"[Apple's] problem is that they thought they did not have a problem." Crucial insight, there. From the perspective of an observer who has no special affection for Apple, it's surprising that a company of that competence would succumb to such a basic process error.
Is this true though? It's easy for everyone for all the armchair CEOs to say that Jobs never would have released such an epic fail, but I'm not so sure. If there's one thing that Apple hates as much as a half-baked UX, it's dependency on another tech company. It seems pretty obvious to me as a casual developer and observer of Google maps over the years that global mapping is really really hard. How could Apple not ha…
On top of all that, I think Google has more business intelligence than to actually let the contract for iOS maps go. Maybe both sides were just bluffing and never thought the one party would cut the other loose, or something like that, but you'd think with a deal this big at some point someone would come back with their tail between their legs and reopen negotiations.
Of course, it's all speculation at this point anyway. It'd be nice if someone with knowledge could come in here and elucidate, though the likelihood of that is really small.