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CNN Live Event/Special
When the Wheels Came Off: The Rise and Fall of the American Auto Industry
Aired May 30, 2009 - 20:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
CHRISTINE ROMANS, CNN HOST: 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 HOST: 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."
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's 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.
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. They 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 are employed 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 U.S., 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.
UNIDENTIFIED MALE: 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 "Smoky and the Bandit" and Archie Bunker's old LaSalle.
So what happened? How did the wheels come off?
Peter Valdes-Depena is senior writer for cnnmoney.com, Mike Quincy is an auto specialist from "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 legacy costs and health care costs really dragged down Detroit.
PETER VALDES-DAPENA, CNNMONEY.COM: Well, that's not the entire story. You have 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 was the idea of the car companies. It wasn't the union's idea. They wanted national healthcare, but the car company said no, that sounds a little too much like socialism. We don't like that.
We'll take care of your healthcare costs for you through your retirement. We'll support you in retirement, but at the time in the '50s and the 1940s, they were the only game in town. They had all of the market share. They had all of the reason in the world to think they could continue doing this forever and then came the Germans, Japanese and all the competition. Market share falls. You have more retirees then you have workers and not enough 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 tending to the needs in retirement and health care of the many, but what you could have judged was that 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, "FINANCIAL TIME": Yeah. 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. And there's no one thing -- I think there are a lot of things that happened in a very mature industry. A hundred years, it's been a century. We're really marking, as you said, what a way to celebrate 100 years in business.
MIKE QUINCY, "CONSUMER REPORTS": To go into bankruptcy.
ROMANS: To go into bankruptcy. How much of this 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, 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 was 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 and in walks the Japanese and out walks Detroit's market share basically and the Japanese were building cars that were very reliable. They realized if they get a small car that's relatively inexpensive and it really runs 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.
FREELAND: I think that's also ...
VELSHI: Peter ...
FREELAND: I'll just jump in.
VELSHI: Peter ...
Go ahead.
FREELAND: I was going to say, I'll jump in ...
VELSHI: I'm not speaking.
ROMANS: No, he's just saying he's not speaking.
FREELAND: I'll 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 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 why we've seen car sales fall from 16 million to 9 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.
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 is a perception that the style -- which we'll talk about a lot in this hour is back and the perception that the quality is back. Peter 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 of their cars is actually excellent, right up there with the Japanese. In terms of styling and features like that, I mean, GM, they were just saying that recently, they had the guys from the auto task force come to New York and Bob Lutz said he couldn't get the guys away from the Cadillac CTS. I totally believe him. I couldn't get away from that car. I mean, they've got some really hot-looking stuff right now.
QUINCY: I have got to echo what peter is saying. According to "Consumer Reports" reliability data, a lot of the Ford products definitely rival the Japanese. The Ford Fusion is some of the best news out of Detroit that anybody's got. The Ford Fusion hybrid in "Consumer Reports'" test fleet getting regularly about 35 miles per gallon. I mean, it's not all bad news.
ROMANS: OK. We have 51 minutes to really zero in on what happens next. Thank all of you. We'll be back with you. Ali?
VELSHI: All right. Listen, we've got to talk about the cars and we've got to talk about the design, but we have got to hear the voices of the American autoworker. We're heading out to Warren, Michigan, to hear from people who build and sell the cars. We'll ask them what they think.
Plus look at that lineup, there is 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)
UNIDENTIFIED FEMALE: What happened to you? I've been so worried.
UNIDENTIFIED MALE: Come on, get in. Come on, come on, come on!
UNIDENTIFIED FEMALE: What happened?
UNIDENTIFIED MALE: Just a road thief. Picks people off and runs off with their things. What a racket.
UNIDENTIFIED FEMALE: How did you get the car?
UNIDENTIFIED MALE: I gave him a black eye for it and had to tie him 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 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's so rich with history, so much passion shared by Americans about the auto industry. And I'm here with Jeffrey Leestma. Come on in Jeffrey. He's the president of the Automotive Hall of Fame. Jeffrey, 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 focus on the history. But one of the things I think that the history has taught us is the auto industry 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 love affair that people have with their automobiles.
