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How the Wheels Came Off: The Rise and Fall of the American Auto Industry
Aired May 29, 2009 - 20:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
(BEGIN VIDEOTAPE)
CHRISTINE ROMANS, CNN ANCHOR (voice-over): Since Henry Ford first built his Model T in 1908, Americans have been car crazy. Ford's mass production model transformed industrial manufacturing. Good-paying jobs making and selling cars helped build the middle- class.
And Hollywood's love of cars inspired Americans to stretch their wallets for the latest and greatest.
ALI VELSHI, CNN ANCHOR (voice-over): Right now: how cars changed America. What happened to the mighty auto industry? What does the future hold for America's iconic Big Three?
This is "How the Wheels Came Off: The Rise and Fall of the American Auto Industry."
(END VIDEOTAPE)
VELSHI: Hello, everyone. I'm Ali Velshi.
ROMANS: And I'm Christine Romans.
Detroit's path was determined long before this economic crisis. An industry that defined the 20th century lost its way. We step back and celebrate the American car and consider what is next.
VELSHI: Christine, I'm coming to you today from the Automotive Hall of Fame in Dearborn, Michigan. It's a museum that is dedicated to all things auto, the car, the culture and the influence that it's had on the American way of life.
ROMANS: Ali, the last century belonged to the American automobile. You cannot overstate how the car changed the way we live.
(BEGIN VIDEOTAPE)
ROMANS (voice-over): Henry Ford started at the beginning of the last century with four wheels and a running board -- 1908 was the birth of American car culture.
That same year, General Motors was formed in Flint, Michigan. It wasn't until 1925 when the Big Three was complete, with the formation of Chrysler Corporation. JOHN DAVIS, HOST, "MOTORWEEK": When the Big Three emerged, they not only emerged as, you know, rivals that really gave Americans much better automobiles at the time, but they also cemented the American automobile as a world standard.
ROMANS: As goes General Motors, so goes the nation. That phrase defined America's economic power for much of the last century.
PETER MORICI, ECONOMIST, UNIVERSITY OF MARYLAND: So many folks were employed at either at General Motors or the other two major carmakers, making steel and all the other components that go into cars. It just meant that, if the automobile companies were prospering, the country was prospering, too.
ROMANS: Today, there are 74,000 rank-and-file GM workers in the Midwest, but, in its heyday, GM was the largest industrial company in the world, a technology leader. By 1979, 600,000 people worked for GM. Those good jobs helped build America's middle-class.
DAVIS: It also allowed us to migrate out from the cities, to have that corner lot in a suburb, to basically get away from a lot of the congestion of the metropolitan areas.
ROMANS: General Motors was the company that revolutionized what we drove, how we thought about our cars, and how we paid for them.
GM invented auto loans and the model year. It was the first to hire designers, instead of engineers, to create new car concepts. Think big fins and chrome of the 1950s and '60s. And everything changed. Ford adopted flashy fins with the Ford Fairlane, as did Chrysler with the popular DeSoto.
Automobiles from the Big Three put their stamp on popular culture, from music, to movies, to television. What's considered to be the first rock 'n' roll song ever recorded was "Rocket 88" by Ike Turner about a GM product.
The Pontiac GTO, considered by many to be the first true muscle car, was showcased in a song by Ronny and the Daytonas, the Corvette on "Route 66," the 1948 Ford in the iconic movie "Grease," the Trans Am in "Smokey and the Bandit," and Archie Bunker's old LaSalle.
(MUSIC)
ROMANS: So, what happened? How did the wheels come off?
(END VIDEOTAPE)
ROMANS: Peter Valdes-Dapena is a senior writer for CNNMoney.com. Mike Quincy is an auto specialist for "Consumer Reports." And Chrystia Freeland is the U.S. managing editor for "The Financial Times."
I can think of no other single product that inspired movies, songs, changed the way we lived and defined a century so much.
So, what happened, Peter? You say that -- that legacy costs, that health care costs really dragged down Detroit.
PETER VALDES-DAPENA, CNNMONEY.COM: Well, that's not the entire story, but, yes, health care and retirement costs for their workers had a lot to do with it. And some labor economists -- labor historians I talked to pointed out to me that that was the idea of the car companies.
It was not the unions' idea. They wanted national health care. But the car companies said, no, that sounds a little bit too much like socialism. We don't like that. We will take care of your health care costs for you through your retirement. We will support you in retirement.
But at the time, in the '50s and the 1940s, they were the only game in town. They had all the market share. They had all the reason in the world to think they could continue doing this forever. Then came the Germans, Japanese, all the competition. The market share falls. You have more retirees than you have workers, not enough market share to support that system. And it puts you in a bad situation today.
VELSHI: You know, Chrystia, you couldn't really have foreseen the fact that the auto industry was going to be so much smaller today than it was back then, that we were going to have a few workers really tending to the needs in retirement and health care of the many.
But what you could have judged is that oil prices would go up one day, gas prices would go up one day. We saw it happen in the '70s and then we saw it happen again in the last few years. That's a big criticism of Detroit, not planning ahead for that.
CHRYSTIA FREELAND, "THE FINANCIAL TIMES": Yes. I think that the fuel issue is absolutely key.
And that's not entirely the fault of the auto industry. You know, that's partially the fault of the government. If you look at Europe, for example, they have much higher taxes on gas. That creates a natural incentive for consumers to buy smaller cars.
