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

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.

Some of the book will be familiar to people who have followed the industry. A long section on Ross Perot's relationship to G.M., for example, seems superfluous. But Comeback gives an excellent, meticulous survey of what went wrong, particularly at G.M., in the eighties. 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.

G.M. had believed that the secret to Toyota's efficiency lay in some mysterious high-tech process. When G.M. managers visited the factory, they discovered the secret was in fact a radical philosophy about labor relations and quality control. G.M.'s Detroit executives just couldn't absorb the lesson. Instead of applying Toyota's approach to other plants, they split up the Toyota-trained G.M. managers, reassigning them to different operations where they didn't have a chance to spread the good lessons they had learned.

Downshifting 

By 1994, a combination of bad management and new manufacturing techniques, the authors note, had turned G.M. into a jobs destruction machine." It was headed to total U.S. employment of 300,000, down from twice that in 1985.

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. 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.

My main concern about this book, however, stems from a wider problem in business journalism. Covering business news is a lot like covering sports. Unlike the more nuanced, interpretive task of writing about politics (which carries its own risks), business writing depends on hard numbers to judge performance. 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.

Yes, things have been getting better at the Big Three. 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. Big Three quality has improved for some models, and some factories are approaching the efficiency of the better Japanese plants.

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. Because of the cyclical nature of the industry, auto recoveries always produce astonishing profits. Between 1984 and 1988, the Big Three earned $45 billion. G.M. and Chrysler were becoming desperately sick, but to the world they looked robust.

The authors know this as well as anyone. 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. 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. Between 1980 and 1985, while lavishing $42 billion on new factories and equipment, G.M. went from being the lowest cost producer among the Big Three to being the highest cost auto producer in the world.

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. 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.

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. Again, this is familiar. In the mid-eighties, the yen also surged. 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.

This time, the Big Three are raising prices more slowly than the Japanese. Still, Toyota workers to cost-cutting, making seemingly picayune savings like not painting four hidden screws on the Corolla. 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.

The authors are too smart not to mention these facts, but they do not dwell on them. They do not suggest that the mistaken conclusions journalists have drawn in the past should restrain euphoria about the apparent comeback. The overwhelming impression they convey is that Detroit is back - and if Detroit is back, Detroit's managers must be larger than life. Sometimes, the urge to make that point gets them into trouble.

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. These costs are an index of durability since they show how much the company is spending to fix the cars it sells; they dropped by 42 percent between 1989 and 1993. 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.

Well, Smith did not take over until, at the earliest, the spring of 1992. As a result, this is a bit like using one guy's home runs to calculate another guy's slugging percentage. 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.

The Big Three are getting better, although G.M. in particular has a very long way to go. The Japanese auto makers are also getting better, as are the Europeans and the Koreans. Many are rushing to build factories in the United States, the new global center for low-cost manufacturing. 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. 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; and consumers, whose cars and trucks are safer, and less likely to break.