The Future Is Now for Auto Industry

This is a rush transcript from "On the Record ," April 10, 2009. This copy may not be in its final form and may be updated.

JAMIE COLBY FOX NEWS GUEST HOST: The economy is surely suffering. You're probably feeling it in many ways.

How about the U.S. auto industry? They could be on the brink. But tradition never dies, because the New York auto show started today, and it's running until April 19.

You say you can't get there? Not a problem. FOX's Lauren Sivan will take you there. Hi, Lauren.

LAUREN SIVAN, FOX NEWS CORRESPONDENT: Hi, Jamie.

After the auto bailout companies like GM and Chrysler, well, they don't want to seem like they're burning taxpayer money on glitz and glam, so this year's auto show had no smoke machines, no sexy spokes models, no paid celebrities.

Instead the companies concentrated on the cars. From big to tiny to alternative fuel, there's something for everyone in every price range. But the largest crowd, they were gathered around a $1.2 million Koenigsegg CCXR. So that's where we started.

(BEGIN VIDEOTAPE)

SIVAN (On camera): $1.2 million for this car. I've got to ask, who's buying these cars?

UNIDENTIFIED MALE: People that have money and love cars, I guess.

SIVAN: Cadillac is known for those luxury vehicles. In this economy, are people still buying them?

UNIDENTIFIED MALE: Yes. The neat thing about it is that what used to mean luxury was size, and everything very oversized and big, and just opulent, let's say.

Now we're downsizing luxury and we're getting the right size and shape, easier to park, easier to drive, more nimble.

SIVAN: We thought, though, it was going to be the death of the SUV. That's not happened, though, has it?

UNIDENTIFIED MALE: Well, I think what people still want is size. They want that height advantage. And if you have a big family and you have kids that have friends, then you might need eight passenger seats, right?

SIVAN: I've seen the smart car all over Europe, very, very popular. But now it's here in the U.S.

UNIDENTIFIED FEMALE: Yes.

SIVAN: What's smart about it?

UNIDENTIFIED FEMALE: Everything is smart about it, from the fuel economy to the price to the fun factor.

SIVAN: What are you looking for in a car?

UNIDENTIFIED MALE: Something that could hold my beautiful wife and my kids.

SIVAN: How many kids do you have?

UNIDENTIFIED MALE: We have four.

SIVAN: They're not going to fit in this, sir.

We've been hearing a lot about the Chevy Volt. What is the Chevy Volt?

UNIDENTIFIED FEMALE: The Volt is an extended range electric vehicle. It's not a hybrid. It's all electric.

For the first 40 miles it relies on the lithium ion battery. Once you've depleted most of that energy, the Volt features an extended range onboard generator that will allow you to commute several of hundreds of additional miles.

SIVAN: You're literally plugging the car in to charge it.

UNIDENTIFIED FEMALE: Yes.

SIVAN: People still wants the sports cars, rig ht?

UNIDENTIFIED FEMALE: They do.

SIVAN: How does it sell?

UNIDENTIFIED FEMALE: Before we even hit production, we had 11,000 preorders for the Camaro, so it's going to be big.

SIVAN: What do you think of this car?

UNIDENTIFIED MALE: It's unbelievable.

SIVAN: Do you care about the other cars, like the fuel cell technology and electric car?

UNIDENTIFIED MALE: No. No. American muscle. That's all you need to say.

(END VIDEOTAPE)

SIVAN: American muscle. That never goes out of style, right? That Camaro is a car that can sell itself.

But many of these companies, they drastically cut back on marketing, even if they're financially solvent. And that's because they say there's a backlash against excess. Consumers just don't want the glitz. They want a decent car.

COLBY: Well, you saw a lot of people there, Lauren, and they were looking for sure. They said they were going to buy. Did you see anybody pony up?

SIVAN: A lot of people talked about it, of course. The cars there are just for show. But, you know, the cars that were selling the product specialist told us about, those are the hybrid SUVs, the Camaro, like you saw there. Not many people have deep enough pockets for that $1.2 million machine.

