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 A Compelling Story. January 6, 2010
AdamSmythe (Colorado)
65 out of 66 found this review helpful
I generally prefer to describe books more than I like to recommend them, because every reader is different, and armed with some reasonable information people can (and should) make up their own minds about what to read. That said, this is a book I recommend, due to the significance of the auto industry and, perhaps more importantly, the enormous amount of taxpayer money that's already tied up in the industry.
Author Paul Ingrassia has covered the auto industry for The Wall Street Journal for 25 years, and he has won a Pulitzer Prize--so he knows the industry and can write. Briefly, he has written a compelling story of how the U.S. auto industry got to be in the mess it's in today. If "mess" looks a bit nonspecific, just consider that the Detroit automakers have shed over 300,000 jobs in the last decade and somehow managed to lose $100 billion. The story, of course, starts at the beginning of the U.S. auto industry, and there is plenty of material in this book tracing the industry's history back to the times of Henry Ford, William Durant (the founder of GM), GM's visionary manager Alfred P. Sloan, Jr. and UAW leaders like Walter Reuther, Leonard Woodcock and Douglas Fraser. Indeed, I'd say that almost three-quarters of this book deals with Detroit before the recent crises and bankruptcies.
It is easy to forget that auto companies were once pioneering leaders in American industry and that Detroit was somewhat like today's Silicon Valley, attracting top talent from across the country. It is also easy to forget the degree to which the auto culture mixed with American culture--to the point that songs were written about cars (Mustang Sally, Little Deuce Coupe, GTO, Dead Man's Curve, 409, etc.) Ahh ... those were the days. Or were they? The problems that would eventually lead to the implosion of the American automakers were already developing, starting with a toxic relationship between corporate management and the UAW. Ingrassia doesn't really heap more blame on the oligopolistic automakers or the monopoly union, and that is probably fitting. They both seemed oblivious to economic reality, with the union typically demanding more than worker productivity would allow, and corporate managers giving in to union demands as the path of least resistance. Perhaps they deserved each other. The result was a dysfunctional industry, ripe for new competition--which is exactly what it got with the arrival of the "transplant" foreign auto factories in America. According to Ingrassia, Detroit probably reached its high-water mark in the 1970s and then began a long decline. I confess that I owned a Chevy Vega back then, and I found the history of this troublesome car to be very interesting.
After laying the foundation for an understanding of how the American auto industry developed, warts and all, Ingrassia moves on to the remarkable story of the last few years, including blow-by-blow descriptions of tense negotiations and corporate and government decisions. It is fascinating material, though not a pretty sight.
Summarizing, if you have an interest in just how the American auto industry got into the fix it's currently in, this book should inform, enlighten and even entertain you. (It includes a dozen or so pages of photos of classic cars.) The industry's story is perhaps more convoluted and messy than you might imagine. Indeed, I'd say that frequently it appears stranger than fiction. But it's real, of course, and this compelling book gives the reader a good understanding of the hopes, dreams, trouble and turmoil that has come to be the American auto industry.
Excellent Summary - January 20, 2010
Loyd E. Eskildson (Phoenix, AZ.)
27 out of 33 found this review helpful
Last year the federal government spent $106 billion to bail out G.M. and Chrysler. In return, the two companies went through bankruptcy and substantially reduced their debt loads, will shut down 16 more factories by 2011 (after closing 22 between 2004-08), 3,000 dealerships will disappear, along with Pontiac, Saturn, and probably Saab, and the UAW gave up its 'Jobs Bank' (allowed senior workers to volunteer for layoffs at 95% pay) and many other prized bargaining wins. Only 60-some years previously these same auto companies, along with Ford and other firms, had been key to America's industrial might that helped win WWII. "Crash Course" provides an excellent accounting of how Detroit's auto oligopoly and labor union monopoly both failed after 70 years of constant battling.
In 1955, G.M. became the world's first company to earn over $1 billion in a year, its market share exceeded 50% (was being closely watched by the Justice Dept.), and Detroit's CEOs were king of the world. In 1960, imports comprised less than 5% of the U.S. auto market, though rising to 15% (mostly German) by 1971. More ominously, the year 1970 brought a 67-day strike against G.M., and worker sabotage at its Lordstown (Vega) plant. G.M. then worsened its quality problems by creating a new overall division (GMAD) in charge of production, separate from design and marketing and creating a lack of accountability. Then, in 1973 Detroit's import problems intensified with the first Arab oil embargo - buyers not only tried and liked Japanese cars' better fuel mileage, but their improved reliability (vs. the Chevrolet Corvair and Vega, Ford Pinto, and the later Dodge Omni) as well.
