>> it is a pleasure for me to welcome the micheline maynard h. the senior business correspondent with the new york times. we have also had the good fortune to have miche as an a djunct lecturer from time to time. her last book in 2003 was the end of detroit which turned out to be sadly accurate in its forecast for prediction of things to come. now she has followed this book up with a tremendously interesting book, "the selling of the american economy." so maybe we could first ask, how did you get from the end of detroit to the selling of the american economy? >> it is an interesting story. psst i want to say thanks for having me. it is my first real experience in this beautiful new building.

essentially came out in 2003 and looked at what was going on with the american car buyer. what i saw in that book was the selling trend for the american market were changing significantly. one of the reasons they were changing was that foreign companies that come to the united states, had opened plants in ohio and indiana and mississippi and alabama and reusing their american plants to neutralize this the year of buying a foreign car. when you had a honda workers in ohio who was building a car with 75 percent of american parts to drove from his subdivision outside columbus and paid taxes and kids went to school. essentially as american as any on-line. i was deeply interested in these people. i want to know about the state to tried so hard to get these

plants. it was not just the auto industry. it was something that was going on across the american economy. >> a much of a broader phenomenon. i was struck as i read the book by the sharp contrasts in the way that people have thought about foreign companies doing business in the united states. on the one hand we have governors and other public officials seemingly doing everything they can to attract companies to come set up shops in their states or locales. and the other hand we have people sort of subscribing to the negative reading of your title, "the selling of the american economy." this is a really bad idea. maybe it gives as good things in the short run, but in ther long run it is a loss of control. so that sense of the same starkness in viewpoints? >> absolutely. i think foreign investment

touches a nerve in this country. one reason is that our companies speak for america. coca-cola, mcdonald's, starbucks. obviously general motors, ford, and chrysler for a time. this touches a nerve. it says we have lost something when foreign investment comes to the united states. if you look back at american history foreign companies have been investing in the united states since the 1600's. the jamestown colony, the settlement of new england. the railroads. here in the state of michigan you look at the mines. they were funded by foreign money. and so there has been a comfortable relationship. world war one. german companies. world war two, japanese companies. more recently japanese companies and other foreign companies took the brunt when we had recessions in the '80's and now.

>> the imbedded acquisition of anheuser-busch would be a great example. as american a brand name as you can find. >> budweiser. it is a belgian company. one of the interesting things that they did right away when they bought budweiser was they said, we are going to consolidate. we don't want to get here and have you think of will be fine. we have to cut jobs. there has been some resentment because of that. there would have been resentment of budweiser as an american-owned company if they had get jobs. >> one of the things that three-year research you have found is the relative treatment, i guess you could say, of american workers inside american companies and foreign companies you have looked. my sense was that you were saying that the treatment within the foreign companies of

american workers was at least as good if not better than with an american companies. is that what your research has shown? >> it is interesting to look at the statistics. if you look at the big picture there are five and a half million jobs in the united states from foreign direct investment. 150 million jobs. it does not sound like a lot. did you remember back when we were talking about the bailout there was a study that came out from the center for automotive research that said the u.s. auto industry was 2-3000000 jobs. so foreign direct investments jobs are bigger than the auto industry. and in manufacturing it is about 10 percent of all manufacturing jobs. the average worker in manufacturing and a foreign company earns about $60,000 per year and is about 20 percent more than the average worker at all manufacturing companies in the united states. companies tend not to be

unionized. american manufacturing is more unionized than foreign manufacturing. it is still a tiny percentage compared with what it used to be. as far as managers are concerned it is interesting to look at a couple of industries. the other industry, essentially general motors, ford, and stress were were training grounds. they came in here and we're hiring managers. toyota was populated by gm managers from the beginning. when you look at companies like the indian company that owns coffee, they left the 8:00 management in place. they hired people away from american contractors. so this has been an opportunity for these people rather than anything to be concerned about. >> chapter eight in the book has a very interesting title. it basically tells the story of when a foreign company is coming

to the united states and thinking about opening a plant they will basically announce their intentions. a number of bidders, if you will, will show up for that. one of the particular stories he told was about mississippi. first of all, missing out on the first round when toyota decided to go to san antonio. in the second round when you looked at and pole a ball of the tax incentives and fled preparations and so forth it basically came out to $147,000 per job created. so do you have a sense that foreign companies really are, because of this competition between the states, are they able to extract most of the benefits which are being created? is this some kind of equal division between what the companies are getting and what the states are accruing even after they have had to compete with one another at auctions?

>> first of all you have to look at what the foreign companies are after when they come to the united states. many times they are after the american market. we are still a very, very wealthy country. we are a highly educated company. we are a consumer country. foreign companies want this market. that is the first reason why they come. in many instances in their home markets, especially three european companies you have highly unionized atmosphere, high operating costs. they come here and it is like a clean sheet of paper. they get to start over. mississippi was devastated after katrina. people focus on louisiana, but they don't always remember that the southern part of mississippi was just ripped apart. three days after the storm haley barbour and his associates were on the phone to companies in asia assuring them that they

would clean up the situation. now they use that as a selling point to other foreign companies to want to invest. so i think they would say that all of the money they have spent, even on the toyota plan that has not opened yet has been worth it for what it has done for the image of mississippi. >> right. we have seen a number of cases where the cost per job, if you will, we talked about one at 147,000. other ones have been as high as 300,000. $300,000 per job created. is it enough passage of time for us to relieve the back on that and say, that was a at was a god investment? >> there are a couple of good examples where it was a good investment. one is ohio. governor rhodes went to japan. there were no promises made, but essentially when honda was ready to build in the united states

they went to ohio and said we would like to put a motorcycle plant here. the state of ohio gave $5 million in investment. says since then they have built two car plants and an engine plant, a technical center. they employ 25,000 people. they are the biggest manufacturing employer in the state of ohio. ohio would say it was a fantastic idea. kentucky would say it is a fantastic idea. georgetown, kentucky is a little town. i was out there when toyota broke ground. there was one traffic light and one mcdonald's. i don't know if you have seen it's a wonderful life. the town is just lit up. traffic and lights. that is what drips down kentucky looks like now. people complain about the traffic.

