Checking Under the Hood
Bennet, James
On Political Books Checking Under the Hood The business press—and the executives of the Big Three—say Detroit is back on top. But for how long? BY JAMES BENNET Comeback: The Fall and Rise of the...
...But in his shiny new Cadillac plant, Smith's robots spent their time painting each other instead of the cars...
...built lousy cars...
...once retired, he was astonished to discover self-service gas stations...
...Students of bureaucracies will be fascinated by the stories about G.M.'s inability to learn not only from its mistakes, but from its successes, like its joint manufacturing venture with Toyota near San Francisco, which makes Corollas for Toyota and Prizms for Chevrolet...
...it didn't help that Iacocca once called White House Chief of Staff Donald Regan a cocksucker...
...A long section on Ross Perot's relationship to G.M., for example, seems superfluous...
...Similarly, the business press treated Don Petersen, the chairman of Ford, as a guru, a philosopher of humane management, largely because he talked a good game and Ford was making record profits in the late eighties...
...Iacocca refused to back out, and ordered Ben Bidwell, a Chrysler executive, to deliver that message...
...Still, this big book picks up where The Reckoning, David Halberstam's very big book about the decline of the Big Three, left off...
...My main concern about this book, however, stems from a wider problem in business journalism...
...Downshifting By 1994, a combination of bad management and new manufacturing techniques, the authors note, had turned G.M...
...But in his shiny new Cadillac plant, to take one infamous example, Smith's robots spent their time painting each other instead of the cars...
...I say astounding, because the findings were so mundane...
...The Big Three are getting better, although G.M...
...Between 1980 and 1985, while lavishing $42 billion on new factories and equipment, G.M...
...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...
...But it is too much of a leap to conclude that Detroit has regained the lead, as the packaging of this book suggests, perhaps in hopes of drawing a wider readership...
...The Japanese auto makers are also getting better, as are the Europeans and the Koreans...
...While one can easily overdo the tear-jerking tales of blue-collar layoffs, this story would have been less bloodless had the authors better shown the human impact of the screw-ups and, more importantly, of the structural changes they describe...
...Ultimately, the authors back away from their personality-heavy analysis and come to a less arguable conclusion about the real winners of this perpetual free-for-all, which pits each company against the others, not the Americans against the Japanese...
...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...
...For example, in describing efforts by G.M.'s new chief executive, John F. Smith, Jr., to improve quality the authors track warranty costs for the Cavalier subcompact...
...The overwhelming impression they convey is that Detroit is back—and if Detroit is back, Detroit's managers must be larger than life...
...employment of 300,000, down from twice that in 1985...
...But as the authors reveal for the first time, Petersen in private was a tyrant who often expressed himself with his subordinates by flying into rages and flinging his watch across the room...
...boardroom shakeup that followed Smale's investigation, suggest such shenanigans are past for Detroit...
...Covering business news is a lot like covering sports...
...But as the Japanese cut costs to adjust, the Big Three simply raised their prices to reap profits rather than try to win back share...
...Statistics like earnings and market share seem to separate the winners from the losers, and from there it is a short leap to turn the winners into heroes...
...went from being the lowest cost producer among the Big Three to being the highest cost auto producer in the world...
...had believed that the secret to Toyota's efficiency lay in some mysterious high-tech process...
...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...
...Between 1984 and 1988, the Big Three earned $45 billion...
...Well, Smith did not take over until, at the earliest, the spring of 1992...
...They do not suggest that the mistaken conclusions journalists have drawn in the past should restrain euphoria about the apparent comeback...
...As a result, this is a bit like using one guy's home runs to calculate another guy's slugging percentage...
...Iacocca, when the parade of ships begins, the television screens will go blank...
...And if the President doesn't accede to Mr...
...Reagan blinked...
...When he traveled as chairman, a convoy of limos awaited him at every airport...
...Because of the cyclical nature of the industry, auto recoveries always produce astonishing profits...
...The authors, who won a Pulitzer Prize for their coverage of the G.M...
...G.M.'s Detroit executives just couldn't absorb the lesson...
...Unlike the more nuanced, interpretive task of writing about politics (which carries its own risks), business writing depends on hard numbers to judge performance...
...Perhaps...
...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...
...Sometimes, the urge to make that point gets them into trouble...
...It is also hard to pick winners accurately now because of the strength of the yen, which is driving up the prices of Japanese vehicles in the U.S., and the weakness of the Japanese economy, which means the Japanese auto makers can ill afford big losses here...
...and Ford...
...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...