And, in a time of globalization, the fact that America has had cheaper gas than the rest of the industrialized world has really hurt Detroit, because it means that the kind of cars that Detroit automakers sell at home, they have a hard time selling abroad.
Contrast that with the Japanese. They can sell small cars in their domestic market and small more fuel-efficient cars in the U.S.
ROMANS: Mike, let me ask you about complacency. There's no one thing. I think there's a lot of things that happened in a very mature industry, 100 years. It's been a century. We are really marking -- as you said, what a way to celebrate 100 years in business.
MIKE QUINCY, AUTO SPECIALIST, "CONSUMER REPORTS": To go into bankruptcy.
ROMANS: To go into bankruptcy. QUINCY: That's right.
ROMANS: How much is complacency, bad management, the inability to see that times were changing, the Japanese were a powerful competitor, globalization would change, and frankly so would American consumer tastes?
QUINCY: You know, Christine, I think, in some ways, Detroit really was a victim of its own success.
Post-World War II, they were selling great numbers of cars. Their styling unbelievable. People aspired to own a Cadillac. It really was the standard of the world. But they became so good and so big, fat and happy that they really didn't see the Japanese coming. The price of gas goes up, Detroit doesn't have much to sell that's fuel-efficient. In walks the Japanese. Out walks Detroit's market share, basically.
And the Japanese were building cars that were very reliable cars. They realized that, if they get a small car that's relatively inexpensive and it really runs well -- well, they had a chance to get that buyer for life.
And I think that's really something that GM really missed the boat on. Not just GM.
(CROSSTALK)
VELSHI: Peter, you and I...
(CROSSTALK)
VELSHI: Sorry. Peter...
(LAUGHTER)
VELSHI: Go ahead.
(CROSSTALK)
VALDES-DAPENA: Go, Ali.
FREELAND: OK. No, I was just going to say, I will jump in with another point.
VELSHI: No, I'm not speaking.
(CROSSTALK)
ROMANS: No. He's just saying he's not speaking.
(CROSSTALK)
FREELAND: OK.
No. I will just jump in with another point that a member of the Obama car task force pointed out to me, which is a mistake that Detroit didn't have to make, but it did make, in the last decade. And what this Obama task force member said to me was subprime also applied to the car industry.
ROMANS: Really?
FREELAND: And you had the same high-octane financing of cars that you had of homes. People were encouraged to buy cars beyond their means.
And Detroit is paying for that right now. That's part of the reason we have seen car sales fall from 16 million to nine million. There was this huge overhang. And that's part of the reason that they were less able to endure this recession.
ROMANS: OK, Ali, your turn now.
(LAUGHTER)
VELSHI: And the only way we're going to get those cars back up, the only way we're going to get those car sales back up is if there's a perception that the style, which we're going to talk about a lot in this hour, is back and a perception that the quality is back.
Peter and -- and Mike, you both drive all of these cars, every new car that comes out, and you think that Americans may not be understanding fully that in many cases the quality is back on many of these American cars.
VALDES-DAPENA: I think the quality is back. In terms of Ford, the dependability on their cars is actually excellent, right up there with the Japanese.
And in terms of styling and features like that, I mean, GM, they were just saying that recently they have had some of these -- the guys from the auto task force come to New York. And Bob Lutz was saying he couldn't get these guys away from the Cadillac CTS.
I totally believe him. I couldn't get away from that car.
VELSHI: Yes.
VALDES-DAPENA: They have got some really hot looking stuff right now.
(CROSSTALK)
QUINCY: I have got to echo what Peter is saying. According to "Consumer Reports"' reliability data, the Ford -- a lot of Ford products definitely rival the Japanese. The Ford Fusion is some of the best news out of Detroit for many -- that anybody's gotten.
The Ford Fusion hybrid in "Consumer Reports" test fleet getting regularly about 35 miles per gallon. It's not all bad news.
(CROSSTALK) ROMANS: OK, we have 51 minutes to really zero in on what happens next.
Thank you, all of you. We will be back with you -- Ali.
VELSHI: All right, listen, we have got to talk about the cars, we have got to talk about the design, but we have got to hear the voices of the American autoworker.
We are heading out to Warren, Michigan, to hear from people who build and sell the cars. We will ask them what they think.
Plus, look at that lineup. There's something about a classic car. We are going to take you down a trip -- on a trip down memory lane.
And what Academy Award-winning movie featured the Ford Model T?
(COMMERCIAL BREAK)
(BEGIN VIDEO CLIP, "IT HAPPENED ONE NIGHT")
UNIDENTIFIED ACTRESS: What happened to you? I have been so worried.
UNIDENTIFIED ACTOR: Come on, get in.
UNIDENTIFIED ACTRESS: Look at your face. You have got a cut.
UNIDENTIFIED ACTOR: Come on, come on, come on, come on.
UNIDENTIFIED ACTRESS: Well, what happened?
UNIDENTIFIED ACTOR: Just a road thief, picks people up, then runs off with their things. What a racket.
UNIDENTIFIED ACTRESS: How did you get the car?
UNIDENTIFIED ACTOR: Oh, I gave him a black eye for it and had to tie him up to a tree.
(END VIDEO CLIP)
VELSHI: The car is such a part of American culture.
Frank Capra's "It Happened One Night" swept the Academy Awards in 1935. It showcased with the classic Ford Model T.
Welcome back to "How the Wheels Came Off: The Rise and Fall of the American Auto Industry."
I'm here at the Automotive Hall of Fame in Dearborn, Michigan. This is a building that is so rich with history, so much passion shared by Americans about the auto industry.