VELSHI: And what you see in here, there's a lot of stuff about innovation, I mean, 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're looking at design. What do 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: I don't know about that. Cars are art. There's no question about that and people drive their cars for -- for that art. What the future of the car will look like, who knows? I mean, I think we can all know they'll look different, the technology will be different, but again, that need for that personal freedom won't go away.
VELSHI: So no matter what we do, we'll get into smaller, more fuel efficient cars, but we're all going to keep our cars.
LEESTMA: There's no alternative.
VELSHI: The way we live and the way we've developed.
LEESTMA: That's right.
VELSHI: Jeffrey, thank you very much and thank you for hosting us here at the Automotive Hall of Fame in Dearborn, Michigan. It's been said, the heart of the American automobile is the American auto worker. 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 is in Warrant, Michigan. Susan?
SUSAN CANDIOTTI, CNN 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 and now down to about 1,600. That's how much times have changed. I want to talk with some of them about how these cutbacks have directly affected them. Nicole, 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've 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: Yeah. Actually, I just got one, my oldest son just graduated college and it's really tough right now. I've got another younger one at home. And worrying about being able to possibly put him through as well, it's the American dream.
CANDIOTTI: Is this job ...
UNIDENTIFIED MALE: It's been the American dream and 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, everything's been cut back at say $12, $14 an hour, would you recommend it?
UNIDENTIFIED MALE: Well, it makes it hard for them to be able to live and buy a house and those kind of things. They're starting at the bottom of the wage scale. CANDIOTTI: It's tough. And Retiree -- and this is Bill Carr, who is a retiree. Worked for years at GM. They just voted to cut your healthcare benefits way, way back. You are suffering from lung cancer. What does this mean to you?
UNIDENTIFIED MALE: I'm just one of 500,000 UAW GM retirees that is going to take a 25 percent cut and didn't get a voice or vote in this matter.
CANDIOTTI: How are you going to pay for your health care? You have lung cancer.
UNIDENTIFIED MALE: Well, I'll be all right until the end of this year, and then we'll see what Viva brings us, because this contract's agreed to let Viva downsize on our benefits.
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 they didn't get a vote and I'm going to work the next year very hard to change our constitution to allow us. We built this union and this company so, yeah, we need a vote.
CANDIOTTI: 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've been coming to Michigan for years to report on the auto industry, and that is a real stalwart 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, thank you very much. We'll be checking in with you again. Christine?
ROMANS: 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've assembled our own classic car rally in Columbus Circle in New York City. Plus the Steve McQueen movie that made the 1968 Ford Mustang famous. That's next.
(COMMERCIAL BREAK)
ROMANS: 1968's "Bullitt" starring Steve McQueen, Jacquelyn Bissett 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: I have a Mustang, believe it or not, right here in New York City. I'm here with Zack Moseley from Classic Car Club Manhattan. He is a guy who knows classic cars, he knows how to drive them and why we love them and you have a Mustang that's a pretty special car. Tell me about this Mustang and what makes it so special.
ZACK MOSELEY, CLASSIC CAR CLUB MANHATTAN: This particular Mustang, this color combination was only available to Ford employees. It's a really special car. They made about 90 of them.
ROMANS: Only 90 ...
MOSELEY: Only 90.
ROMANS: ... in this particular color?
MOSELEY: Yeah. And what else is special about this particular Mustang is this car spoke to a generation so directly. That's why it's so successful. Young baby boomers getting their first car wanted something fast, stylish and affordable and this was it. That's why they sold millions of them. That's why people love them so much.
ROMANS: You are not a baby boomer and you got this car why.
MOSELEY: Because I think it's a beautiful car and it represents the peak of what American car design can be.
