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The Business of America : COMEBACK: The Fall and Rise of the American Automobile Industry, By Paul Ingrassia and Joseph B. White (Simon & Schuster: $25; 496 pp.)

October 23, 1994|Lawrence S. Dietz | Lawrence S. Dietz, who wrote a car column for California Magazine, drives a 1985 Peugeot 505 Turbo sedan

President Calvin Coolidge didn't say much, but his announcement that "The business of America is business" ought to be considered a worthy substitute for "In God We Trust" on our paper money, since the closest thing to heaven for most Americans is a profitable bottom line. Of all the businesses in this country, the one that has been most closely identified with, and provided the economic underpinnings for, our national being is the manufacture of motor vehicles, primarily automobiles.

The success and failure of the Big Three American car companies is measured almost daily by the media: as Detroit goes, so does a substantial portion of the American economy, and the American psyche. The decade of the 1980s was first boom and then bust for General Motors, Ford and Chrysler, all of which suffered mightily at the hands of Japanese competitors and the hubris of their top executives.

As recounted in fascinating detail by Paul Ingrassia and Joseph B. White (who cover the auto business for the Wall Street Journal, where they won a Pulitzer Prize together for their stories on GM), all three companies had to lose billions of dollars, in two cases--Chrysler and, incredibly, GM--barely skirting total economic collapse before they recovered.

That such large, established manufacturers could perform so miserably appears to have been the result of a narrow-minded executive elite enjoying its boom times by throwing corporate money around. That corporate chieftains are out of touch with middle- or working-class America is no surprise: to be picked up by a waiting car on the Tarmac after a ride in a corporate jet is to enjoy a particularly pleasant form of social insulation.

What you learn reading this book is that the perks are available down the pecking order. One doesn't even have to be a corporate officer at Ford to get a new, company-leased car every year, with parking provided in the executive garage, where the car is filled with gas daily and washed three times a week. To take care of their families, executives at this level could lease two more cars at "favorable" rates and obtain low-cost insurance for those cars, a big saving if there's a teen-age driver. Corporate generosity extends past the executive's working life: In retirement he (it's almost always a he) continues to get a leased car.

Speaking of retirement, it is instructive to learn that one departing GM chairman managed to sneak a $600,000 increase in his pension past his board of directors, who remained unaware that they had approved doubling his package until a reporter later deciphered a proxy statement. By then the damage was done, and the board was too embarrassed to admit openly that they had been snookered.

In the insular world of Detroit auto execs, the early 1980s were so profitable that anything seemed possible. General Motors bought Hughes Aircraft for $5 billion, beating Ford's $4-billion offer. GM spent billions and billions on automated factories, while at the same time signing labor contracts that kept the work force in place. The bloated number of workers couldn't make the new machines operate properly. A production expert from Toyota, invited to visit GM's most high-tech plant, was asked what he thought after he walked through. "They have many problems," the Toyota man replied, "that they have not thought of yet."

Ford used its vast amount of cash to buy a savings and loan and two consumer lending companies, then spent $2.5 billion to outbid GM for Britain's prestigious but financially ailing Jaguar. (The then-head of Jaguar preferred a partnership with GM, rather than outright ownership by Ford, saying, "When an elephant gets in bed with a mouse, two things happen--the elephant doesn't have much fun, and the mouse gets killed.")

Chrysler, the smallest of the Big Three, paid $636 million for Gulfstream, $400 million for FinanceAmerica and $200 million for American Motors (but had to assume $700 million of its debt and $300 million in unfunded pensions). Then it started a joint venture with the Italian manufacturer Maserati to produce luxury two-seat coupes, which wound up costing $400 million for 7,300 cars. With another bad joint venture--to produce and sell a Renault model under the Eagle name--and some plant shifts and closings, Chrysler went through $4.85 billion, money the company didn't use to develop new cars or engines.

When sales dropped off after the 1987 stock market crash and ensuing (in California and other places, continuing) recession, Detroit's manufacturers were drowning in red ink. Their recovery seems to be due to new leadership at all three companies, as well as a willingness to listen to and put into practice the ideas of mid-level executives who learned how the Japanese manufacture cars.

Of course, it helps mightily that the dollar has tumbled so far against the yen that even compact American cars now enjoy a $2,000 price advantage against their direct Japanese competitors.

One factual quibble: The authors repeat a couple of times that Ford's introduction of the Taurus in late 1985 "revolutionized automobile styling around the world," ignoring the fact that the Taurus was a softer version of British Ford's Sierra, which had hit U.K. showrooms in fall of 1982; it hadn't sold well, the British car magazines declared, because its aerodynamic shape was too advanced for the public.

Moreover, the book is filled with phrases that are the literary equivalent of the 1980s boxy Chrysler K-Cars or the Pontiac Fiero (which had the annoying habit of bursting into flames): A GM exec "came through in the clutch"; "It quickly became apparent that this coupe was no coup." Executives are "top guns," "marketing mavens" and "heavy hitters." These caveats notwithstanding, "Comeback" is an absorbing, cautionary tale about corporate behavior in an industry that creates the one product necessary both for basic transportation and to define our individual personality.

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