And I'm here with Jeffrey Leestma. Come on, Jeffrey. He's the president of the Automotive Hall of Fame.
Jeffrey, there's -- there's just so much about what Americans came to love about the automobile in this building. What are you sensing about what Americans want out of their auto industry? What excites them when they come in here and they see these cars of the past?
JEFFREY LEESTMA, PRESIDENT, AUTOMOTIVE HALL OF FAME: Well, it's true we -- we focus on the history.
Well, one of the things I think that the history has taught us is that the auto industry is -- is just incredibly resilient. It comes back again and again.
And I think the reason for that is that the need for automobiles, that need for personal transportation won't go away and it will be here for as far as we can see. It's that freedom, it's that excitement, that -- that love affair that people have their automobiles.
VELSHI: And what you see in here, there's a lot of stuff about innovation, about -- it's great little bits of history, but a lot of it is design.
Ultimately, when you look at these pretty pictures and these beautiful cars around here, you are looking at design. What do you people you hear, what do they say to you when they come in here? What are they excited about when it comes to design? Do they think that the auto industry of today is delivering?
LEESTMA: Well, I don't know about that.
I mean, cars are art. There's no question about that. And people -- people drive their cars for -- for that art. What the future of the car will look like, who knows? I think we can know that it will look different. The technology will be different. But, again, that -- that need for that personal freedom won't go away.
VELSHI: So, no matter what we do. We will get into smaller, fuel -- more fuel-efficient cars, but we're all going to keep our cars, you think?
(CROSSTALK)
LEESTMA: There's no alternative.
VELSHI: Yes, the way we have lived and the way we have developed.
(CROSSTALK)
LEESTMA: That's right.
VELSHI: Jeffrey, thank you very much.
LEESTMA: Thank you. VELSHI: And thank you for hosted us here at the Automotive Hall of Fame in Dearborn, Michigan.
LEESTMA: My pleasure.
VELSHI: Now, it has been said that the heart of the American automobile is the American autoworker. But who are the men and women, the faces of this industry, and what is happening to them? How are they feeling?
CNN correspondent Susan Candiotti is about 20 miles from me here. She's in Warren, Michigan -- Susan.
SUSAN CANDIOTTI, CNN NATIONAL CORRESPONDENT: Ali, these people represent, as you indicated, the heart and soul of GM. At this one local alone, used to have 5,000 members back in the '70s. Now down to about 1,600. That's how much times have changed.
I want to talk with some of them -- some of them about how these cutbacks have directly affected them.
Nicole (ph), what has it been like for you, changes at the workplace?
UNIDENTIFIED FEMALE: Well, changes at the workplace -- nothing is constant. My day-to-day job changes. Currently, I'm a material handler, which means I handle shipping and receiving. But, lately, we have been doing furniture moves. So, whatever we have to do to keep us working is what we do.
CANDIOTTI: How do you deal with the worry at home? You have families to worry about.
UNIDENTIFIED MALE: Yes. I -- actually, I just got one -- my oldest son just graduated college. And it's really tough right now.
We have -- I have got another younger one at home, and worrying about being able to possibly put him through as well. It's been the American dream.
CANDIOTTI: Is this a job that...
(CROSSTALK)
UNIDENTIFIED MALE: It's been the American dream. And I have been -- I'm at the tail end of that American dream, it seems. So, that's where I feel at right now.
CANDIOTTI: And I must ask you, for example, if you -- your child was at the age where they could start at -- everything's been cut back, at say $12, at $14 an hour, would you recommend it?
UNIDENTIFIED MALE: Well, it makes it hard for them to be able to live and then buy a house and those kind of things. They're starting at the bottom of the wage scale.
CANDIOTTI: It is tough.
And retirees -- and this is Bill Carr (ph), who is a retiree -- worked for years at GM.
They just voted to cut your health care benefits way, way back. You are suffering from lung cancer. What does this mean to you?
UNIDENTIFIED MALE: Well, I'm just one of 500,000 UAW GM retirees that's going to take a 25 percent cut, and didn't get a voice or a vote in this matter.
CANDIOTTI: How are you going to pay for your health care? You have lung cancer.
UNIDENTIFIED MALE: Well, I will be all right until the end of this year. And then we will see what VEBA brings us, because this contract's agreed to let VEBA downsize in our benefits. So...
CANDIOTTI: Are you angry at these people who voted? Seventy- four percent of them said, got to cut.
UNIDENTIFIED MALE: I'm not angry that they voted that way. I'm upset that I didn't get a vote. And I'm going to work the next year very hard to change our constitution to allow us...
CANDIOTTI: To change that. To change that.
UNIDENTIFIED MALE: We built this union and this company. So, yes, we need a vote.
CANDIOTTI: You got it. You got it.
Thank you very much.
We will be back later in the broadcast to talk more about the future of GM -- Ali.
VELSHI: Susan, I have been coming to Michigan for years to report on the auto industry. And that is a real stalwart of -- of autoworkers. They just don't lose faith. They never think the game is over. They always, always come back to try and make things right.
Susan, thanks very much. We will be checking in with you again -- Christine.
ROMANS: (AUDIO GAP) have made some pretty special cars. Think of maybe a red 1959 Corvette, my personal favorite, just about any Mustang from the '60s, the Pontiac GTO. We have assembled our own little classic car rally here in Columbus Circle in New York City.
Plus, the Steve McQueen movie that made the 1968 Ford Mustang famous, that's next.