In 1982 Honda opened a plant in Ohio - it planned to sign with the UAW (its Japanese plants were unionized) but held back due to the plant managers' concerns. More than two dozen other Japanese plants followed, and the UAW's monopoly was quietly broken. Simple things involving respect - like providing job security, valuing worker ideas, making the work more ergonomic, locating predominantly in non-union areas, and improved dignity through common uniforms, parking, eating and restroom facilities for all levels eliminated the UAW's appeal.
Instead of focusing on improving car quality in the 1980s, Detroit went in other directions. G.M. bought Hughes Aircraft for its technology and EDS for its computer skills, paid Ross Perot $375 million to get off G.M.'s board and stop criticizing management, and established a 'Jobs Bank' for workers displaced by automation (later expanded to those displaced for any reason without any time-limit, and costing about $1 billion/year). The good news for G.M. is that it abolished both GMAD (assembly plants) and Fisher Body (stamping plants) to improve accountability, launched Saturn to build small cars with innovative labor relations and high-tech, and entered a partnership with Toyota to re-open a Fremont, Ca. plant (NUMMI) that had previously been G.M.'s worst. (Using the same workers and union leaders, Toyota led NUMMI to become a top quality facility as it produced cars for both firms.) Meanwhile, G.M.'s market share dropped to 41% by 1986 - had been over 50% at its peak. Across town, Chrysler bought Gulfstream and Maserati and moved production line locations ($800 million), and Ford spent billions to buy Jaguar, Aston-Martin, and part of Mazda.
The years 1990-91 brought $6.5 billion in losses for G.M., and the U.A.W. sabotaging the Saturn effort by insisting that expanding production into another facility required U.A.W. contract coverage (the Table of Contents ran nearly 20 pages), and that parts procurement had to be via union vendors. Other years in that decade brought record profits, aided by stretching factory depreciation from 35 to 45 years, and increasing projected pension investment returns. Mercedes bought Chrysler for a 40% stock premium in 1998, expecting $3 billion/year in savings - instead, Chrysler profits fell. Another strike at G.M. in 1998 lasted 54 days, and led to spinning off parts production into 'Delphi,' while continuing to guarantee Delphi's pension obligations. The U.A.W., in response, refused to allow suppliers to deliver pre-assembled modules that would save $2,000/car. Ford continued its acquisitions - buying Volvo for $6.5 billion, a chain of car repair shops in England for another $1.6 billion, and Land Rover for $2.9 billion. Soon after the Ford Explorer-Firestone tire problem hit, costing Ford at least $3 billion in recalls; thus distracted, Ford's quality hit bottom on J.D. Power ratings. The decade ended with all the Big Three all deciding to focus on trucks and SUVs - their profit areas.
The new millennium began with G.M. acquiring 20% of Fiat for $2.6 billion and agreeing to acquire the rest of the company later, spending $1 billion to close Oldsmobile and pay off affected dealers, expanding GMAC into home mortgages and commercial lending, and finding itself with a 29% market share. An internal report concluding that the company still had too many brands, factories and people was ignored. Its last profit was in 2004, at which time market share was down to 27%. About half of that was Chevrolet, and the rest spread over 7 other brands - including Subaru (owned 20%). The result, again, was a period in which G.M. cars looked like each other - for obvious cost-saving reasons. Then the Japanese brought out SUVs, gas prices rose, and G.M. was forced to pay $2 billion to Fiat to withdraw from its prior buy-out agreement. Meanwhile, Ford lost $12.6 billion in 2006, brought in a new CEO (Mulally, from Boeing), and borrowed $23.6 billion. Chrysler, meanwhile, was still losing money and the U.A.W. refused to grant contract concessions - Mercedes then sold it to Cerberus for virtually nothing (about a $35 billion loss from the original purchase price).
G.M.'s ratio of retirees to workers had now reached about 3:1 and added $1,600/car, vs. $200 for Toyota (few retirees). G.M.'s viability could no longer be taken for granted, and the UAW agreed to a two-tier wage structure (lower for new hires), and to take responsibility for retiree costs (for $35 billion from G.M., covering about 70% of projected costs). Government bailout talks in 2008 brought a succession of revival plans from G.M. - even the third plan only proposed to 'study' the topic of what to do with excess brands Saab and Saturn, to make Pontiac a 'niche' brand, and to recover by 2014 - based primarily on wishful thinking that the Chevy Volt ($37,000 cost, only 10,000 sales over its first three years) would accomplish this, and to avoid bankruptcy (the only way to break the UAW stranglehold). President Obama's 'car czar' concluded that CEO Wagoner and his board had to go, and they did. Now, Ingrassia concludes, instead of the Big Three, America will have a Medium Six.
