• This is a rush transcript from "Your World With Neil Cavuto," July 26, 2010. This copy may not be in its final form and may be updated.

    NEIL CAVUTO, ANCHOR: Well, Ford taking the wraps off its next-generation Explorer. It is environmentally friendly and gas friendly to boot. How about up to 26 miles per gallon friendly?

    To an always friendly Ford Motor Company CEO Alan Mulally on a gentler, kinder SUV monster, because these guys used to all be called monsters. I guess less so, right?

    ALAN MULALLY, CEO, FORD MOTOR COMPANY: Well, this is a new one, and it really is an exciting development because we were just talking that we have sold over 6 million Explorers over the years; 4 million are still on the road. And every year 140,000 of those owners are trading their vehicles in, and this is the vehicle they wanted. All the latest technology, the quality, the fuel efficiency, the safety, the smart features like MyFord and Sync.

    So now they have the new SUV they have always wanted.

    CAVUTO: Showing my car ignorance, the four-cylinder version that’s out, which gets all this power, is more expensive than the six-cylinder version. Why?

    MULALLY: Exactly, because of the fuel efficiency that it brings to the consumer. With the V6, we have two options, a V6 or you can do an I4, which is an EcoBoost engine that has turbo charging and direct fuel injection.

    CAVUTO: And why would I want the six?

    MULALLY: Well, depends if you want to have some extra towing capability, because you can pull about 5,000 pounds with that, about 2,000 pounds with the I4. But most people, they have one need or the other. So the neat thing about the I4 is you get this tremendous improvement in fuel efficiency, 30 percent over the existing Explorer.

    CAVUTO: So you’re not worried about cannibalizing a hot product here?

    MULALLY: No, not at all, because the Explorer is a very important market on that medium-size SUV. It has been for a long time, it continues to be.

    Remember, the Ford offering was that we would have a vehicle in every market size, small, medium and large, cars, utilities and trucks, and the promise that every vehicle that you get from Ford is going to be best in class on quality, fuel efficiency and safety.

    CAVUTO: While I have you here, I was reminded when you came that Harry Reid says I guess you owe the auto industry rescue your success. Specifically, this is what the Senate majority leader had to say. Listen to this:

    (BEGIN VIDEO CLIP)

    SEN. HARRY REID, D-NEV., MAJORITY LEADER: My friend says that we bailed out the auto industry. Well, isn’t that a good thing we did? Isn’t it a good thing today in America we have an automobile manufacturing sector? If it had been up to them, General Motors would be gone. If it were up to them, Ford Motor Company would probably be gone.

    (END VIDEO CLIP)

    CAVUTO: You didn’t take any bailout money.

    MULALLY: Not at all. And I think maybe what he was referring to or trying to frame was the fact that clearly when GM and Chrysler were running out of money and they told all of us that they were bankrupt, we made a very big decision to decide to go back to Washington, D.C., and actually testify on their behalf that they get temporary help.

    CAVUTO: Why did you do that?

    MULALLY: Well, clearly, in the automobile business in the United States, 70 percent of all the parts come from our suppliers and they support all the automobile companies.

    CAVUTO: So they would have gone down your suppliers...

    (CROSSTALK)

    MULALLY: ...if Chrysler and GM would have gone into freefall, then the suppliers would have gone in...

    CAVUTO: But you wouldn’t have gone out of business.

    MULALLY: Well, most people think it could have taken the U.S. from a recession into a depression, which would have put pressure on all of us.

    But clearly in Ford’s case, we had a plan, we had already borrowed the money to transform Ford, to accelerate the development of the new cars and trucks, but it was a surreal experience to go back and testify. But I think in hindsight — we never would have known — but I think in hindsight we did the right thing.

    CAVUTO: Yes, but to say that — not pushing on this penny, but to say you’d have been gone had it not been for rescuing GM and Chrysler seems to me a bit of a leap.

    MULALLY: Well, we clearly had a plan at Ford. And of the neat things that came out of that was that everybody realized that Ford was not only making great products, but they were also creating a strong business.

    So I think we did the right thing for the industry, and the right thing to the U.S. economy.

    CAVUTO: But do you ever, Alan, feel at a competitive disadvantage? I mean, if you were to ask anyone in the White House or the congressional leaders who they’re rooting for — they love Ford and the president speaks very admirably about you — but I think if they had to put their dollar on the car maker they want to see make it, it’s the ones they rescued, right, not you?

    MULALLY: Well, I don’t think we really are disadvantaged, because people ask us about the debt. Because clearly when GM and Chrysler went through bankruptcy, that they shed a lot of their debt. Well, we took on the loans to transform Ford, and now, as we’re profitable and generating free cash flow, we’re actually paying back the loans, which is fantastic. And the good will for us not taking precious taxpayer money and actually running a healthy business and creating products that people want, I wouldn’t trade our position...

    (CROSSTALK)

    CAVUTO: Yes, but what do you make then when GM buys essentially a sub-prime lender?

    MULALLY: Well, the neat thing about Ford, again, is that we have our own finance company. We’ve had it for many years.

    CAVUTO: I know you do.

    (CROSSTALK)

    CAVUTO: I know Mr. Whitacre’s explanation for why, because you have that and it puts them at a competitive disadvantage.

    But, ironically, the one thing the government argued for rescuing them, that they got a little too heady and deep in, they’re doing again with buying a sub-prime lender.

    MULALLY: Well, you know, clearly it goes back to the fact that not — the previous president and also President Obama, they made — they both made a decision that it could have taken the U.S. from a recession into depression, so they did what they thought was right at the time. We supported that. And I’m...

    CAVUTO: Because there was a school of hard knocks on that, too, you didn’t really have to do that.