(COMMERCIAL BREAK)
VELSHI: Nineteen sixty-eight's "Bullitt" starring Steve McQueen, Jacqueline Bisset, and, of course, the 1968 Ford Mustang. Christine was talking about the Mustang.
You don't have to go to a museum like the one I'm in to see some classic cars. You could, for instance, head out to Columbus Circle in New York City, right outside where we work, where Christine is standing by.
Christine, what have you got?
ROMANS: All right. I got a Mustang, believe it or not, right here in New York City.
I'm here with Zac Moseley from Classic Car Club Manhattan. And he is a guy who knows classic cars. He knows how to drive them. He knows why we like love and love them.
And you have got a Mustang here that's a pretty special car. Tell me about this Mustang and what makes it so special.
ZAC MOSELEY, CLASSIC CAR CLUB MANHATTAN: Well, this particular Mustang, this color combination is only available to Ford employees. It's a really special car. They have made about 90 of them.
(CROSSTALK)
ROMANS: Only 90 with this particular color?
MOSELEY: Yes, only 90, yes.
And then what else is special about the Mustang is, this car spoke to a generation so directly. And that's why it was so successful. You know, young baby boomers getting their first car wanted something fast and stylish and affordable. And this was it. And that's why they sold millions of them.
(CROSSTALK)
ROMANS: You are not a baby boomer, and you love this car. Why?
MOSELEY: Because I think it's a beautiful car and it represents the peak of what American cars I think can be.
ROMANS: Let's talk about this car.
MOSELEY: Sure.
ROMANS: This is a car that you drive. This is a car you have done a little bit of work on. This is a car that, every weekend, someone is driving this car in New York.
MOSELEY: Yes.
ROMANS: This is a Chevelle Super Sport '67.
MOSELEY: Yes.
ROMANS: What is so great about this one? MOSELEY: Well, with the Chevelle, everything says, was it a big block? And this is a big block Super Sport Chevelle. So, the -- American muscle, it's about big motors and small, lightweight cars.
ROMANS: Show me under the hood.
MOSELEY: Sure.
ROMANS: Tell me -- tell me -- beauty is only skin deep in a car like this. What really matters is the soul of one of these cars and the soul of it here. You have done a little work on this one.
MOSELEY: Yes. You know, we kept it true to what it's originally going to be. To get around the streets of Manhattan, we do things like put an aluminum radiator, so it will cool a little bit better.
But, no, it's -- it's a great car. And the thing is, these cars are 99 percent nostalgia.
ROMANS: Right.
MOSELEY: You can go down the road and everyone talks to you.
(CROSSTALK)
ROMANS: They're holding their value, right? Even in this recession, they're holding their value?
MOSELEY: They are. While new cars and exotic cars are very hurt in this economy...
ROMANS: Right.
MOSELEY: ... cars like this are still holding their value really well.
ROMANS: This reminds me of the one -- the General Lee. But it's same body, but a little different.
(CROSSTALK)
MOSELEY: Yes. This is the sister car to the General Lee. This is the Plymouth GTX. It's the same body. And the performance Chrysler cars, known as Mopars, they are a real cult thing. The Mopar guys are Mopar guys for life. They love their cars.
ROMANS: This is a fast car?
MOSELEY: Very fast. This particular one is really worked. Like the guys in the '60s did, people with these cars now hot-rod them to make them go faster. And this is a really good example of that.
ROMANS: Will Detroit be able to make these kinds of cars again? Will Detroit be able to have a moment where people all over the country are going to go to the fairgrounds and look at cars that are 30 years old and idolize them and talk about what they meant for their -- for their lives?
MOSELEY: Yes. Yes, absolutely.
My (INAUDIBLE) classic cars, always thinking about this. It's really tied to the cars. And what they need to do and what I'm starting to see them do now, because I really do hope the -- American auto manufacturers, that they're starting to design cars that people want. You know, they're thinking about what the consumer wants and making something that will satisfy you when you're sitting in the driver's seat.
ROMANS: For a car guy like you -- I grew up with a '59 Corvette in the garage. I was a Corvette girl, my brothers, my uncles, my dad, you know, fixing cars, changing oil, working on cars all the time.
You grew up like that, too.
MOSELEY: Yes, absolutely.
ROMANS: And will there be the next generation to grow up like we did with the greasers and the people who really cared about their cars and what it meant, their cars?
(CROSSTALK)
MOSELEY: Well, there will be.
There are -- there are -- you know, young kids now are into tuning their cars. It's a different thing. The future, you know, it's going to be them reprogramming their electric cars. Who knows?
ROMANS: Right.
MOSELEY: Maybe there's a whole new future out there...
(CROSSTALK)
ROMANS: All right, Zac Moseley, tell me your company again.
It's the Classic Car Club Manhattan?
MOSELEY: Classic Car Club Manhattan.
ROMANS: Fantastic.
MOSELEY: Yes, where you can drive cars like this.
(CROSSTALK)
ROMANS: Yes.
Ali and I are lining up, as a matter of fact.
He has also got something over here. It's a Tesla. It's a fantastic -- this is the future. This is the past, the present, what we love, what we grew up with. But there is the future over here. Ali, there's some pretty cool stuff going on.
VELSHI: Christine, I tweeted before the show that people should tune in to find out what a gearhead you actually are. And as always, you always deliver.
Now, if you promise not to tell our bosses about this, I will tell you that rented a convertible Mustang, which is what I'm driving around Detroit in, just really to support the American auto industry.
(CROSSTALK)
VELSHI: I am going to come back and talk about...
