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Poker Game. What followed resembled in some respects a war game, in others a game of poker. First the Administration announced that it would sell 100,000 tons of excess aluminum from the Government's huge stockpile, hoping to pressure the companies by weakening prices (yet denying any such aim). As the Aluminum Co. of America joined the price rise, the Government raised that total to 200,000. Then Alcoa Executive Vice President Leon Hickman, chief negotiator for the industry, vowed that the aluminum producers would stick by their price boosts. Furious at this open defiance, the Texas White House issued further orders to up the ante.
By this time all the orders were being fielded in Washington by Defense Secretary McNamara, who received word from Presidential Special Assistant Joe
Califano at the Texas White House that he was to run the aluminum show, thus enabling Lyndon Johnson to keep in the background. McNamara quickly moved into the limelight in front of Gardner Ackley, Treasury Secretary Henry Fowler and Commerce Secretary John Connor (who opposed the stockpile dumping as unworkable, confined his own action to a speech defending the Administration after the price hike had been rescinded). McNamara used roughly the same technique that the U.S. had used on the Russians during the Cuban missile crisis: turn the screw only half a notch at a time, then release it to enable the foe to back off. Turning the screw again, McNamara let word be issued that the Government would now dump 300,000 tons of aluminum, an amount that the industry feared would rock the aluminum market.
No Time to Shave. That twist was enough to do it. The same day Alcoa President John D. Harper hurried from Pittsburgh to McNamara's mammoth third-floor office in the Pentagon's guarded E ring, began negotiating for a truce. Harper was back in the Pentagon the next day, too, and he and McNamara also spoke several times by telephone. At 8:35 p.m. on Wednesday, Harper phoned McNamara from Pittsburgh to surrender: Alcoa would cancel its price boosts. Lest the company change its mind overnight, McNamara called in newsmen for a 9:45 conference, acting so quickly that he had no time either to shave off his 5 o'clock shadow or don the blue shirt he always wears for TV.
Magnanimous in victory, McNamara insisted that the beaten executives had performed "a patriotic act of industrial statesmanship." Now that he had so successfully used the stick, he also skillfully brandished a carrot. Said he: "As Secretary of Defense, I am the biggest buyer of aluminum. The department will buy between 300,000 and 400,000 tons of aluminum in 1966 [double its 1965 consumption] which I believe is 10 or 15% of the industry's production." Why buy aluminum when the Government has so much in its stock pile? The explanation was that stockpile aluminum is not completely processed, and the Government owns no facilities for processing it; the aluminum the Government buys from industry is fabricated for special purposes, such as helicopter landing pads or guns. The other aluminum companies got the point, quickly rescinded their price increases.