. You've got plants closing, profits are down, the Japanese are taking over. Are we in a situation now after several pretty good years where the industry is just in an inexorable downslide, and the Japanese are up, or what's going on?

LEE IACOCCA, Chairman, Chrysler Corporation: Well, it's pretty bad right now, but it's going to get better. We had the same general problem in 1980 and we came out of it. You can't compare the auto industry, the American auto industry of the '90s to the one of the '80s, certainly not Chrysler. We're in good shape financially. We're in a recession essentially on cars and trucks. We're in a margin recession, big rebates. Nothing wrong with that; the consumer likes it. But I hope, I'm hopeful that this spring things will get better. Nothing would help our industry probably more than a drop of two or three points in the interest rate, because most cars are bought on time. As far as the Japanese threat, they're a big producer of cars in this country today and they're still shipping almost 2.3 million from Japan. We've got to turn that around and this gets to the point that we've got to convince the American public that the perception of our cars is not the reality. Our quality, our reliability, our safety of our cars, our features, and especiallyprice, because the change of the yen/dollar from 260 to 140 has made most of our prices under all the Japanese cars across-the-board and we have more value today. But you don't earn your stripes that easily. Between '80 and '80, some of our cars weren't too good. A guy went to an import, you want him back. You've got to have the goods and you've got to show him.

MS. WOODRUFF: Well, how do you do that? What is it, all three of the big auto makers had big declines in profits over the last --

MR. IACOCCA: Yeah. I'm afraid to say, it happened to all of us, but in the last quarter of last year, North American profits at Ford, GM, and Chrysler in the aggregate were probably in the red. There was no money in the business. Our dealers suffered badly. There was no money in the business. And that's a combination of two things, over capacity in the industry, much the same as Europe had in '80/'85, and they were losing their shirts, now they're big heroes and making money. Well, they're sort of protectionist. They don't allow the Japanese in there, No. 1. We're different. And they had too much capacity and got rid of it. And that's why I had to close two plants; I had no option. So I think as we restructure and get out the old facilities and put in new ones, with all the problems, and there are some real problems and unfair advantages, but I don't want to get into those today, what we're here in the store for us to show people what we have is world class competitiveness across-the-board and we're going to go on television and we're going to spend money and advertise to the American public before you make up your mind on an import because you think that everything in Japan or Europe, if you buy foreign, it's got to be better than American, that mood's got to change for the good of the country, but we've got to have the goods to do that. We think we have it today and we're showing people our fall models, '91, we're showing some people '92s and '93s, and we think we're in good shape.

MS. WOODRUFF: You say that and others, of course, say that about Detroit, but, I mean, there are some articles last week in the Wall Street Journal, analysts who are supposed to be objective about all this, say the technology on the part of the Japanese is still way ahead of American technology and perhaps more important, the application of that technology, that they are able to get it into these new models and turn them around and get them out on the market within a much shorter period.

MR. IACOCCA: Well, let's take the shorter period first. They can do a car from the ground up like our new '92 Sedans. The best they can do one in 33 months and we're 36 and we've got to try to squeeze the 3 months out of that, but we're very very comparable in that, and as far as technology, I mean, the technology surely do some things that we haven't even approached yet. For example, four wheel steering, we know how to do that, but we don't want to spend the investment to put in what we consider something that the public doesn't need or want. We take nothing from them in the fact that they are able to process and manufacture cars at really, in many cases at lower cost, and in some cases faster than we have, but we're about there. You see, we're about there, and the perception of people is that somehow, and the press has been pretty tough, and I've had a big beef with the press on this, as long as you stick with facts, I don't mind it, but the story referred to he went by our plant and said this says it all, the Japanese are forcing the U.S. to board up their cities like he wasproud of it. Well, he should have gone across the street to see the billion dollars we're spending to put up a new one. That's not easy to come by, that capital. He didn't go out to the suburbs and see our billion dollar research and development center that we're doing. We're taking the long view. I often say to the press, make up your minds, am I a short-term thinker or long? Don't beat me over the head and say I only think short-term. I'm thinking long-term and you people are getting antsy, the analysts included, about, well how about today's profits, how about this quarter. I don't want to be concerned about that at Chrysler. For the long haul, this industry will make it because it's plowed back its earnings for the last decade.

MS. WOODRUFF: What about the quality issue? I mean, here again, you have got analysts who are supposed to be objective, these folks who do these surveys and studies and so forth.

MR. IACOCCA: What cars are you talking about? We have some better than them. They can't touch this mini-van here on quality. Consumer Reports says it's miles ahead of anything Japanese. They take the convertible market, we're ahead of everybody, quality, reliability. They get into some Sedans. There's a car against a Honda Accord that has the same quality and reliability. Maybe you'll find a jeep at an older plant like Toledo that won't have the same repairs per hundred that a Japanese comparable unit will, so they drown you in an average and say but the image is that everything they do is perfect. Well, they have more recalls than we have, but nobody knows that.