Bottom Line: "Crash Course" is the story of an American tragedy - how early success, combined with timorous leadership, led ultimately to failure. Many blame Detroit management for focusing on SUVs and trucks - reality, however, is that these were the only vehicles they could earn profits with, as long as the Japanese had none, gas prices were low, and the UAW was so strong. This story, unfortunately, has also played out in the steel (more steel was produced in 2007 than in 1970, with one fifth the employees and one twelfth the man-hours per ton - thanks to bankruptcy and innovation) and airline industries, though with much better results in the latter - thanks to managements' aggressive use of bankruptcy law. Undoubtedly union abuse of power also has motivated the initial off-shoring of millions of additional American jobs. Unfortunately, the problem continues today - Boeing's 5-year string of $13 billion in profits brought the fourth strike by its Machinists Union in 20 years - this time for 8 weeks, delaying deliveries, causing cancellations, and prompting Boeing to lay off 10,000 workers and spend billions more to start a second-production line in non-union South Carolina.
Finally, American managers are often blamed for short-term thinking - eg. Detroit's CEOs failing to use bankruptcy laws to tame the UAW, and U.S. bankers dragging the nation into the 2008 Great Recession. Both Detroit's and the banking system's failure were abetted by U.S. regulators and political leaders failing to act. Conversely, our Chinese competitors are hampered neither by strong unions nor inept regulators. And that gives them a very strong advantage, in addition to their low costs.
A warning, good for any industry! February 18, 2010
R. C Sheehy (Foxboro,MA USA)
3 out of 3 found this review helpful
Paul Ingrassia writes a cautionary tale in Crash Course that details how any industry can fail when it loses its eye on what it should be focused on, the market, and instead focuses on a number of rules and regulations. Crash Course does an amazing job of showing how the classic Big 3 became hidebound by managerial incompetence, union greed and short term thinking and in doing so, sowed the seeds of their own destruction. Where Ingrassia is strongest is when he goes into detail on how the Union and company management refused to work together prior to the bankruptcies of GM and Chrysler out of fear that doing so might be seen as weakness.
Ingrassia gives a long and deep history of the American auto industry which is important because he shows how the industry's eventual collapse began long ago in its history but was a result of some long and hard fought battles which did benefit all parties in the short term. However they also resulted in complacency and a commitment to short term advantage and an attitude which can only be described as cutting off ones nose to spite their face.
The ironic thing is that when Ingrassia wrote this book Toyota and Honda were flying high. While they are mentioned as they obviously played a role in the downfall of Detroit, it is now easy to see them, especially Toyota going down a number of the same paths, bad management, protection of the company's executives over protection of the customer, as what we have with GM and Ford.
This is a well thought out and well developed book. In many ways it reads as both a mystery as well as a history. Ingrassia has a number of valuable insights and he is not afraid to offer an input when it is called for. Well worth your time!
Funny and awful at the same time March 13, 2010
babybmr (California)
3 out of 3 found this review helpful
"Crash Course" is a great history of the Detroit automakers--history as in it is over. I also think it has a lot to say regarding whether people are inherently good or inherently bad.
Interesting to realize as I was reading this book that generations of Americans lived and died never knowing that the arrogance, greed, incompetence and dishonesty of most of the men who ran the US auto industry killed it off.
The unholy alliance between GM and the union is mind-boggling--even though I thought I knew about that, what I read in this book shocked me. Generations of auto workers enjoyed a "workers' paradise" of inflated pay, superb benefits and insane job protections such as the jobs bank. And management right up through the very top loved all of that too because though it was bad for the company, it did not hurt them personally and that's all that mattered.
Though "Crash Course" is specifically about the auto industry, it's also a cautionary tale about investing in the stock of any American corporation. Corporate executives are immune from failure, they walk away with millions regardless of what happens to a company, so beware investors.
Excellent February 18, 2010
kkav (Cumberland, RI United States)
2 out of 2 found this review helpful
Years ago I read a great book called Comeback that detailed how the US auto industry failed to see the threat that Japanese imports were doing to market share and how the Americans companies fought back. I still remember the book because it was well researched and well written. It finally dawned on me that this was the same author who wrote Crash Course. Crash Course is as good as Comeback, maybe even better. Writing a book about the history of the car industry is a daunting task and other than great books like Douglas Brinkley's Wheels for the World, most of these automotive histories fall flat.
Crash Course is different. The book provides a basic background for each of the automotive companies and hits the high points, but never bogs down. It details just how the American and foreign car companies came to be, how they failed, and which ones may ultimately survive. Paul Ingrassia writes with ease and competence, so the reading is quick and interesting.
Showing reviews 1-5 of 34
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