Comeback: The Fall and Rise of the American Automobile Industry. - book reviews

Washington Monthly, Sept, 1994 by James Bennet

At the beginning of 1992, the directors of General Motors Corporation, the world's biggest industrial company, decided to figure out what was going on in the organization they theoretically controlled. The company by then was losing more than $1 billion every three months, and it had given up 10 percentage points of its U.S. car market share - an amount greater than the Chrysler Corporation's total car sales - in the previous seven years.

So in an unprecedented end run around top management, the board deputized one of its own, John G. Smale, the retired chairman of Procter & Gamble, to spend two months interviewing G.M.'s executives and reviewing the company's internal reports.

What Smale found, as described by Paul Ingrassia and Joseph B. White, was astounding: G.M. built lousy cars; it was the industry's most inefficient car designer and producer; and its announced cutbacks wouldn't close the gap between its dwindling sales and its colossal production capacity, meaning the losses would continue.

I say astounding, because the findings were so mundane. This is roughly equivalent to a blue-ribbon presidential commission taking two months in 1994 to figure out that the federal government is running a really big deficit. As the authors note, G.M. did not lack for independent sources of criticism: Automotive journalists and Wall Street auto analysts had been saying all this for years. But the board didn't believe them, because it was easier not to, and because management kept telling them everything was under control.

One of the unstated lessons of this absorbing, rich book is the power of individual men - and they are all men - to bring enormous companies to their knees by spinning captivating visions of financial growth and then controlling information as things go wrong. At G.M., the notorious Roger Smith would issue board members thick financial papers on the mornings before their monthly meetings, then grab them back as soon as the meetings ended. Who could have expected the directors - "bewildered sheep," the authors call them - to have noticed little changes, like when Smith blithely altered projections in 1990 to assume retirees would die two years earlier and that the pension fund would earn 10 percent more per year?

The authors, who won a Pulitzer Prize for their coverage of the G.M. boardroom shakeup that followed Smale's investigation, suggest such shenanigans are past for Detroit. The book ends at last January's chest-thumping Detroit auto show, with Big Three sales booming, the Japanese on the run, all the villains conveniently departed, and a new generation of sober leaders committed to teamwork firmly in place.

Perhaps. Still, this big book picks up where The Reckoning, David Halberstam's very big book about the decline of the Big Three, left off. And one can't help suspecting this publishing cycle is likely to repeat itself.

It is true that the publicly egomaniacal auto barons have exited. Their managerial flaws notwithstanding, their departure is mourned by journalists because they made great copy. Their antics yield the liveliest passages in Comeback.

One of the many previously unreported anecdotes has Ronald Reagan trying to ease Lee Iacocca out of a speaking role during the 1986 celebration of the Statue of Liberty's restoration. Chrysler was a major sponsor of the celebration, Iacocca had headed the national commission to restore the statue, and he was scheduled to introduce Reagan. But the White House was nervous that Iacocca harbored presidential ambitions; it didn't help that Iacocca once called White House Chief of Staff Donald Regan a cocksucker.

Iacocca refused to back out, and ordered Ben Bidwell, a Chrysler executive, to deliver that message.

"Are you saying, Mr. Bidwell," shouts an outraged protocol officer, "that Lee Iacocca will not accede to the wishes of the President of the United States?"

"That's exactly what I'm saying," Bidwell replied. "And if the President doesn't accede to Mr. Iacocca, when the parade of ships begins, the television screens will go blank!" Reagan blinked.

The authors do a wonderful job of shredding the already frayed Iacocca myth. Like Roger Smith, Iacocca, a notorious cheapskate, is seen greedily trying to further pad his bulging pockets and pleading for continued use of the company jet as the board finally pushes him out the door. When he traveled as chairman, a convoy of limos awaited him at every airport; once retired, he was astonished to discover self-service gas stations.

Since the days when Henry Ford squashed all efforts to improve the Model T, this kind of executive arrogance has been a recurring pitfall for the Big Three. It led Iacocca to make many of the same stupid mistakes as executives at G.M. and Ford. During the eighties, the three companies spent billions diversifying into businesses they didn't understand, while their core auto operations suffered. Chrysler lost untold millions trying to manipulate its stock price, buying its own stock high and selling it low.