How can Waterfall kill a project?

Waterfall engineering process has been used in many industries with great success. We've used it to build airplanes, railways, buildings, and many other things. But in software industry "Agile" has become THE software engineering process everyone is following. What is wrong with waterfall?

I often use this simple story to explain my understanding of it.

 A company has come up with this great idea to build car, boat, and truck (assuming they never exist before) to get to the emerging market. Being an innovative company, they really want to push the technology boundary.

The project is following a waterfall model. They started by doing a good design of the things they want to build. During this process, they realize that they need a piece named "engine" that can be reusable for all three products. They start to design this perfect engine. Nobody has ever built something like this before. Invent an "engine" is hard and invent an "engine" that can fit into all three products is harder than that. A lot of resource is put into the effort. The resource required is so immense that the project runs out of budget before they can deliver a single car.

In retrospect, what could have been done differently? Why didn't they design an engine that only works for cars and deliver some cars before worrying about boats and trucks? One would reasonably believe designing a simplified "engine" just for cars should not have consumed so much resource. In terms of software engineering, the lesson learnt is waterfall tends to over-engineer a product or a part of it. The effort put into this over-engineering effort may cause delay for accessing the market.

Some people learn the lesson differently. They think the "design" piece in waterfall is to be blamed for the failure. Why do you spend so much resource on generating these useless design documents before writing code? Coding is design after all!

 I believe lessons learnt this way is part of the reason that "agile" is born. In the name of "reducing documentation overhead", the design step is removed from the engineering process so that no design documents are generated. But I don't agree with the way this lesson is learnt. Can Agile kill a project? That'll be my next post.