Betting the Farm
Bill Collins, Ford’s suave and effective communications man in New York, told me what would become my favorite anecdote about Alan Mulally. He shared it over steaks in 2015, a full six years after the company that had practically defined American industry for the first half of the twentieth century had been on the verge of collapse.
As we were waiting for our rib eyes to show up, Bill began talking about how bad things had been in 2008, when the financial crisis had just begun to destroy the economy. Back then nobody was thinking about a steak house lunch, especially in Detroit. Survival was the key. Apocalypse had come to Motown. GM was headed toward bankruptcy. Chrysler was headed toward bankruptcy and eventual acquisition by a savvy, swaggering, argumentative, sweater-wearing, chain-smoking Italian-Canadian named Sergio Marchionne, the CEO of Fiat. Credit, the lifeblood of the auto industry, was nonexistent in the United States at the time. Lehman Brothers was bankrupt, and the grim rumor was that Goldman Sachs was dangerously close to the same fate. The only thing standing between America and Great Depression 2.0 was a bearded, soft-spoken Princeton economist, Federal Reserve chairman Ben Bernanke. In the White House, the lame duck George Bush was alternately bewildered and exhausted. (After leaving office, he would retire to Texas to paint odd portraits of his own feet in the bathtub.) On the campaign trail, Republican presidential candidate John McCain doomed his bid by claiming that the crashing economy was going along fine and by adding Sarah Palin, the factually freewheeling and devoutly self-promotional governor of Alaska, to his ticket.
On the Democratic side, Barack Obama was reaping the benefits of Hillary Clinton’s Wall Street ties. At the beginning of the campaign, he had had nowhere to run but on her left flank. Fate created an opening there. The near collapse of the banking system enraged voters, and the senator from Illinois took the revolutionary rage of Occupy Wall Street and transformed it into an appealing message of hope, which was summarized by an iconic poster created by street artist Shepard Fairey.
Meanwhile, the hyperventilating pundits on CNBC, whose Wall Street cheerleading and CEO fealty had looked like smart career moves just six months earlier, were screaming, “Sell! Sell! Sell!” Jim Cramer, the loudest cheerleader of them all, is still living down his dramatic reversal of sensibility about the boundless virtues of an unfettered stock market.
Back in Detroit, as Bill Collins told it, there was blood in the streets. The U.S. auto industry had seen rough times before. GM had barely dodged the Great Depression of the 1930s, and in the late 1970s and early 1980s the government had bailed out Chrysler. The car business is cyclical, and everyone who works in or around the industry, from the oil-change guys to the executive suite, knows that the downturns follow the upswings with grim frequency. There’s no way to prepare for them, either, other than to pile up cash on corporate balance sheets. The only viable strategy is to lay in a war chest with the full knowledge that the nature of the business will force you to spend all of it in order to remain in the game.
As the election neared, it already felt as if the auto industry was on the downside of a downturn, although it was hard to tell, because the yearly sales numbers looked pretty good, gas wasn’t wildly expensive, and Americans were still buying big trucks and SUVs.
But at that point GM was struggling. It hadn’t posted a profitable quarter in years, and the carmaker was hemorrhaging money every month to maintain its far-flung operations and keep up with its legacy pension and benefit obligations. The company was running on debt, was constantly low on cash, and was posting staggering quarterly losses. Cynical outsiders were calling for GM to file for bankruptcy protection, but the board and leadership knew they wouldn’t be able to prove that the company was a “going concern.”
At Ford, the contrast with the good times was stark. An impressive 17.3 million vehicles had been sold in 2000, when Ford had $24 billion in the bank, a “cash hoard,” as the New York Times called it, “one of the largest of any company in the world.” And although that number declined slightly in the years before the Great Recession, sales plunged to just over 10 million in 2009—a year after the company’s stock price had plummeted to unimaginable lows. Detroit had seen bad. It had been battered by the Big Three’s decades of declining market share and ferocious competition from Japan and Germany (free trade is a bitch). And in Detroit’s case, serving the most competitive car market in the world had become daily combat. For much of the 1970s and ’80s, Detroit had been losing battles. But by 2009, it was losing the war.