ROMANS: Nice. I think I...
(CROSSTALK)
(LAUGHTER)
VELSHI: I'm going to come back and talk about the future of Ford. I am going to have a look at how the automaker is able to keep on trucking while its competitors are struggling. My exclusive interview with Ford CEO Alan Mulally is next.
(COMMERCIAL BREAK)
VELSHI: You're watching "How the Wheels Came Off: The Rise and Fall of the American Auto Industry."
We are at the Automotive Hall of Fame in Dearborn, Michigan. And not everything is falling apart in Detroit. Chrysler and General Motors have their problems. And they are extremely serious. But Ford, led by CEO Alan Mulally, believes that it is on the right track.
I spoke with Alan Mulally this week.
(BEGIN VIDEOTAPE)
ALAN MULALLY, CEO, FORD MOTOR COMPANY: Good to see you.
VELSHI (voice-over): Alan Mulally is a bit of a rock star on the shop floor, not typically the kind of place a car company CEO would find fans.
MULALLY: Looking good.
UNIDENTIFIED FEMALE: No, no, you're looking good.
MULALLY: Thanks a lot. Thank you.
VELSHI: Mulally is widely credited with keeping the company out of bankruptcy and just maybe on the road to success. Since coming to Ford in 2006, Mulally has tried to keep spirits high in the midst of a crisis that threatens the survival of the U.S. auto industry. CHRIS WILEY, FORD AUTOWORKER: Yes, Alan Mulally is a great guy to run your business, period. It's almost as if he foresaw a lot of this coming. And you see what happened to some of our competitors, which is unfortunate for anybody. But it almost feels like he might actually be one step ahead.
VELSHI: Mulally downplays being one step ahead, but he does cop to leading Ford through tough decisions, which included laying off workers and closing plants, consolidating worldwide efforts, and improving vehicle quality.
He also negotiated huge loans for Ford while times were still good, before the current economic crisis made it too late for Chrysler and General Motors to do the same. But perhaps the biggest decision -- and Mulally makes a lot of them at his weekly management meetings -- was one of his earliest, the decision to focus attention on the blue oval, the Ford brand.
MULALLY: We had many brands. We were a house of brands. We had Aston Martin, Jaguar, Land Rover, Mazda, Volvo, and, of course, Ford, and Lincoln, and Mercury. So, clearly, what was Ford going to be?
VELSHI: Ford ultimately sold off Aston Martin, Jaguar, Land Rover and Mazda, and it's looking for buyers for Volvo. Mulally thought Ford should go back to what worked and that meant turning to the Taurus. For five years through the late '90s, it was the best selling car in America.
MULALLY: The day I arrived I wanted to see the product line. I'm going through the entire product lines, small, medium and large and there was no Taurus. And I said, where's the Taurus?
They said, well, we made a couple of them look like a football and they didn't sell very well so we decided to, you know, come up with a new name and new vehicle. I said, you're kidding me? This is a Taurus. Think of the value that we have in this vehicle.
VELSHI: Taurus is back. But is Ford back? The company lost almost $15 billion last year and it's still losing money, although it didn't take a penny of taxpayer-backed loans from the government.
Ford isn't without its issues. Like General Motors and Chrysler, it focused for too long on the profitable trucks and SUVs.
MULALLY: Here's the number one vehicle in the United States.
VELSHI: Ford's iconic F-series pickup has been for 27 years the best selling vehicle in America. Ford's not quite prospering just yet but there's hope that the worst might be behind it, and it appears to be in better shape than Chrysler and GM. But Ford does share one major problem with its competitors, potential customers losing jobs or being unable to get credit for car purchases.
MULALLY: This is the Fiesta. Look at this.
VELSHI: Mulally needs the economy to recover soon to finish the job he started with Ford.
MULALLY: Clearly, it's not over yet. And, you know, we have a long way to go.
(END VIDEOTAPE)
VELSHI: And, Christine, one of the things that Ford is focusing on and I think General Motors is going to have to focus on the same thing, that is leveraging the strength around the world, the inventions, the developments at their plants around the world and trying to create cars that will sell not just in the United States but in China and India and all of those places. They're going to try and consolidate a lot more than they have already -- Christine.
CHRISTINE ROMANS, CNN BUSINESS CORRESPONDENT: All right, Ali.
You know you think American autoworker and you think of assembly line workers for Ford, Chrysler, General Motors, but American autoworkers build Honda and Toyota cars right here.
Back now with our panel, Chrystia Freeland, Peter Valdes-Dapena, Mike Quincy.
Mike, next year, foreign autoworkers could build more cars in the U.S., next year, the year after maybe than the big three. Is that possible?
MIKE QUINCY, AUTO SPECIALIST, CONSUMER REPORTS: It's certainly possible. I mean, the foreign automakers have been making big investments in the United States for many years with plants throughout the country, a lot of them in the Midwest. They employ thousands of people. They revive towns. They help people, you know, buy houses.
There's delis. There's dry cleaners. There's all this ancillary stuff that goes with it. So certainly the foreign car companies are employing a lot of people in this country.
ROMANS: And, you know, we talk about the American car, the American autoworker. It's not simple and it hasn't been simple like that, Peter, for a very long time.
When you look at, for example, this Pontiac G8, I think made in Australia, it's got an engine from Mexico. It's got other parts from around the world. This is truly a globalized car sold right in the United States. Pontiac.