ROMANS: Let's talk about this car. This is a car that you drive and this is a car you've done a bit of work on and this is a car every weekend someone is driving this car in New York. This is a Chevelle Supersport '67. What is so great about this one?
MOSELEY: Well, with the Chevelle, everyone says, was it a big block? This is the big block Supersport Chevelle. American muscle. It's about big motors and small lightweight cars.
ROMANS: Show me under the hood. 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 is in here. You've done a little work on this one.
MOSELEY: Yeah. We kept it true to what it was originally going to be. To get around the streets of Manhattan, we do things like put an aluminum radiator in so it will cool a little bitter. But it's a great car. And the thing is all these cars are 99 percent nostalgia. You go down the road and everyone talks to you. You get thumbs up.
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, cars like this are still holding their value very well.
ROMANS: This reminds me of the General Lee. But it's the same body, but a little different.
MOSELEY: This is the sister car to the General Lee. This is the Plymouth GTX, the same body and the performance Chrysler cars, known as Mopars, they're a real cult thing. The Mopar guys are Mopar guys for life. They love their cars.
ROMANS: This is a fast car?
MOSELEY: It's very fast. This particular one is really worked. Like the guys in the '60s did, people in these cars now hot rod them and make them go faster. This is a really good example of that. ROMANS: Will Detroit be able to make these 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 lives?
MOSELEY: Yeah, absolutely. Our partners at Classic Cars, we always think about this, it's really tied into cars and what they need to do and what I'm starting to see them do now is I'm starting to see them do now that gives me hope in the American auto manufacturers are starting to design cars that people want. 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, fixing cars changing oil, working on cars all the time. You grew up like that.
MOSELEY: Yeah. Absolutely.
ROMANS: Will there be the next generation to grow up like we did, with the greasers and the people who really cared about their cars?
MOSELEY: Well, there will be. There are young kids now are into tuning their cars and it's a different thing. In the future it will be them reprogramming their electric cars. Who knows? There's a whole new future out there.
ROMANS: Zack Moseley, what's your company again?
MOSELEY: Classic Car Club Manhattan. Where you can drive cars like this.
ROMANS: Ali and I are ling up, as a matter of fact. He has something else over, it's a Tesla, it's just fantastic. This is the future. This is the past, the present and what we love and what we grew up with. But there is the future over here. Ali, there's 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 I rented a convertible to Mustang, which is what I'm driving around Detroit in, just really to support the American auto industry. I'm going to come back and talk about the future of Ford. I'm going 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're 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're extremely serious. But Ford, led by CEO Alan Mulally believes it is on the right track. I spoke with Alan Mulally this week.
UNIDENTIFIED MALE: How are you?
VELSHI: 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.
ALAN MULALLY, FORD CEO: Looking good.
UNIDENTIFIED FEMALE: Oh, no, no, you're looking good.
MULALLY: Thank a lot.
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 AUTO WORKER: Meeting 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 saw what happened to 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, 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, and I'm going through the entire product line -- small, medium and large and there was no Taurus. I said where is the Taurus? They said, well, we made a couple of them that looked like a football and they didn't sell well so we decided to come up with a new name and new vehicle. Are you kidding me? This is the Taurus. Look at the value we have in the 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 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 we have a long way to go.
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 and the developments at their plants around the world and trying to create jobs 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?
VELSHI: All right, Ali. You think of American auto worker and you think of assembly line workers for Ford, Chrysler, General Motors. But American auto workers build Honda and Toyota cars right here. Back now with our panel, Chrystia Freeland, Peter Valdes Dapena, Mike Quincy.
Mike, next year, foreign automakers could build more cars in the U.S., next year or the year after maybe, than the Big Three. Is that possible?
QUINCY: It's certainly possible.
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 buy houses, there's delis, there's dry- cleaners, there's all of this ancillary stuff that goes with it. So certainly the foreign car companies are employing a lot of people in this country.
ROMANS: And we talk about the American car, the American auto worker. It's not simple. And it hasn't been simple like that 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 and other parts from around the world. This is truly a globalized car sold right in the United States, Pontiac.