...But the White House was nervous that Iacocca harbored presidential ambitions...
...The authors know this as well as anyone...
...Still, Toyota claims to have devoted one in five white collar workers to cost-cutting, making seemingly picayune savings like not painting four hidden screws on the Corolla...
...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...
...When G.M...
...managers, reassigning them to different operations where they didn't have a chance to spread the good lessons they had learned...
...G.M...
...in particular has a very long way to go...
...dent sources of criticism: Automotive journalists and Wall Street auto analysts had been saying all this for years...
...And one can't help suspecting this publishing cycle is likely to repeat itself...
...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...
...It also might have led them to devote a little more space to the role of the United Automobile Workers union in helping to get these companies into trouble—and to get them out of it...
...Sales have been strong for more than a year, the companies are reaping record profits, and the Japanese are struggling to retain their share of the market...
...Bidwell," shouts an outraged protocol officer, "that Lee Iacocca will not accede to the wishes of the President of the United States...
...Again, this is familiar...
...Instead of applying Toyota's approach to other plants, they split up the Toyota-trained G.M...
...and consumers, whose cars and trucks are safer, and less likely to break...
...During the eighties, the three companies spent billions diversifying into businesses they didn't understand, while their core auto operations suffered...
...Even when executives like Smith try to hide in the background and emphasize the work of their underlings, we journalists have a tendency to build cults of personality around them...
...Are you saying, Mr...
...Big Three quality has improved for some models, and some factories are approaching the efficiency of the better Japanese plants...
...BY JAMES BENNET Comeback: The Fall and Rise of the American Automobile Industry Paul Ingrassia and Joseph B. White, Simon and Schuster, $25 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...
...into a "jobs destruction machine...
...What Smale found, as described by Paul Ingrassia and Joseph B. White, was astounding: G.M...
...managers visited the factory, they discovered the secret was in fact a radical philosophy about labor relations and quality control...
...It was headed to total U.S...
...Such changes will add up, and once these companies figure out how to compete at 100 yen to the dollar, the "comeback" could fizzle fast...
...Yes, things have been getting better at the Big Three...
...did not lack for indepenJames Bennet is the Detroit bureau chief of The New York Times...
...But Comeback gives an excellent, meticulous survey of what went wrong, particularly at G.M., in the eighties...
...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...
...That's exactly what I'm saying," Bidwell replied...
...Some of the book will be familiar to people who have followed the industry...
...The authors are too smart not to mention these facts, but they do not dwell on them...
...Chrysler lost untold millions trying to manipulate its stock price, buying its own stock high and selling it low...
...It is true that the publicly egomaniacal auto barons have exited...
...The authors do a wonderful job of shredding the already frayed Iacocca myth...
...In the mid-eighties, the yen also surged...
...The New York Times Magazine in 1985 lauded Roger Smith as "The Innovator," praising his massive capital spending campaign on gee-whiz automation...
...But the board didn't believe them, because it was easier not to, and because management kept telling them everything was under control...
...Their managerial flaws notwithstanding, their departure is mourned by journalists because they made great copy...
...and Chrysler were becoming desperately sick, but to the world they looked robust...
...One of the many previously unreported anecdotes has Ronald Reagan trying to ease Lee Ia-cocca out of a speaking role during the 1986 celebration of the Statue of Liberty's restoration...
...This time, the Big Three are raising prices more slowly than the Japanese...
...they dropped by 42 percent between 1989 and 1993...
...These costs are an index of durability since they show how much the company is spending to fix the cars it sells...
...car market share—an amount greater than the Chrysler Corporation's total car sales—in the previous seven years...
...it was the industry's most inefficient car designer and producer...
...In an aside, the authors mention that Smith's quality initiatives came on top of efforts begun by his predecessor, Robert Stempel, whom they generally portray as being hopelessly in over his head...
...Many are rushing to build factories in the United States, the new global center for low-cost manufacturing...
...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...
...and its announced cutbacks wouldn't close the gap between its dwindling sales and its colossal production capacity, meaning the losses would continue...
...Their antics yield the liveliest passages in Comeback...
...It led Iacocca to make many of the same stupid mistakes as executives at G.M...
...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...
...They are the auto workers—not just because they still have jobs, but because some bosses are now interested not only in their muscle, but in their ideas about organizing production...
...As they note, The New York Times Magazine in 1985 lauded Roger Smith on its cover as "The Innovator," praising his massive capital spending program on gee-whiz automation...
...As the authors note, G.M...
Vol. 26 • January 1994 • No. 9