Alan Mulally, who had joined Ford in 2006 after a successful run at Boeing, could see defeat and surrender over the horizon: Ford was poised to lose a knee-buckling $12.7 billion that year, according to the consulting firm McKinsey & Company. At the time, it was reported that Ford was going to cease production at ten factories, creating in one desperate gesture a vast amount of unused manufacturing capacity and a virtual army of idled autoworkers.
Ford’s losses represented a healthy chunk of the market capitalization of the entire company. The pressing question when Mulally moved into the big chair at Ford, at age sixty-one, was whether a plane guy could do cars—whether the guy who had leaped from success to success at a plane maker could concoct a turnaround at a carmaker. But that turned out to be entirely the wrong question. What we should have been wondering wasn’t whether the plane guy could be a car guy. It was whether there would be any more American cars once the financial crisis had finished savaging the most symbolic of national industries.
By the time Bill Collins and I met up for that New York lunch, Mulally looked like a genius. Convinced as soon as he arrived in Dearborn and got a look at Ford’s books that the automaker didn’t have the balance sheet to endure a downturn, he mortgaged all of the Ford Motor Company’s assets—factories, real estate, inventories, the whole shebang—for $25 billion. He called it, wryly, Ford’s “home improvement loan.” But that was classic Mulally, earnestly downplaying a big bet. Mulally favored tan trousers, blue blazers, and red sweater vests; he wasn’t going to adopt a uniform of intimidation at Ford. He didn’t change his wardrobe even when he headed to Congress in the throes of the crisis.
In his manner, Mulally resembled a man on his way to church. His expressions were uniformly placid and optimistic. He lacked anything even vaguely resembling rage. Steady beams of bright Midwesternness emanated from his eyes. If you met him at a bar, you would be surprised, because men like Alan Mulally don’t go to bars. I watched him bound onto a stage in the years immediately following the financial crisis and half expected him to start singing campfire songs. The overwhelming impression Mulally delivered was deep trustworthiness. But it was entirely an act. Ford was his big chip, and he was all in.
When he mortgaged the farm, Mulally hadn’t come across as a genius. He’d come across as desperate. At the 2007 Detroit auto show I had sat with some journalist colleagues and tried to draw a bead on what Mulally’s Ford was all about. Apart from the pickup-truck business—the Ford F-Series has been the best-selling vehicle in America, year after year, since sometime before the start of the Vietnam War—and a certain iconic muscle car, there wasn’t much to point to. “It’s a pickup and Mustang company,” I concluded, with a dismissiveness I would come to regret.
I didn’t think Ford would be able to turn itself around—to reinvent itself, to abandon any of its old attitudes, or retain the no-longer-justified reputation for consistently achieving great things. It all just seemed like hubris. In Detroit, the men and women who run the American auto industry haven’t yet discovered the false modesty that defines executives in newer business cultures. CEOs don’t sit with the troops in open-plan offices, where status is erased by professional geography. The auto-industry big shots have big offices, with big views. If you’re seeking the last gasp of the American mid-century style of business, Detroit is it. Everyone wears a suit, and the higher-ups often wear suits that are quite sharp. Very expensive Swiss watches are the rule. The smoking has largely vanished, but there’s no shortage of drinking. The industry does business over beer, wine, and liquor—and doesn’t apologize for it. I thought these guys didn’t have a chance at another act. Ford and the rest of the carmakers were going to be done in by an excessive, inflexible pride in their past, and outpaced by the radical new business ideas of the Googles and Apples and Teslas, companies that didn’t make things so much as create experiences—albeit cold, virtual ones.
Mulally wasn’t exactly of that old auto-industry culture, coming from Boeing and its hard-core aerospace and defense-engineering culture, where they’re always trying to think a few decades into the future. But he was the CEO of Ford, so he did his work in a big room.
