The history of the US auto industry

Megan McArdle attempts an even-handed look at how Detroit's automakers got into their current plight:

In the early 1950s, for various reasons Detroit developed a cozy three-way oligopoly. The UAW developed a cozy monopoly on supplying labor service to that oligopoly. In some ways, the UAW helped sustain that oligopoly. If you're a big company whose quality suffers, you have problems. But if you have a union making sure that labor quality cannot vary across the industry, you don't need to worry that your competitors will make a better car. Detroit competed on styling and power, not reliability or price.

During those years of oligopoly, the Big Three's first loyalty (after their loyalty to management) was loyalty to the union. The worst thing that could happen to a Big Three manager was a strike. Making a car that is reliable is only partly a matter of engineering; it's mostly a matter of extremely tight control over the assembly process. That tight control is necessarily less pleasing to the workers than looser rules. The unions could severely hurt a company with a strike. Whereas the customers? The customers could only go to another company where the same union was negotiating the same loose work rules.

(Yes, yes, I know that Toyota does it differently, with group responsibility. But Toyota's system was developed in the absence of a strong union; the adversarial model that the UAW had developed along, however historically necessary, made the Toyota example completely unworkable in a Detroit plant.)

After the unions, for the Big Three, the government was the next most worrisome constituent, followed by the dealers, then the suppliers. The customers were somewhere down there with the mayor of Youngstown, Ohio, in emotional importance to Detroit managers. It's not that the managers in Detroit had anything against their customers, and I've no doubt that they had lots of meetings in which moving testimonials to the gosh-darned swellness of Chevy or Buick or Mercury buyers. But the buyers had little power to punish them, and their other constituencies could make their lives miserable.

The biggest risk to any company, generally speaking, is unforeseen change. Yet, paradoxically, the safest method of planning (safe in the sense that the planner is less likely to be fired) is to base your plans on current trends continuing. The larger the organization, the greater the risk of sudden unanticipated change, yet the greater the tendency within the organization to resist any plan that deviates from the "current trends will continue" model.

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