VALDES-DAPENA: 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 cars in a certain place and don't utilize their global resources you're making them not competitive. So we have to be careful when we start demanding that a company like Ford or GM, for example, build a Chevy Aveo in the U.S. which is built in Korea. It might just not be competitive for them and we want the companies to succeed.
ROMANS: Because you look at some of these other cars and we'll show other cars that have big parts that are made some place else or made completely in Canada, for example the Impala is made in Canada, your home country. We also know that 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 -- and did Detroit not see it coming or did they embrace it? Where did they go right and where did they go wrong?
FREELAND: 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 with 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 cars being produced by American workers in the Midwest, in the South, they're producing great cars that 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 is not so much to do with the people right now. It's just to do in some ways, the glory of 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 ratified really eliminates the gaps between the cost of an American automaker and the cost of an American automaker who is not unionized. The issue here -- and I want to ask you about this, Peter -- are these cars exciting again? Can you get into them? Because ultimately these smaller cars that the American automakers made, they just didn't put any energy into them, they didn't put creativity into it. If you wanted a truck or 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. 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. 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 are changing their attitudes and will want smaller cars. And I recently had the opportunity to drive the European Ford Fusion they're going it sell here and that's going to be a really nice little car. ROMANS: All 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 we'll end in L.A. with the classic car show of all classic car shows. And what 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. She found out what they really wanted to talk about, the auto mess.
POPPY HARLOW, CNNMONEY.COM: That's it. They wanted to talk about Detroit and the automakers, Christine, and the rising gas prices. I started off at home in Minneapolis, Minnesota and headed out over few days, Memorial Day weekend, right out 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 to this town of 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 Vicky and Whitey Cummins. They both have friends, family that worked at this plant. They talked about how it affected their entire community. Take a listen to them.
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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 -- 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.
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HARLOW: 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 is 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 there, just came out of bankruptcy and the biggest customers of the auto supplier, Ford and General Motors. We went into a local diner, we talked to David Holdiron (ph), he is the general manager at the diner. He gave us an interesting perspective of how it affects folks that come in there every day.
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UNIDENTIFIED MALE: With our automobile industry, with the local economy up here we rely heavily on the automobiles and we have really take an big hit on them. Being close to Detroit, there's a lot of businesses that spanned off of the -- from the automobiles. (END VIDEO CLIP)
HARLOW: There are a lot of jobs, the suppliers and the dealers and the 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.
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UNIDENTIFIED MALE: This particular area is devastated. You have a lot of automotive industry in this area. You have a lot of suppliers in this area. They have a lot of car dealers in this area. The government has made a big mistake.
HARLOW: What about GM and Chrysler? They should have let them fail?
UNIDENTIFIED MALE: They're doing the very same thing they were going do from the very start. So why -- why did the government have to interrupt?
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HARLOW: Why did the government have to interrupt? That's his question. And Christine, $19.4 billion to General Motors and they say they're not going to be able to pay that back and 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. Poppy Harlow, thanks so much. Ali?
VELSHI: I'm envious of Poppy's road trip. You know how much I like those, Christine. 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's 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 it. This is a '65 cobra. There are cars here from every era. This is a 1948 Ford in beautiful condition. Basically, we're 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 about you get a glimpse of them as well and a lot of classic opinions about what has been going with the car industry and specifically Detroit because Detroit is everywhere here. Sam Ghaffary has a 1951 Merc. 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 the car isn't buying American. Explain.
SAM GHAFFARY, OWNS '51 MERCURY: Well, what's happened over the last few years, the gas prices have 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 in what we call the European market cars. They're using the Japanese cars to get from point A to point B. When cars like this were king, those days have long past us in Detroit.
ROWLANDS: Style didn't cost as much as it does now.
GHAFFARY: No, it doesn't. With the new market and the 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 Merc, 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. 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, as we heard earlier in the show, producing is a good product. A guy that knows Detroit products very well is John Hennessey. He makes a living on taking cars like this Camaro and turning it into a souped-up version. You're optimistic about what Detroit is turning out.