Bill Collins described Mulally’s office, a sizable affair on the twelfth floor of Ford’s headquarters in Dearborn, a place known colloquially as the Glass House, in reference to its extensive use of the material. The office has a view of the legendary River Rouge plant that Henry Ford built over more than ten years, throwing open the doors in 1928. In its heyday, the Rouge was a factory where train cars full of iron ore rolled up at one end and finished cars rolled out at the other. Thunderbirds and Mustangs were built there. At one point the facility had its own river freighter, the SS William Clay Ford, named for Henry Ford’s grandson. Vehicles are still built in the 600-acre facility, now called the Rouge Center. Alan Mulally got to look at it every day.
“Bill,” Mulally said to Collins one day, as they sat in that office, “I look over there”—to the east and downtown Detroit—“and I can see GM.”
Mulally paused. Collins waited.
“And if I look over there,” Mulally gestured north toward Auburn Hills, thirty-five miles away. “I can just see Chrysler.”
Detroit sits on a vast, flat plain in the Upper Midwest, on the banks of the Detroit River. If you’re up high, you can see for miles. You can see Canada. And you can, if you’re Alan Mulally, see the future.
“I do this all the time, because I like to keep an eye on everyone. But I also do it to remind myself of something,” Mulally said. “I remind myself that this could all go away.”
That was quite a black realization, it occurred to me as Bill finished the story, to be living in the mind, the conscience, of one of the country’s most important industrial leaders at a time of crisis. Yet Mulally is a man who smiles easily. He is driven not by fear but rather by the optimism of someone who spent much of his career overseeing the design and construction of huge machines that can fly 600 miles per hour at 35,000 feet.
Ford, and the auto industry generally, brought Mulally back down to earth. The financial crisis and the Motown meltdown meant that the landing was anything but soft. It was a full-on crash. At one point, Ford’s stock price fell to $1.24. The joke at the time was whether you “wanted fries with that.” There was a certain amount of untoward celebration about not just Ford’s struggles but also GM’s and Chrysler’s. At the extremes, some pundits argued that the government should simply let the industry go and allow it to rebuild itself through either traditional bankruptcy or liquidation. But that overlooked a pair of critical factors.
First, with credit locked up because of the banking crisis, there was no one but the government to provide bankruptcy financing. And even if financing had been available, an executive such as GM CEO Rick Wagoner knew from experience that a carmaker of GM’s size wouldn’t be able to sustain itself through a conventional Chapter 11 restructuring. GM’s parts-making arm, Delphi, had been spun off in the decade before the financial crisis to satisfy Wall Street’s desire to see GM unlock some trapped value. But Delphi had fallen into bankruptcy and languished in Chapter 11 for years, with GM providing the funding.
Second, it was unclear whether the solvent players in the U.S. industry—the transplants from Japan, Germany, and South Korea—would be able to take over Detroit’s manufacturing capacity. The Big Three employed hundred of thousands of workers in dozens of plants, many assembling the trucks and SUVs that tended to satisfy the U.S. markets. Toyota and Honda built mainly cars at their U.S. plants. The Big Three also supported an extensive supply chain in the Midwest. Their financing arms generated billions in auto loans. As much as critics of the U.S. industry—including those longtime detractors who continued to think that the Big Three built crappy cars and existed mainly to keep the United Auto Workers in business—might have fervently hoped to see a day of reckoning that would vaporize 100 years of industrial history, there were some very practical considerations in a market that should require at a minimum 14 million to 15 million new cars and trucks every year.
Everyone in the industry knew that the crisis, as bad as it had gotten, was not going to last forever. Barring complete economic collapse, an annual U.S. vehicle market of merely 10 million units simply wasn’t conceivable. Beyond those core issues, there was also the national security question. Even if, say, Toyota, Honda, BMW, and Mercedes had been able step in, was it really advisable to turn over the most advanced and sophisticated industrial enterprise in the world to companies not based in the United States?
