January 12, 2010
News & Opinion: Crash Course
Paul Ingrassia's new book Crash Course: The American Automobile Industry's Road From Glory to Disaster is a story we're all familiar with, but Ingrassia, a Pulitzer Prize winning writer who's covered the auto industry for 25 years in the Wall Street Journal, reveals a current and broad overview of the industry. Including the involvement of current President Obama, Ingrassia delves into how politics, unions, and culture collide to deal with what has happened in Detroit, and where it will go from here. A great story filled with lessons on what can go horribly wrong, and incredibly right, in business. Here's an excerpt about the incredible impact the U.S. auto industry had: "In the 1950s and 1960s, television brought cars and all they represented - freedom, status, style, and sex - into millions of American living rooms nightly. Cars were the perfect appliances for a society that was physically and upwardly mobile. And new institutions were being built around the automobile by people who didn't even work for the car companies...Kemmons Wilson, who opened his first Holiday Inn on the road between Memphis and Nashville in 1952, launching a national motel chain that made car travel more reliably comfortable than the no-name dives then dotting the highways." Think about all the amazing businesses that the auto industry helped spawn. Here's another excerpt about an example of how things went wrong: "Meanwhile, Wagoner's second big bet was that profits from gas-hungry SUVs and pickup trucks would continue. That bet assumed that gasoline would stay priced where it was in 2003 and 2004 - around $1 a gallon, even less in some states. Wagoner's manana strategy, in effect, was a big bet on continued cheap oil. By coincidence, in June 2004, National Geographic magazine carried a cover story titled "The End of Cheap Oil." One GM executive showed the story to Wagoner and suggested GM might be relying too heavily on trucks and SUVs. Wagoner retorted that the same faulty thinking had made GM the last company in Detroit to cash in big on the truck boom, and he wasn't about to repeat that mistake. As usual, GM was slow to sense where the market was heading. Wagoner wasn't about to hedge his bet on gas prices staying low." From there, it's diversification into mortgage lending, bail-outs, and the attempt to resuscitate a giant. An amazing story that isn't over yet.