Scenes from the End of the Detroit Dream

AP Photo Last year the American auto industry was brought to its knees and forced to ask for a government handout. An excerpt from Paul Ingrassia’s new book, Crash Course, on the Big Three’s glorious heyday and their struggle to survive.

Paul Ingrassia's Crash Course, the first book about last year's automotive bailouts and bankruptcies, traces Detroit's woes to the 1970s, when alienated workers dealt with inbred managements. Early in the book, Ingrassia, who won a Pulitzer Prize covering Detroit for The Wall Street Journal in in 1993, describes the depth of labor-management division.

Some UAW members began earning enough to join the country clubs where their managers belonged, but Detroit’s line of social demarcation was class as well as cash. Executives mostly lived west of Interstate 75, in the northwest suburbs of Birmingham and Bloomfield Hills. Their social courts were country clubs such as Orchard Lake and the Bloomfield Hills Country Club, the latter being such a GM bastion that even a Ford was considered a foreign car.

Not since Studebaker in 1966 had a major American car company filed for bankruptcy.

Hourly workers, though, lived east of I-75 in Macomb County, where their powerboats, sitting on trailers, often were longer than the homes alongside them. This social-geographical dividing line continued all the way up to the playground communities atop Michigan’s Lower Peninsula. West of I-75 lay the white-collar resorts of Petoskey and Harbor Springs on Lake Michigan, home to summer “up north” parties where the women wore silk and the men wore seersucker. East of I-75 the Lake Huron shore was lined with blue-collar bungalows and blue-jean bars, where even saying "seersucker" would get you a punch in the jaw.

Crash Course: The American Automobile Industry’s Road from Glory to Disaster. By Paul Ingrassia. 320 pages. Random House. $26. The companies' management teams, meanwhile, were becoming inbred and sycophantic. In a telling incident in the mid-1970s, some junior GM executives had a meeting with Chairman Thomas Aquinas Murphy that happened to fall on Ash Wednesday. Murphy, a devout Catholic, was wearing the ritual ashes on his forehead. One of the young men dipped his finger into a nearby ashtray, dabbed a smudge on his own forehead, and—yes—walked in to meet the boss. Years later he would become an executive vice president of the company.

During the 1980s and 1990s, Detroit's car companies swung wildly between reform and relapse, going back and forth between record losses and record profits during the two decades. Detroit's boom of the 1990s was fueled by the popularity of sport-utility vehicles, a trend the Japanese initially missed. Ford and GM earned a combined $13.2 billion in 1999.

The profits from SUVs and other trucks covered up many underlying ills. One was the Jobs Bank, a program begun in the 1980s that paid laid-off auto workers 95 percent of their wages indefinitely. In a perverse but predictable twist, the Jobs Bank led to "inverse layoffs," which occurred when senior workers volunteered to be laid off and thus bumped junior workers back on to the assembly line. After all, why should a senior worker slave away building cars when workers with lower seniority collected virtually full pay just for sitting around? Such was the logic of Detroit's dysfunction.

All this set the stage for disaster. In 2005, when Hurricane Katrina sent gas prices soaring and SUV sales plunging, GM lost a stunning $10.6 billion, despite near-record industry-wide car sales. The next year, Ford lost even more: $12.6 billion. When the economic crisis struck America in September 2008, the two companies, along with Chrysler, decided to seek federal assistance. The story unfolds:

On Saturday, Nov. 15, 2008, GM Vice Chairman Bob Lutz and his wife attended Madame Butterfly at the Detroit Opera. Patrons in the next box noticed he was furiously thumbing his BlackBerry right up until the opera began, and then again during intermission. Was Lutz, they wondered, exchanging ideas with CEO Rick Wagoner and other GM executives on how to present GM’s request for billions of dollars in government aid to Congress? Not exactly. The 76-year-old executive was playing BrickBreaker. Just three days before Wagoner would give Senate testimony that might decide the fate of General Motors, the company’s vice chairman was fully absorbed in a videogame.

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Jacob Bernstein is a senior reporter at The Daily Beast. Previously, he was a features writer at WWD and W Magazine. He has also written for New York magazine, Paper, and The Huffington Post.

Lloyd Grove is editor at large for The Daily Beast. He is also a frequent contributor to New York magazine and was a contributing editor for Condé Nast Portfolio. He wrote a gossip column for the New York Daily News from 2003 to 2006. Prior to that, he wrote the Reliable Source column for the Washington Post, where he spent 23 years covering politics, the media, and other subjects.

Paul Ingrassia is the former Detroit bureau chief for The Wall Street Journal. Winner of the Pulitzer Prize in 1993 (with Joseph B. White) for reporting on management crises at General Motors, Ingrassia has chronicled the auto industry for twenty-five years. He is co-author, with White, of Comeback: The Fall and Rise of the American Automobile Industry, and has made numerous media appearances on NBC’s Meet the Press, ABC’s 20/20, and NPR’s Diane Rehm Show.

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Scenes from the End of the Detroit Dream

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