Ultimately, President Obama got behind the bailouts of GM and Chrysler and turned the challenge of saving Detroit over to “car czar” Steve Rattner, an erstwhile investment banker and Democratic political supporter who during the 2008 election had longed to become treasury secretary in a Hillary Clinton administration. In a 2010 Vanity Fair story about Rattner’s ambition, William D. Cohan called his desire to lead Treasury “one of the biggest open secrets in New York’s social and financial circles.” Rattner’s job was to deal with the Chapter 11 issues and Chrysler’s bondholders, while a second member of the team, Ron Bloom, would tackle the UAW and its sprawling legacy costs. Another staffer would devote his full attention to GM.
There was no question that GM would be saved, but Chrysler was another story. It had already been bailed out once before. And the company had been kicked around and disastrously operated for a period by Daimler before being acquired by Cerberus Capital Management, a private-equity firm. Cerberus couldn’t do any better than Daimler, so by the time the crisis hit, Chrysler was a basket case. Obama and his advisors wanted to let it go, but the hangover of the Lehman catastrophe was still fresh. Fiat’s Sergio Marchionne arrived with a plan to effectively take over the management of Chrysler, assuming the government’s problems in exchange for its provision of the billions in financing that a rapidly executed bankruptcy of the automaker would demand.
Looking back, the hasty and controversial decision-making process that unfolded between the autumn of 2008 and the spring of 2009—with a presidential election thrown in—has been vindicated in its mostly improvisational wisdom. The more vehement critics of the bailouts and bankruptcies of GM and Chrysler, notably Mitt Romney (whose father had been an auto-industry executive before ascending to the governor’s office in Michigan), were mistaken in their dogmatic attitudes toward unfettered capitalism and competition in the midst of a nearly unprecedented crisis. By the end of 2015, the U.S. auto industry had decisively recovered, setting a new record for annual new vehicle sales at the end of the year—17.5 million cars and trucks had rolled off dealer lots and into driveways and garages from sea to shining sea. GM, Chrysler (now Fiat Chrysler Automobiles), and Ford are now firmly re-ensconced as the Big Three. (Or at least the Detroit Big Two plus Fiat Chrysler.) But it had been a hell of a fight.
At GM, Mark Reuss, now CEO Mary Barra’s right-hand man, performed a vital yet familiar role for the automaker: the car guy. Before him, this had been the job of Bob Lutz, an outspoken former U.S. Marine, who at one point flew fighter planes in his spare time but who had also worked in the European auto industry and, during a spell at Chrysler, had been a confidant of Lee Iacocca. Lutz was on the ground when GM CEO Wagoner was taking his fall. But Lutz survived and took on an ever more important position after the bailout and the bankruptcy. After Lutz left, and a series of CEOs passed the baton to Barra, Reuss answered the call.
Reuss may have been disappointed that he didn’t get the top job—this has been widely discussed, rumored, and hashed over to the point that some felt he would bail on a lifetime at GM when the announcement was made. But he stuck around, and it was a good thing he did. He had the experience of having fought in the trenches to save the business.
Reuss would later turn out to be a central player in the rivalry between Ford and Chevrolet that was reignited by the GT’s return to Le Mans, where it would face off against not just Ferrari but also Corvette Racing, a team that had been tearing it up in the GT Le Mans sports-car class in the years before 2016. Reuss, like Lutz, is a hell of a driver. Maybe not pro-racer level, but he holds the official qualifications that tell you he’s not going to baby a 550-horsepower Vette or Caddy through a turn. He’s going to drop the hammer.
Reuss does business the way he drives: on the edge, but with an inspiring degree of precision and expertise. In person, Reuss is that guy you wish had been your dad’s best friend: cheerfully gruff, with a passion for what he does, but a straight shooter who tells it like it is. You want him as a boss for the inspiration—but you also know that you’re going to have to live up to his expectations. He wears a tailored suit and wears it well, but he also has his own racing helmet.
“That time period was pretty surreal,” Reuss told me, when I asked him about the crisis years. In the mid-2000s he was running Holden, GM’s Australian division. Holden is where all the car guys want to wind up at some point. While the rest of the world, over the decades, has replaced old-school American rear-wheel-drive muscle with front-wheel-drive decorum or all-wheel-drive soccer-mom mobiles, and of course various varieties of hybrids, Holden operates in the land that time forgot. Aussies have a term for driving in an enthusiastic manner: hooning. And you don’t hoon in a Toyota Camry. You hoon in a Holden Commodore, with a nice, big V-8 sending power to a pair of furiously spinning back wheels.