JOHN HENNESSEY, BUILDS CUSTOMIZED CAMAROS: I think Detroit is building some great cars. It's a sad deal that GM is in the shape 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 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, 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. I own several gm products and I think the new Camaro is as good as a hot rod or muscle car that you can buy. Right now you can't hardly buy them. They're all going for over sticker on eBay.
ROWLANDS: All right, Ali. I tell you what. If you're ever in Burbank, California, on a Friday night come to the Bob's Big Boy. It's a virtual museum. They're here every week. Jay Leno stops here with one of his cars. Probably not tonight, because it's his last night on "The Tonight Show" but just an unbelievable scene here and it plays out, believe it or not, every week.
VELSHI: Ted, the next time I'm in, you'll take me there. I think what your guests were saying, it's really interesting. The Mustangs, the Camaros and the Corvettes, 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!
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UNIDENTIFIED MALE: Yee-hah!
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ROMANS: Paging Sheriff Roscoe P. Coltrane. I know you guys all know that one. Those two crazy boys Bo and Luke Duke in 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 is next? What will American carmakers look like and will GM and Chrysler look like and will they survive without a direct line to the U.S. Treasury Department? Chrystia?
FREELAND: 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 people actually working in the car industry clearly really worried about it but when you look at all Americans, bailing out Detroit has not been that popular. And I think the reason we have seen Obama really stepping in is they were worried that if he let these companies die right now at the depth of the 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 of 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. You think about all of the choices that Americans have now for the cars that they can go out and buy, and with the reduction of General Motors, get rid of Pontiac, you might be getting rid of Saturn, all this stuff, people will have fewer choices in the short run, which is kind of too bad for consumers. But certainly competition has always made all of the products better. Detroit has gotten a lot better because of all of the pressure from Japan, the Korean automakers. I don't see 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 to decide what's a good car to buy.
ROMANS: Peter, what do you see down the road?
VALDES-DAPENA: I agree with Mike. I think we're going to see definitely better quality. Already we have seen Ford improving their quality. They're not part of this whole bankruptcy situation. But GM is improving their quality. I think some good things coming out of Chrysler. I have some hope that they can hang on, they can do pretty well too. We will see better quality, better fuel efficiency, more technology. All three companies have said they will come out with electronic cars starting sometime in 2010 or 2011. We will start seeing commission 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 stepping tone stone to the middle class? Is that part of the 20th century and it's gone, it's nostalgia?
FREELAND: It's gone. That era is it gone with globalization, and if the American economy is looking towards 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 talk to Americans who are very passionate about their automobiles.
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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 is it going, Ted? Every Friday night, right?
ROWLANDS: Yeah, every Friday night. It's not like an organized show, Christina. It's amazing, and literally from the '50s. People used to come here and show off their cars and just sort of drive them around. If you had a cool car, you would come to the Bob's Big Boy, and back in the day it was a 16-year-old with his gal, as Ken was telling us earlier.
UNIDENTIFIED MALE: Exactly right. Every Friday and Saturday night, it was waiting in line with your girlfriend in your $350 hotrod 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 have been married to mine for 50 years.
ROWLANDS: All right. And this is your car there?
UNIDENTIFIED MALE: Correct, the black Deuce.
ROWLANDS: Black Deuce. Beauty. Christine, it runs the gamut here. 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. Nice car.
UNIDENTIFIED MALE: Six hundred 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 a '57 here for you. Look at this baby. Perfect condition. It really is amazing here. And, you know, 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 -- 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 can get the 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 inspired so much loyalty as the American car?
ROWLANDS: Yeah. What other product would people gather at a Bob's Big Boy and just stand by for hours showing off? It's a sense of pride for all of these car owners.
ROMANS: 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, General Motors' 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 Dunday at 3:00 p.m. Eastern for YOUR MONEY. Thanks for joining us.