PETER VALDES-DAPENA, AUTOS WRITER, CNNMONEY.COM: Yes. But, remember, this is an example of how a company like General Motors can use its global facilities, its global footprint to remain competitive.
Now some people might complain, wait a minute, we should be building cars here in the U.S. but on the other hand, wait a minute, GM's competitors like Toyota, they don't have to build cars in the U.S. and sell them here. If you demand that companies build the cars in a certain place, don't utilize their global resources, you're making them not competitive. So we have to be careful when we start demanding a company like Ford or GM, for example, build the Chevy in the U.S. which is built in Korea. It might just not be competitive for them and we want these companies to succeed.
ROMANS: Chrystia, look at some of these other cars. We're going to show some other cars that are -- they have big parts that are made someplace else or made completely in Canada. For example, the Impala is made in Canada, your home country. We also know that, I think, maybe a third of the American cars sold in this country were made either in Mexico or in Canada.
I mean, it's a truly globalized supply chain and -- did Detroit not see it coming or did they embrace it? Where did they go right and where did they go wrong?
CHRYSTIA FREELAND, MANAGING EDITOR, "FINANCIAL TIMES": Well, I think actually the global nature of the car industry is good news for America. And I think that the point that you started this section was about how well the foreign automakers are doing in the U.S. is really good news because what it says is that it's not American workers who are useless.
You know, when you look at the cars that are being produced by American workers in the Midwest, in the south, they're producing really great cars which people are buying. A lot of the problems that Detroit has are to do with what Peter was talking about right at the beginning which is these legacy costs. And that's something that's not so much to do with the people right now. It's just to do with acting in some ways, you know, the glorious history. At a certain point that becomes just too much to bear.
VELSHI: Ultimately, those legacy costs are going to start to disappear. In fact, this new agreement that General Motors workers have ratified really eliminates the gaps between the cost of an American automaker and the cost of an American automaker who's not unionized.
The issue here, and I want to ask you about this, Peter, is -- are these cars exciting again? Can you get into them?
Because ultimately the smaller cars that the American automakers made, they just didn't put any energy into them. They didn't put their creativity into it. If you wanted a truck or an SUV, you knew you could go to an American lot to get it. But if you wanted a smaller car, they really dropped the ball on this for a few years.
VALDES-DAPENA: They certainly did. They made some pretty lousy small cars for a long time. And there was a -- there was no reason for that is that these cars, for an American car company that's not a profitable product because Americans, we equate size and price.
In other countries where gas prices are higher, people will gladly pay more money for a nicer, small car. In this country, not so much so they are making pretty much the same effort to build the car but they can sell it for less.
In the future, Ford, in particular, thinks that that's going to change in the future, that Americans really are changing. They're actually are going to want smaller cars. And I recently had the opportunity to drive the European Ford Fusion that they're going to sell here, and that's going to be a real nice little car.
ROMANS: Right. Peter, Chrystia, Mike Quincy, we're hitting the road to talk to Americans about their car and their auto industry and their neighborhood. It's Poppy Harlow's road trip and will end in L.A. with the classic car show of all classic car shows.
And what's the '32 Ford Deuce Coupe and the '55 Chevy 150 have in common?
(COMMERCIAL BREAK)
ROMANS: The decline of the American auto industry has been devastating for Detroit, but the influence of the big three is everywhere.
CNNMoney.com's Poppy Harlow drove from Minneapolis to New York City last week. And she took a camera and she asked people along the way about the economy. And she found out what they really want to talk about, the auto mess.
POPPY HARLOW, CNNMONEY.COM: That's it. They wanted to talk about Detroit, the automakers, Christine, and those rising gas prices.
Folks, I started off at home in Minneapolis, Minnesota. Headed out over a few days Memorial Day weekend right on here to New York City. And we talked to folks about the auto industry, what it means for their town.
We stopped first in Janesville, Wisconsin. You see the town right there. Why it matters so much to this town of about 63,000 folks?
Well, a GM plant closed there in 2008 and it's estimated about 4,500 people lost their job either at the plant or at companies that supplied that plant. We talked to Vicki and Whitey Cummins (ph). They both have friends, family that worked at this plant. We talked about how it affected their entire community. Take a listen to them.
(BEGIN VIDEO CLIP)
UNIDENTIFIED FEMALE: For Janesville, it's pretty hard right now because they shut down the General Motors plant and at least 2,000 people, probably 3,000 have been affected by layoffs. The families are -- the homes are being foreclosed on. What I hear a lot of them saying is now we have to sell and get out now while we can, transfer, take whatever we can get because GM is not going to come back.
(END VIDEO CLIP)
HARLOW: Well, GM not coming back. That's a scary thought for Janesville where the unemployment rate is 13 percent, the highest across Wisconsin. We traveled next to Maumee, Ohio. That town has about 14,000 people. It's right next to Toledo, Ohio, and right there they have a lot of suppliers and a lot of auto dealers.
In fact, a huge auto supplier, Dana Holdings (ph), there just came out of bankruptcy. The biggest customers of that auto supplier, Ford and General Motors.
We went into a local diner. We talked to David Coldiron (ph). He's general manager at the diner. He gave us an interesting perspective about how this affects folks that come in there every day.
(BEGIN VIDEO CLIP)
DAVID COLDIRON (ph), LOCAL DINER OWNER: The automobile industry, the local economy up here relies heavily on the automobiles. And we've really taken a big hit on that. Being close to Detroit, there's a lot of businesses that feed off from the automobile.