“At GM, we had a lot of different CEOs and leadership back then,” Reuss said. After Wagoner departed, Frederick “Fritz” Henderson, who had been with GM since the first Reagan administration, took the job, in March 2009. He lasted less than a year. Then Ed Whitacre, a lanky Texan, who had run AT&T before joining the GM board, took over. In autumn of 2010 came Dan Akerson, who had joined GM’s board from the Carlyle Group, a private-equity firm.
“There were a lot opinions about the company that were very public,” Reuss recalled. “They were coming from people who were close to the TARP funds.” TARP was the Troubled Asset Relief Program, the official name for the bailouts of GM and Chrysler, as well as the money that was pumped into the banking system during the financial crisis by the U.S. Treasury and the Federal Reserve: $425 billion in total, with roughly $80 billion going to the U.S. auto industry.
“You’re totally defensive,” Reuss added. “Everybody’s got a pen. Everybody’s got the Internet.”
At GM, there was also the matter of the automaker’s hidebound legacy. It was, for better or worse, the definitive hierarchical corporation, a bastion of bureaucracy, a citadel of Organization Man and Woman. A colleague once told me a great story about “old GM,” the GM of the 1950s, ’60s, ’70s, and even ’80s. He showed up for a meeting and was told to wait outside the conference room while some staffers attended to something.
“What are they doing in there?” he eventually asked.
“They’re lining the room,” was the reply.
“What’s lining the room?”
In the conference room—one of those classic corporate spaces, with a huge fine-grained wooden table surrounded by chairs, the kind you routinely see in movies but rarely encounter in real life—a crew of GM employees had stretched taut lines of string in right angles across the table’s expanse to precisely align leather business portfolios, pads, pens, and glasses. That was what the executives who were about to meet expected: rote precision.
The financial crisis didn’t completely do away with this aspect of GM’s culture—the place still runs on a rigorous timetable, and offices are typically manicured in a way that would baffle the average Silicon Valley tech worker who gallops between Ping-Pong table and espresso machine—but it did humanize a company that had woven together a bizarrely successful combination of industrial dominance, employee loyalty, and systematic dehumanization.
Reuss was part of the revolution. “The truth is that GM isn’t a bunch of silos sitting on the Detroit riverfront,” he said, in a reference to the Renaissance Center, the John Portman–designed complex distinguished by its five steel-glass-and-concrete towers, which serves as GM’s world headquarters.
“GM is the people who build the cars,” he said. “The company was talked about as some entity back then. But the company is people—and those people had incredible resilience. But in those days it was really hard. Everyone went home at the end of the day not knowing if they were going to have a job. That was pretty tough.”
The restructuring was an ordeal, and from Reuss’s point of view, it changed attitudes not just inside GM but also across the industry. He had the good fortune to be distanced from the often-unpleasant proceedings. Reuss’s frontline seat for the Detroit meltdown wasn’t in Detroit. It was a day’s flight to the bottom of the world.
“On a daily basis, Holden was difficult, but it was also rewarding,” he said. Reuss and his team truly were off the grid, running the business on whatever cash came in the door that day, as their lines of credit vanished. Major global companies don’t operate this way—credit is the lubricant that prevents them from seizing up.
But the financial crisis changed all that. Even General Electric lost access to the credit markets, leading Jeff Immelt to call Henry Paulson, the treasury secretary at the time, in a baffled panic about GE’s inability to issue short-term debt. No key business leader had ever worked this way.
In Australia, Reuss had few choices. It was do or die.
“You could see it start to work,” he recalled. “It was an amazing time. We were making it happen, but it was hand to mouth—everything or nothing.”
Then he said something everyone in business dreams of saying: “We were able to create our own destiny.”
If you do get to create your own destiny, Reuss now contends, you can’t be seduced by success into taking it for granted.