The cars that aren't selling yet are the electric car, the Volt, and the hydrogen fuel cell cars, and that's because they're not on the market yet. There's no infrastructure. Until you can charge up your car just like you can fill up at the gas tank, you're not going to see those on the road.

COLBY: When I'm ready to buy, I'm taking you with me. Boy, you sound like a whole auto expert. David Asman's here, and he's very impressed too.

Thanks so much, Lauren Sivan.

Meanwhile -- there he is -- what does the U.S. auto industry need to survive? Are serious concessions by the powerful United Autoworkers Union a necessary element, and will they come to the table?

David Asman is here to talk about that. He's the host of America's Nightly Scoreboard, 7:00 p.m. on the FOX Business Network. And if you don't get it, you've got to demand it.

DAVID ASMAN, FOX BUSINESS NETWORK: You've got to demand it, and call your cable service right now. Absolutely.

By the way, Steve Moore, your previous economic guest, is in love with the Camaro. So I'm sure he's going to be buying one if he can get the money.

COLBY: If he can get a break.

ASMAN: If he can get a break.

COLBY: Will the automakers get a break from the United Autoworkers? Will they give concessions? Should we have to use taxpayer money to pay for healthcare plans for employees that have retired?

ASMAN: We already are, and we already have been. And the question is, for how much longer can we afford to do that? We are putting in so much money, not only in the car companies, but you mentioned financing for car companies.

G-MAC, which used to be the main financier for GM autos is going bankrupt. They had to call themselves a bank first in order to be entitled to TARP money. But they are--

COLBY: And they got it.

ASMAN: And they got it, and they're now getting bailed out.

People in America are fed up to here with the bailouts because they found out so much of their money is going to bailout rich people. It's going to bailout hedge funds.

Chrysler, we should emphasize when we talk about the U.S. auto industry, Chrysler is owned by a private equity firm called Cerberus. They have only put in 7 percent of their equity into Chrysler to fix it. They come to the taxpayers, and we're supposed to bailout their investment.

Not only that, but there are a lot of foreign investors in Cerberus. So you talk about a U.S. car industry, and yes, there are U.S. workers working in that car industry. But who are the owners? A lot of the owners are foreigners.

COLBY: It reminds me of AIG, where a lot of the money went overseas.

The reason I had asked you about the lending car loans is they have to move some of these cars off the lot. But it's not that easy to get financing. The money hasn't been freed up. The interest rates are still pretty high.

Yet, Ford hasn't taken money, seems to be doing OK. They're not teetering on the brink of bankruptcy. Why? What's the model for them?

ASMAN: The reason is financing, because Alan Mulally, the guy who took over Ford a couple of years ago - and, by the way, he's not a pencil pusher the way Fritz Henderson is at GM and Wagoner, his predecessor at GM. He's an engineer. He loves engineering. He focuses on cars.

But he also realized that this financing strategy that GM had for years and years and years in which it wouldn't book a sale until it actually got off the lot -- that is, they give essentially the cars to all their dealers -- terrible business strategy, and led to the demise of G- MAC, their financing firm.

Ford got out of that model about two or three years ago. So that has really saved them from a lot of the heartache of GM.

Now, getting a loan these days is really tough to do, because G-MAC is in trouble. Banks aren't lending, unless you have super good credit. The money is there and it is going out in dribs and drabs, and the interest rate is very low. But to qualify, you have to be a superstar credit-wise.

COLBY: Well, the deadline is looming. Do you think we'll see these companies file for bankruptcy?

ASMAN: The interesting thing is that a lot of the companies -- a lot of the banks that are holding GM and Chrysler debt are banks that have taken money from TARP.

So, once again, the government can kind of twist their arms and say ease up on GM, save them. Ease up on their debt payments, and so forth. If that happens, they might survive.

But I think GM is definitely going into bankruptcy, and so is Chrysler, and it's just a matter of time.

COLBY: Incredible after all these years.

ASMAN: After all these years, and after all of our billions of dollars.

COLBY: Yes. David, this is definitely a story to watch, and we're glad you came over from the FOX Business Network, which you must get if you don't have.

ASMAN: Thank you very much, Jamie, appreciate it.

COLBY: Thanks for being with us.

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