MS. WOODRUFF: They have more recalls than you have?

MR. IACOCCA: Oh, yes, the Japanese always have had. But see, that never gets advertised. Their safety record is next to being awful. They don't even offer air bags. Oh, they do in the $35,000 Infinity and Electras, but the other cars don't have them. We have them on our $7,000 cars. So again it's how you package value to the customer. And that's nobody's fault but ours, because we spend a lot of money presenting these products to the American public. We've got to get that message across.

MS. WOODRUFF: Well, if all that's the case, why hasn't the message gotten across? Why have the Japanese eaten up what, 15 percent of the American market in the last decade, less than a decade, and the projections are they're going to be way ahead of where they are --

MR. IACOCCA: Well, early in the decade, and you've got to go back 15 years, you'll find that they lucked out a little bit. There was an oil embargo the years of the '70s with the dollar/yen at 260, they had two things, $1995 cars and $2500 cars that got 30 miles to the gallon when people were waiting in lines at gas stations. That's gone now. They did their homework and from there after they got this huge beach head concentrated on quality. But I think it's self-flagellation. I think the American public is getting an inferiority complex about itself, so we have --

MS. WOODRUFF: What do you mean by that?

MR. IACOCCA: Well, anything American is bad. We send, we have two vivid examples of that. There are two plants in this country that build the exact same car with an American name plate and a Japanese plate, they go down the same line, they're identical; it's a joint venture. When they come to the end of the line, they say they prefer the Japanese car.

MS. WOODRUFF: Why is that?

MR. IACOCCA: Perception, perception.

MS. WOODRUFF: But --

MR. IACOCCA: We're trying to get the reality to match a perception. We will come out with a program and go head to head, car to car, not averages, car to car, and say here's what we have, and here's what they have, give us a shot before you think of buying an import. If the import's better, buy it. If our car's better, take a look. So that's an uphill battle because of the sins of the past.

MS. WOODRUFF: Does it really matter though in the last analysis if they are in this country, again, if they have hired American workers, if they are making parts for U.S. name brand cars, what does difference does it make?

MR. IACOCCA: The difference is over time the imbalance of trade between Japan and the United States of America is 60 billion; 35 of it every year like clock work and it's growing is cars and trucks. We cannot sustain that. There will be backlash of the first order. The consumer will be king for a while, but the jobs will go out of here so fast you'll see a reaction. There's a thousand page trade bill up on the Hill right now. The President has all the ammunition he needs to say guys play fair or you're in trouble. I think the Japanese who deal in pragmatic self-interest will understand that. When I go to Japan, I get applauded there. I don't get applauded in Washington. They understand what self-interest is, okay, and you cannot sustain that kind of image, however they got it, cost of capital, they run a good show, if their cost of capital is 3 percent and mine's 10, that's tough on me, because I have got to do my investments and my research center at 10 percent. But why are interest rates high? We borrow so much. We've got to get them. We consume from them. We need their money to keep our deficits going. So we don't want to get into that today, do we, but the budget deficit is too damn high. But they've talked it to death. We should make people buy smaller engines. Don't fight the market, make them buy smaller engines. How do you do that? Get a $1.50 a gallon gas instead of $4.00. It's $4.00 in Japan and Italy.

MS. WOODRUFF: Raise the tax.

MR. IACOCCA: Who builds the best small cars in the world, small cars, small engines, Japan and Italy. Why? $4.00 a gallon gas, isn't there a correlation? We can't figure it out here. I'd like smaller engines. For one reason, it would help the emissions problem, it would help our dependence on OPEC oil, which is now at its highest point since the embargo, but that's a whole other set of issues for the people who we elected to run the country. I've got to play by whatever rules are there and my rules are to bring cars like this out to the world and say these are top quality world class great features and sell them on it. So I'm going to spend a lot of money to sell them on it.

MS. WOODRUFF: Lee Iacocca, thank you very much for being with us. RECAP

MR. LEHRER: Again, the major stories of this Thursday, the videotaped Iran-Contra testimony of former Pres. Reagan was released. He said what he had said before, that he had not sanctioned the diversion of Iran arms sales funds to the Nicaraguan Contras. The testimony will be used in the trial of former National Security Adviser John Poindexter. And Secretary of State Baker told a House committee the United States would not automatically initiate normal relations with the Sandinistas if they won Sunday's elections in Nicaragua. Good night, Robin.

MR. MacNeil: Good night, Jim. That's the Newshour tonight and we'll be back tomorrow night. I'm Robert MacNeil. Good night.