“We haven’t allowed ourselves to be satisfied,” he insisted, when I asked him whether he ever goes home after a long day and allows himself a moment of back patting. “The business is extraordinarily difficult. And the only way to be successful is to not sit around and think about how great everything is going. The enjoyment I feel in the job is not sitting back and reflecting.”
That said, he does allow himself the odd moment of joy when he takes in the racing performance that GM has turned in. “‘Take no prisoners’ and ‘Never give up’—those are the two mottoes Chevy racing and GM live by.”
While Reuss was digging around in his office sofa for loose change Down Under, waiting for a chance to get back to the track to watch Corvettes win trophies, Mulally had his hands full over at Ford. He had to put the carmaker’s finances on the line, rally the troops and his executive leadership, assuage the concerns of a vast network of dealers, retool the company’s unwieldy collection of brands, resist the urge to focus exclusively on the United States while the business in Europe and China was also under incredible stress, and keep track of the agony that Detroit itself was going through (the city would lurch into bankruptcy in July 2013).
It almost goes without saying, but through this wrenching process, a return to endurance racing and to the legendary turns and straightaways of Le Mans was a million miles away from Mulally’s thinking. If he couldn’t save the company that was building Ford F-150 pickups and Mustangs for America, he was never going to be able to get behind a new GT and a reconquest at Le Mans.
When Mulally had arrived at Ford, he discovered a mess. Actually, it was more than a mess—it was a looming catastrophe. The reign of Jacques Nasser as CEO from 1999 to 2001 had demoralized the company and saddled it with a cacophony of brands and models ranging from the posh Jaguar to base versions of the F-150 pickup that were intended to ferry bales of hay around ranches. After Nasser, William Clay Ford Jr. had taken over the family business. Bill is another of Henry Ford’s great-great-grandsons, but as well intentioned as he was, he lacked the skills to run a twenty-first-century global manufacturing company. By the end, his job was to stave off bankruptcy, an imperative driven by the entrenched resistance of the Ford heirs to seeing their incomes threatened as the value of the assets they held was laid low. A merger would have made sense, but nobody wanted to merge. And at this time, the high-flying car company executives who could execute were also prima donnas of the highest order. An effort to woo Renault-Nissan’s rock-star chief executive Carlos Ghosn was met head-on by Ghosn’s titanic ego and his desire to be the one man at the top of the Ford hierarchy.
Actually, Ghosn’s instinct made sense. Like all legacy automakers, Ford had evolved to a point at which working for Ford, not building and selling quality cars, seemed to be the first priority for many execs. In the industry, this problem has always been most evident at GM, where the divisional structure effectively separated the car making from the mother ship. GM’s executive suite oversaw a financial enterprise that was also an insurance company, for all practical purposes, looking after obligations to retirees that had been negotiated in more flush times. This left the heads of the divisions free to make their own luck, by whatever means necessary. And why not? Running Chevrolet or Buick was like having your own car company to play with. The autonomy was a double-edged blade: GM got aggressive market competitors but at the cost of ferocious internal conflict for resources.
Ford’s simpler structure avoided this classic GM problem. But of course Ford served the Ford family. Ford also had its own internal snarling and backbiting. That was the auto-industry way.
Mulally’s personality and experience at Boeing brought a critical new element to the party: proactive teamwork and preemptive quality control. Mulally had overseen the development of the Boeing 777, one of the most successful aircrafts the plane maker had ever built and a critical successor to the legendary 747 jumbo jet. The 777 was a product of innovative collaboration, and since its wildly successful introduction in the 1990s, its development has become a widely used case study in business schools for its willful obliteration of the old “siloed” approach to manufacturing, in which functional groups worked independently, guarding their expertise until it came time to fight for resources—at which point the quality of the product was invariably degraded.
In the American car business, it was the task of marketers and ad agencies to cleverly—at times very cleverly—paper over the flaws with something snappy that spoke to brand enthusiasts. That doesn’t work in the aviation industry, because the biggest advertisement for a Boeing is airlines ordering its planes and being satisfied with their performance. You don’t spend some $200 million on a 777 because TV spots gush over the stitched leather seats or the quietness of the cockpit. The big jet has to speak for itself—and be able to do so over several decades of its service life with an airline.