(END VIDEO CLIP)
HARLOW: There's a lot of jobs, the suppliers, the dealers, that whole road next to the diner, covered with Chrysler, Ford and General Motors dealers.
And then finally, we talked to a man, a retiree in that diner having brunch on a Sunday morning. He's now taken up a second job.
He's frustrated. He's very upset about how the government has handled this whole bailout of GM and Chrysler. Listen to that.
(BEGIN VIDEO CLIP)
UNIDENTIFIED MALE: This particular area is devastating. You have a lot of automotive industry in this area. They have a lot of suppliers in this area. They have a lot of car dealers in this area. Government has made a big mistake.
HARLOW: So what about GM and Chrysler? They should just let them fail?
UNIDENTIFIED MALE: They -- they're doing the very same thing that they were going to do from the very start. So why? Why did the government have to interrupt?
(END VIDEO CLIP)
HARLOW: Why the government have to interrupt, that's his question. And, Christine, $19.4 billion to General Motors, they say they're not going to be able to pay that back. It's expected to cost us, the taxpayers, about $50 billion if we see a GM bankruptcy.
ROMANS: And this is just the beginning of the story. Bankruptcy is just the beginning of the story.
HARLOW: Right. ROMANS: Poppy Harlow, thanks so much.
Ali?
VELSHI: I'm envious of Poppy's road trip. You know how much I like those, Christine.
And let's talk about road trips. From Darlington Raceway in South Carolina to Route 66, to the streets of L.A., Americans share a common passion for classic cars, especially the folks all around CNN's Ted Rowlands. He is live in Burbank, California.
Ted, what are you doing there?
TED ROWLANDS, CNN CORRESPONDENT: Well, Ali, we are enjoying a trip down memory lane here in Burbank. Look, this is a '65 Cobra. There are cars here from every era. This is a 1948 Ford in beautiful condition.
Basically, we are at a restaurant. It is the Bob's Big Boy in Burbank, California. And every Friday night, without fail, since the 1950s people have been showing off their cars here as just a tradition. And they come here, they bring their classic cars. Some of them try to sell their classic cars, and a lot of them just sort of talk to each other.
So you can -- as you can imagine, there are not only a lot of classic cars but a lot of classic people, as well. You get a glimpse of a few of them there and a lot of classic opinions about what has been going on with the car industry and specifically Detroit, because Detroit is everywhere here.
Sam Ghaffary here with a 1951 Mercury -- he's actually selling it.
Sam, you were saying that the love of the car, the American car has gone away and has been replaced by the BMW, the Lexus. The guy that really loves a car isn't buying American. Explain.
SAM GHAFFARY, OWNS A '51 MERCURY: Well, what's happened over the last two years, the gas prices has really impacted how people view cars. It used to be that it wasn't only simply getting from point a to point b, it was getting there in style. And now what's happened is those people are getting there in style and what we call the European market cars. They're using the Japanese cars to get from point a to point b when the cars like this were, you know, the king, those days are long have passed us in Detroit.
ROWLANDS: Style didn't cost as much as it does now.
GHAFFARY: No, it doesn't. But, you know, with a new market, with the new Camaros and the Mustangs, they're still trying to keep some integrity in the world of cars that are coming from Detroit.
ROWLANDS: Sam's car, a '51 Mercury, it's 35 grand if you're interested. The matte finish looks beautiful. Look at this one here. This is a 1955 Bel Air in beautiful condition. $55,000 for this one, a few of the ones on sale.
Ali, not everybody is negative. You know, there are some people that are sort of down on Detroit over the past few years and look with that sort of nostalgic lens but there is a lot of optimism, too. In fact, many people say Detroit is and we heard it earlier in the show producing a good product.
The guy that knows Detroit products very well is John Hennessey, makes a living taking cars like this Camaro and turning it into a suped-up version.
You're optimistic about what Detroit is churning out.
JOHN HENNESSEY, BUILDS CUSTOMIZED CAMAROS: I think Detroit is building some great cars. It's a sad deal that GM is in a state that it's in, but I think their product quality and product excellence is as good as anything in the world.
ROWLANDS: How can you say that when you see all the struggles and you see the sort of a sour opinion? Is it just that the American people are blaming Detroit for past sins?
HENNESSEY: I think there's a lot of blaming Detroit for past sins but unfortunately the -- I don't think Detroit's getting enough credit for the good quality of products that they've been putting out the last few years. And I own several GM products and I think the new Camaro is about as good as a hot rod or muscle car that you can buy. And right now, you can't hardly buy them. They're all going from rubber (ph) sticker on eBay.
ROWLANDS: All right. Well, Ali, this is -- I tell you what, if you're ever in Burbank, California, on a Friday night, come to the Bob's Big Boy. It is a virtual museum. They're here every week.
Jay Leno stops by every week, too, with one of his cars. Probably won't be here tonight because tonight is his last show, "The Tonight Show." But just an unbelievable scene here and it plays out, believe it or not, every week.
VELSHI: Ted, next time I'm in, you'll take me there. I think what your guests were saying is really interesting. Those -- the Mustangs, the Camaros, the Corvette. There's a real new energy to muscle cars and some real style in them. We'll be talking a little bit more about that.
Everybody does love a classic car but could you soon be driving one of these? Why this car could be a big part of the future of the American auto industry.
And this is an easy one. You must know which hit television series featured the hot rod orange 1969 Dodge Charger. Don't make me tell you.
(COMMERCIAL BREAK) ROMANS: Paging Sheriff Rosco, P. Coltrane, I know you guys all know that one.
