This week, I read about the big three auto companies in a book called Crash Course. This is the book for anyone who wants to look under the hood of the American auto industry to see what makes it run. (Couldn’t resist.) The author, Paul Ingrassia, covers the entire American auto industry in 273 pages. He skips some details obviously, but this is a hell of a primer on Detroit’s rise and fall and rise and fall and whatever comes next.
Ingrassia makes it clear that the auto industry has PLENTY of problems. The biggest, in his opinion, is the UAW. Throughout the book, union rules, union pay, union contract negotiations and union benefits are shown as reasons the industry is unable to succeed in this global economy. Competition from Honda (which originally intended to allow itself to be organized by the UAW), Toyota and Nissan didn’t make Detroit better–it made it worse. Here’s the thing though, the book isn’t an anti-union tirade. In fact, he plays it pretty straight through the whole thing, heaping plenty of blame on the management culture in Detroit, on changing consumer preferences, and on the government. Given the scope of the book, it’s hard for me to believe he is unfairly picking on the union. Example after example shows a union that was out of control and company management unable to manage. I’m not anti-union—-many of my friends are union organizers or union associates. I’m not offended by the notion of a union. But Detroit’s example is one for the ages. The Jobs Bank was the worst. The company agreed (!!) to never lay anyone off–you could just transfer to a jobs bank when the plant was idled, and earn 95% of wages. The company could never restructure to make itself profitable. Once the company was cut, it couldn’t stop bleeding. Ingrassia did a fair job of showing the flaws of this structure and how it got out of control.
Here was something else I took away. Rick Wagoner, the CEO that President Obama “fired,” was portrayed as horribly ineffective. The book says he should have been fired many times before, but the insular culture in Detroit always protected him. Another villain was GM’s lead director, George Fisher. Talk about rearranging deck chairs on the Titanic. All this talk of socialism and the government interfering in business (the Drudge headline when Wagoner was fired was HUGE) is ridiculous. If the government took over GM and let Wagoner stay, the plan would have failed outright. According to this book, it was the absolute necessary course of action.
Ingrassia pretty clearly makes the case that saving GM was necessary. He does a great job of explaining how interwoven the auto industry is in our overall economy. He makes a few references to “real people”–the auto dealer in Maine and the factory worker in the South. He seems to agree with the government that saving Chrysler was a close call. Reading this was an interesting insight into how the government worked overtime to save the company. An auto task force with no experience in the auto industry saved two companies from disappearing. Untold numbers of jobs were saved, and two iconic companies were given a “second chance.” Ford comes off smelling like roses, though their overall history was far from perfect. They drew an inside straight to stay alive and return to profitability.
Overall, the book is a case study for the importance of making tough decisions. Much of Detroit’s leadership delayed and altered strategies but never was able to address the underlying problems. Caught up in their own perks and benefits, they never made the most difficult cuts. And then just like the banks, they were too big to fail.
Coda: We bought a Ford Fusion this year. Not because we were patriotic (though we bought on July 4) and not because they had great rebates. But just because it’s a damn good car. Moral of the story? Make good cars and people will buy them. Easy. Right?