FORTUNE — It’s easy to think Detroit’s automakers — at least General Motors and Chrysler — were just too inept to avoid bankruptcy. They couldn’t screw together a popular small car if their jobs relied on it, and they came up lame fighting skyrocketing costs like health care. But author Bill Vlasic shows us Detroit’s Big Three weren’t nearly as dumb as Americans made them out to be. Early in his insider tale of Detroit’s crash and eventual resurrection, Once Upon a Car, Vlasic details how almost everyone in the Motor City knew they needed to change before a crisis pushed them to the brink. But executives at GM, Chrysler — and to a lesser extent Ford — were too hamstrung by decades of bureaucracy and mismanagement. Only Ford, it turned out, could reverse course fast enough to avoid bankruptcy before the economy sank.

Vlasic, a veteran auto reporter and Detroit bureau chief for The New York Times, tells a riveting story. He takes us into deep into GM’s board meetings in 2006 when directors ignore ominous trends in favor of incremental course. He introduces characters like Jim Farley (cousin of the late comedian Chris Farley) who reviled Detroit’s carmakers while working at Toyota (TM) but eventually decided that helping Ford was part of his duty to his late grandfather, who went to work for Ford in 1914, and his twin infants who died after premature births.

Even with all the ink spilled on Detroit lately, Vlasic’s tale is as fresh as a new car. Details from inside GM (GM) board meetings might be the most enraging to taxpayers who ultimately bailed out the auto giant. As chairman and CEO, Rick Wagoner wielded outsized control over the board, and his political maneuvering squashed a potential partnership with Renault-Nissan, one that may have saved GM from filing the largest bankruptcy in U.S. history.

In fact, you walk away from the book wondering if a simple management shakeup — separating the titles of chairman and CEO — would have created a board strong enough to save GM. It seemed to work at Ford (F). In 2005, Bill Ford, great-grandson of founder Henry Ford, understood he couldn’t turn around his family’s company alone. He recruited Alan Mulally as CEO, relinquished that title, and remained as chairman. Vlasic’s reporting makes it clear that two heads at Ford were better than one at GM.

Chrysler isn’t forgotten. We learn that the Germans at Daimler were itching to dump their American arm for months before saying so publicly. In the end, Vlasic shows, Chrysler didn’t have a chance to avoid bankruptcy. Daimler had starved it of R&D in the merger’s waning years. Even the Wall Street hotshots at Cerberus, who bought Chrysler in 2007, were surprised at how hollow the automaker was.

Vlasic says he wanted to write a fast-paced narrative, and he’s penned a page-turner in Once Upon a Car. You dart from inside GM’s tense boardroom meetings to the turnaround at Ford’s Glass House headquarters, to the halls of Congress, where Wagoner, enduring lawmakers’ hostile bailout questions, is waiting to sprint to the restroom after drinking too much coffee.

The book doesn’t forget the hundreds of thousands of workers whose livelihoods were at stake. Vlasic interviews middle-class autoworkers across the country who consider themselves the last of a breed. Union head Ron Gettelfinger isn’t free of blame. He overplays his hand with Chrysler during key health plan discussions and defends the union’s infamous jobs bank.

Fortune makes an appearance when Carol Loomis’s 2006 article predicting GM bankruptcy disappoints the company. Executive Bob Lutz is incredulous at outsiders for not understanding GM’s turnaround plan. We “told her why we’re not going bankrupt,” he says of the Fortune senior-editor-at-large. “And she goes and writes that story anyway.”

That anecdote says a lot about Detroit: The automakers saw trouble ahead, but two of the three couldn’t shift fast enough to avoid it.

Fortune spoke with Vlasic before the book’s publication to hear about the reporting and his thoughts on the future of Detroit.

Q. A lot of books have come out about the automakers. What were you tying to do differently?

A. I wanted to do a narrative. I wanted a turn-the-page, you-are-there book — one where you get to know what really happened and how these executives behaved under such incredible pressure. Hopefully people understand how dire this situation became and how close this industry was to going out of business.

What was most surprising thing you learned?

I didn’t know how dysfunctional General Motors really was at the top — and Ford for that matter, too. I think the perspectives on GM and some of the players will change after they read this. I don’t know if anybody comes off looking more positive than they would otherwise.

At the end of the book Jim Farley, the Ford executive, says “Fuck GM. I hate them.” Is competition back in Detroit?

It’s very interesting to watch them when they are making money. That quote by Farley got a lot of attention. But he’s by no means the only one to express that sentiment within Ford. There’s something about the GM arrogance and fact that they were not only bailed out by the U.S. government, but they were funded like no car company in Detroit has ever been funded. They had $30 billion in [bailout money] in the bank.

One of the larger things that happened was the Big Three broke apart forever. The day that Ford decided not to go back to Congress and ask for money, Ford went down one path, and GM and Chrysler went down another. That’s healthy for the industry. A lot of the negotiating they used to do together brought them all down.