It's those two crazy boys of Hazzard, Bo and Luke Duke, and their 1969 Dodge Charger in the "Dukes of Hazzard."
So much of this week has been focused on the current state of the American auto industry, but what's next? What will American carmakers look like and will GM and Chrysler survive without a direct line to the U.S. Treasury Department?
Chrystia?
FREELAND: Well, I actually think that the U.S. Treasury Department will try to get out of GM and Chrysler as soon as it can.
It was interesting to see the people actually working in the car industry clearly really worried about it but when you look at the polls of all Americans, bailing out Detroit has not been that popular. And I think the reason that we've seen Obama really stepping in is they were worried that if he let these companies die right now, at the depths of a recession, the whole economy will be tipped over. So I don't think that Chrysler and GM can rely on the government to support them forever.
VELSHI: Mike Quincy, you have a direct line to American buyers. Do they want better cars out of Detroit? Because ultimately, all the financing in the world doesn't change the fact that if you make proper cars, people will buy them. If you make sexy cars, people will buy them.
QUINCY: Absolutely, Ali. I mean, you think about -- about all the choices that Americans have now for the cars that they can go out and buy. And with a reduction of General Motors, getting rid of Pontiac, you might be getting rid of Saturn, all the stuff.
People are going to have fewer choices in the short run which is kind of too bad for consumers. But certainly, competition is always made all the products better.
Detroit has gotten a lot better because of all the pressure from Japan, the Korean automakers. I don't see it for a second that any of the cars are going to get any worse. They're going to get more fuel efficient and Consumer Reports is going to be there to study its reliability, help people decide what's a good car to buy.
ROMANS: Peter, what do we see? What do you see down the road?
VALDES-DAPENA: Well, I agree with Mike. I think we're going to see definitely better quality. Already we've seen Ford improving their quality. They're not putting this whole bankruptcy situation, but GM is improving their quality.
I see some good things from out of Chrysler. I have some hope there that they can hang on, that they can do pretty well, too. We'll see better quality, better fuel efficiency, more technology. All three companies have said they're going to come out with electric cars starting sometime in 2010 or 2011, so we'll start to see some competition between more fuel efficient gasoline cars and electric cars and combinations of those technologies.
ROMANS: Real quickly, we were talking about what's next for the American worker. Will there be jobs that will pay so much for someone without an education with good mechanical ability that will be a steppingstone to the middle class? Is that part of the 20th century and it's gone, its nostalgia?
FREELAND: It's gone. It's gone. That era is gone with globalization. And if the American economy is looking for a Detroit for the 21st century, it's Silicon Valley.
ROMANS: All right. Thank you so much, Chrystia, Peter, Mike.
We're going to go back out to Southern California as we talked to Americans who are very passionate about their automobiles.
(COMMERCIAL BREAK)
ROMANS: We're going back out to Burbank, California, to give you one last look at that classic car show. Ted Rowlands is out there.
How's it going, Ted? Every Friday night, right?
ROWLANDS: Yes, every Friday night. It's not like an organized show, Christine. It's amazing. And literally from the '50s, people used to come here and show off their cars and just sort of, you know, drive them around.
If you have a cool car, you'd come back. You'd come to the Bob's Big Boy and, you know, back in the day, was a 16-year-old with his gal, as Ken was telling us earlier.
KEN: Exactly right. Every Friday and Saturday night, it was waiting in line with your girlfriend in your $350 hot rod that you spent your summer job and your part time job supporting during the school year.
ROWLANDS: And now, it's a bunch of you guys. Where are your girlfriends? You have your cars.
UNIDENTIFIED MALE: I've been married to mine for 50 years.
ROWLANDS: All right. And this is your car here?
UNIDENTIFIED MALE: Correct, the black Deuce.
ROWLANDS: Black Deuce. Beauty.
And, Christine, it runs the gamut here. And I know you're a car aficionado. There are Corvettes from the old days and some relatively new models, as well. Look at this Camaro here, the Rally Sport 427.
UNIDENTIFIED MALE: Nice car, 600 horses. ROWLANDS: Six hundred horses.
And, Christine, we have -- I know you love the Corvette. The red Corvette.
ROMANS: That's my car, Ted.
ROWLANDS: We've got a '57 here for you. This one, look at this baby. Perfect condition. It really is amazing here.
And you know what? What's interesting is talking to these guys about Detroit, because Detroit's footprint is everywhere here, obviously.
They're really high on the ability of Americans to make decent cars and they say that, you know, they know cars. They say that the Chevy motor is still the best one out there and they're really optimistic. I thought maybe we'd get a different story here tonight, but there's a sense of optimism that after this clears that America will be still front and center in terms of the real car aficionado.
ROMANS: Ted, let me ask you, can you think of any other product in American history that has inspired so much loyalty as the American car?
ROWLANDS: Yes. What other product would people gather at a Bob's Big Boy to stand by for hours showing off?
ROMANS: Great.
ROWLANDS: I mean, there's a sense of pride for all of these car owners.
ROMANS: All right. Thank you so much, Ted.
Ali?
VELSHI: Christine, this was a fun hour even though it's a tough story. The General Motors' story is likely to change throughout the weekend and into Monday's General Motor's deadline to either come up with a solution or face bankruptcy.
Make sure you stay with CNN and CNNMoney.com for the very latest information.
ROMANS: And join Ali and I every Saturday at 1:00 p.m. Eastern, every Sunday at 3:00 p.m. for "YOUR MONEY." Thanks for joining us.
