This outlook ensured that a host of management initiatives—and stupidities—went unchallenged. Early on, the UAW abandoned Reuther's fight for low car prices; later, it joined manufacturers in lobbying against higher fuel-economy standards. Years of collaboration and quiescence left the union ill prepared for the crisis that shook the auto industry in 1979. The UAW once again blazed a trail the rest of the labor movement would followonly this time it was the path of concessions and explicit labor-management cooperation.

THE CHRYSLER EFFECT—Through postwar recessions and expansions, it had not occurred to American employers that signed contracts could be breached. But when Chrysler Corporation threatened bankruptcy in the fall of 1979, the UAW stepped up to the plate, and workers and retirees took concessions, breaking a once-sacrosanct pattern. More cuts soon followed; by January 1981, Chrysler workers were collectively $1 billion behind. The next year, with the economy, and the industry, in full-blown recession, the union opened pacts at Ford and GM to make cuts there.

Describing the new bargaining climate, a steel industry official told the Wall Street Journal, "The whole posture of negotiating is changed. Basically we're asking for something that we're not entitled to." A staffer for the United Food and Commercial Workers noted, "After Chrysler, everything changed." Employers from meatpacking to airlines to education demanded and got wage cuts.

As important as the monetary concessions was an explicit change in union philosophy: acceptance of the notion that it is the union's job to make the employer more "competitive." Workers were to contribute ideas for boosting productivity, including speedups and job cuts. This "team concept" quickly spread beyond the auto industry. By 1988, AT&T, General Electric, Procter and Gamble, Xerox, Honeywell, and United Technologies were all using teams. By 1990, 85 percent of Fortune 1,000 firms reported using at least one employee-involvement practice.

In essence, the UAW's deal with the auto makers was: do whatever you need to do to boost profits, as long as you maintain the wages and benefits of (a shrinking number of) workers at the Big Three. That "whatever" included lean production; outsourcing to nonunion parts plants; the sale of GM's and Ford's parts divisions in 1999 and 2000, respectively (lopping off a total of 52,000 workers); and, today, worker buyouts. There were 466,000 hourly workers at GM in 1978, and in 2006 there are 112,000.

BUOYED BY THE BUBBLE—In the 1990s, after a decade-long downturn, Detroit discovered a gold mine: the Sport Utility Vehicle (SUV). Foreign rivals lagged behind in making them, and Detroit's market share never dipped below 75 percent. Concerns over the SUV's fuel efficiency were minimal, with gas prices averaging a dollar a gallon.

Bolstered by strong sales in this niche, Detroit's auto giants, their stock prices climbing, hoped to reclaim the global dominance that had seemed to slip through their fingers a decade earlier. The Big Three engineered some high-profile mergers and strategic investments, acquiring the Saab, Fiat, Suzuki, Daewoo, Jaguar, Volvo, and Land Rover brands. Investments, of course, can flow in both directions, and in 1998 Chrysler was acquired by Daimler-Benz.

GM and Ford also paid less and less attention to producing cars, focusing instead on their financial services arms, which by 2000 accounted for a third of their net revenues.

For U.S. auto workers, the 1990s were more mixed. On the one hand, after a decade of concessions and plant closings, workers were relieved to see the return of steady wage increases. On the other hand, most of the new investment was from foreign companies—Toyota, BMW, Mercedes, Nissan, Honda—which sprinkled factories on the edges of the Midwest auto corridor and then across the right-to-work South. These "transplants" kept their factories non-union, as did the auto parts industry that mushroomed in the 1990s.

Union density in the auto plants, which in the dog days of the 1980s declined from 62 percent to 50, fell even faster in the prosperous 1990s, dropping to 37 percent by the year 2000. The UAW proved unwilling or unable to organize the new factories. Instead the union concentrated on the state of its existing members, securing promises of new investment and job security from the Big Three. For example, a 54-day strike at two strategic GM parts plants in 1998 idled most of General Motors' North American operations, and resulted in $200 million in new investment in the two plants.

Unfortunately for the UAW, its fight to protect its shrinking store of good jobs ran headlong into a much bigger trend. The 1990s witnessed an explosion in income inequality. The longest economic expansion since World War II did surprisingly little for those on the lower rungs of the income ladder, in part because of the declining share of the workforce represented by unions.

Adding to the insecurity were large-scale retrenchments by bulwarks of corporate America, including Xerox, IBM, and AT&T. While these layoffs initially grabbed headlines because white-collar professionals were getting pink slips, the nation became inured to the sight of profitable corporations kicking tens of thousands of workers to the curb.

The 1990s also saw the move from employer-funded pension plans to worker-funded 401(k)-style plans. This seemed of little consequence when the stock market was posting yearly double-digit gains. But when the turn-of-the-century recession hit, baby boomers saw their retirement accounts vaporize. UAW members at the Big Three were some of the few to retain their original pensions.