With Ford’s balance sheet shored up by the $25 billion credit line, Mulally could turn his attention to transferring the level of commitment he was familiar with from the aviation business to the auto business. You don’t build bad planes, and you shouldn’t build bad cars. But Mulally also had to remake Ford’s culture at a time when that culture was in crisis.
What Mulally came up with was epic in its simplicity. He would promulgate a core message and make it his highest priority to ensure that every single employee of the Ford Motor Company understood and supported it.
No one had ever really done this before, not on such a scale, in the teeth of an existential crisis. Sure, there was the vaunted “Toyota Way,” based on the principle of kaizen, or “continuous improvement.” But kaizen wasn’t a rallying cry; it was designed to intentionally undermine the ultratraditional Japanese deference to authority and empower all Toyota workers to contribute to making better cars. What Mulally wanted to do, in a sense, was revive a reverence for authority at Ford—but not a reverence for Henry Ford or the Ford family. Rather, he sought to convince employees that Ford was a brand they could pledge allegiance to in a way that bordered on the reverential. Again, this was the dark side of Mulally’s personality turned to the work of the light: the gambler in the red Ford-logo sweater vest was also a cunning con man, and con men traffic in belief. What Ford needed more than anything else in the days before the financial crisis hit was something to believe in.
And so did Detroit.
In the twentieth century, Detroit brought prosperity to tens of thousands of blue- and white-collar workers. It occupied a special place in the national psyche. But eventually Americans began to see Detroit as a failed metropolis, one beset with social unrest and riots in the 1960s and malaise in the 1970s. And in the 1980s, when competition from Japan destroyed the Big Three’s lock on the U.S. auto market, the city evoked the particular mixture of sadness and irritation that comes with faded glory.
Some of the distaste for the city that grew in the second half of the twentieth century is firmly rooted in certain cultural shifts, including demographic changes such as “white flight” from urban centers like the city of Detroit, where poor African-Americans remained, frustrated by entrenched economic and political inequality. Then there was the preoccupation with the rising “service economy” that took shape in the 1970s and 1980s. The future, apparently, belonged to the educated professionals who could organize and control complicated technologies and systems. But Detroit’s is a tale of building stuff. It’s not about managing the global flows of capital or creating media empires—those are New York’s specialties. It’s not comparable to the model that made Silicon Valley rise—which you might call the relabeling of computer science as computer engineering. It’s not akin to Hollywood’s creation and exporting of mega-mass-market entertainment.
Detroit lacks twenty-first-century sex appeal. And yet, as Detroit declined, Americans sensed that something essential was being lost. The city’s problems were complex, culminating in its 2013 bankruptcy, the largest in U.S. history. But Detroit’s attitude was always simple. What it did, in its view of itself, was make cars. And by making cars, the city and its surrounding towns made other things, most critically the American middle class. Unionized autoworkers made good money, even if Detroit didn’t always build the most coveted cars. Auto executives had lived enviable suburban country-club lifestyles, but they weren’t as wildly rich as their counterparts on Wall Street or in Hollywood (and later Silicon Valley). The Ford exec with the nice office in Dearborn felt an affinity with the guy who performed shift labor at an assembly plant building pickup trucks. In the most meaningful sense, they shared a dream, and to this day the people in the offices that steer the Big Three treat a plant visit the way New York gallery owners do a trip to an artist’s studio, or a record executive does the studio session of an important band. They know this is where the magic happens.
But the magic doesn’t have the same economic power it once did. The United Automobiles Workers union has witnessed its membership fade, while all around it organized labor in America has collapsed. But there are still the cars and what they symbolize: freedom, of course, but also the pinnacle of a certain type of American economic empowerment and a sharing of the wealth between management and labor. They continue to be a powerful rebuke to lazy Marxist thinking about the inevitable exploitation of labor, given that the immense labor force the auto industry created in the Upper Midwest was indeed a force, for social and political change.
In the other citadels of American power, the auto industry is borderline despised, and it is misunderstood or underestimated for precisely this reason. In Washington, the Republican right and even chunks of the Democratic left resent the power organized labor wields over politicians in Michigan and Ohio. In New York, Wall Street is baffled by the core proposition of the industry, which can create high-wage jobs at a clip that would stagger even the most avid libertarian technology entrepreneur. The fact that the automakers can operate as their own banks, using their profits to generate auto loans, doesn’t enhance this relationship. (And the fact that they can’t operate fully as banks, taking customer deposits, can exaggerate the differences, as it did during the financial crisis, when automaker finance companies couldn’t obtain the funds they needed to make loans.)
In the United States, the automakers are also fortress employers, with a workforce that is assured of relative stability through the cyclical downturns that are a fact of its history. This obviously isn’t the case in nonunion Detroit South—the southern U.S. auto-manufacturing states such as Tennessee, South Carolina, and Alabama—where workers are employed “at will” and can be laid off at any time. (Union workers are also laid off, particularly when plants are idled to adjust production, but the layoffs are often temporary, and the workers are hired back.)
The auto industry’s economic power hasn’t helped it remain relevant in the national economic narrative, however. While Motown was down in 2009 and climbing back from 2010 to 2013, Silicon Valley was riding high, at the height of its self-confidence (and, arguably, its arrogance) following its own meltdown when the dot-com bubble burst in the early 2000s. Apple was on its way to becoming the most valuable company in the world, displacing ExxonMobil. Google stock was trading in the thousands per share. Facebook’s initial public offering heralded the arrival of a new kind of Web 2.0 technology company, one built of user-generated shared content rather than computers and devices (as Apple was) or packaged software (Microsoft).
Then there was Tesla, whose survival spurred a belief among major tech firms and start-ups alike that the landscape of mobility could be remade for a digital future. After an initial period of wariness, the carmakers were happy to partner with these schemes, bringing much more advanced technology into their cars.
Ford led the way, as Mulally delivered frequent annual keynotes at the Consumer Electronics Show in Las Vegas, enabling the CES to commence the process of displacing in importance some major car shows (mainly those of Los Angeles and New York). Later, Mark Fields intensified Ford’s aggressive efforts to transform itself from a car company into a mobility company, as he often called it.
It was better to join Silicon Valley than to try to beat it. That was the prevailing wisdom, and it was understandable. During the financial crisis, the American automobile was seen as a problem to be solved by the Silicon Valley elites, who often drove luxury vehicles but lamented the state of information technology inside cars and trucks. Larger-scale issues also gripped them: the economic inefficiency of the automobile, pollution caused by the internal-combustion engines, and the relatively slow pace of innovation compared with that in consumer electronics and software.
A certain triumphalism also affected their attitudes, perhaps spurred on by their admiration for Elon Musk and Tesla (formerly Tesla Motors). Detroit had had its time in the American economic sun, but the iconic industry of the second industrial revolution was so twentieth century. The baton was being passed. Geeks writing computer code had won, while the gasoline-soaked engineers and slick executives of Detroit had lost.
Detroit auto executives also knew that their vehicles’ development cycles wouldn’t allow them to keep pace with rapid changes in consumer preferences for connected experiences. So they formed partnerships with Microsoft, Apple, and Google and began to cede control of the dashboard. By 2016, nearly every vehicle in GM’s fleet would offer both Apple CarPlay and Android Auto as infotainment options, and the carmaker would install high-speed Wi-Fi connectivity across the board.
You could say that the Detroit automakers both sold out to Silicon Valley and ran up the white flag of surrender. You don’t try to beat back a tsunami. By 2016, the Big Three were selling more cars than ever before, raking in the cash, and making sure Silicon Valley had access to these rolling “platforms.” Detroit was also designing and building its own self-driving cars and keeping pace with Tesla on the electric-vehicle front. This auto industry was confident. And at Ford, the company had its own visionary to thank for it—Alan Mulally, who looked out his Motown office windows every day not to bask in the trappings of his rise to the top but to remind himself that it could all disappear at any moment.