a lot of people are pretty glad there's jobs are there. an example where it has not worked with the san antonio. the toyota plant has trouble getting to full capacity. it was one of the plants that toyota had ten idle during the recession that hat did not build trucks for a while. they essentially had the workers retraining. they had maintenance going on. they essentially retaught their workers how to build trucks during that down period. i think the jury is still out on whether that plant has been a success, but they are trying to make it a success. >> you interviewed the governor for this book. i imagine you interviewed a number of occasions. what you say is that despite her considerable efforts michigan has been somewhat less successful than other states in attracting foreign companies to

the state. i was wondering if there was any advice you could offer or any strategy is that you would like to see michigan enacting based upon the best practices that you have seen. >> i don't think my editors would be very happy with me offering advice. i could give a comparison for the state of michigan. i think one of the issues she faces is the central state of michigan has a car state, as the union state. her backers are democrats. there are probably members that she get support from. when the bell at happened she went and fought for them. she literally led a parade in favor. you have senator trent lott saying we are going to be

warrior for toyota. i can't imagine senator levin saying i am going to be a warrior for toyota. that is the first problem she has in the state of michigan. one of the things she has done is try to poke is not just on the car business, but on other industries that could invest in the state of michigan. she has been to israel. she has been to other countries. she has gotten investments. the maker of the $2,500 car that is being sold in india and will someday be sold in the united states. 500 engineers in an office building that to engineering g work for boeing, chrysler, for a number of companies. you can have successes. i don't think she is ever going to get the big foreign assembly plant that has gone to the southern states. >> we are academics. we don't worry about offering advice to anybody. we are very free with offering

our advice. i apologize for asking you. >> when people like jim kramer asked me to pick stocks, that is not something i'm going to do either. >> right. what did you see for the future economy of the state of michigan? do you envision any particular industry helping as revive? >> it is a big dilemma. i have total sympathy for people who live here. you have to think that for the last 100 years literally people in michigan could get a well paying job without a high-school education. there was no value placed necessarily on higher education because you could work in a car plant in the summer. all you needed was a dad or an uncle or a brother who knew a foreman who could give you hired. the whole state's economy was built on jobs by the pound.

it was built on mass production, build on what made america great until about the 1980's. now that is still very much indebted. people tell me colloquially that they are still fighting the battle of the overpass. the sit-down strike. people are still honored. but that mentality of it will all come back and we'll be as great as ever, that is probably not going to happen. barring some huge recovery in the american country we are never going to get back to car sales on the level that we once had. michigan has some amazing natural resources. beautiful coastline. has innovation. one of the reason why the foreign auto companies but the technical centers in the detroit area is this is where engineers are. for the state's future it would be a good idea to leverage all of that talent, and leverage the natural resources. look at how well michigan is

doing with the film industry. there are clearly things here that appeal to investors from outside the united states, whether it is from hollywood or overseas. i think the less that we can try to pretend the old days will come back and the more we try to figure out what the future will be it will be better for the states. >> toward the end of your book you talk about obama. very hopefully in terms of his not waiving a protectionist tide flag. on the other hand being opened to foreign companies doing business in the united states. you also expressed the concern or the opening that unless more work is done we won't see the continued flow of foreign jobs. i was wondering if there are any programs or activities that you could see that would make the united states a welcoming

environment. >> well, when you have a recession the tendency is to pull in and protect yourself. the stimulus package that was put through congress almost a year ago had a very strict by american provision. this weekend. even that provision has offended canada. i think that reaction, that let's buy american, let's require this. this required that. people from outside the united states look at that and see a lack of sophistication. they look at the idea that they bought be welcome here. if we can tone down the political rhetoric on both sides that it would probably help americans, the american landscape as a place for foreign companies to invest. one thing i've found very interesting was that president obama had jobs. he was photographed.

the presidents shaking hands with workers. they look like plan workers. they happen to be working at the nest the plant. it is a little bit. i am going to go and shake hands with american workers and whoever their employer is matters less than that they are americans and that they are working. >> it has been six or seven years. anybody who reads either one of those two books would get the sense of the deep research that you do. the work on your block. if we fast forward to the year 2016 we go back. what might we be talking about then? is there anything we see that lighting cage you for the next five years of your life? >> i am very interested in what is going to happen next.

it is a once-in-a-lifetime opportunity. this opportunity has only come about a couple of times in american history. after the great depression we remain ourselves by going to war. we rebuild our industrial complex by the military. after world war ii we came back and a sense of the looked inward and rebuild america. this time i don't think we can rebuild ourselves by looking inward again or by choosing the just conflict as a way to rebuild. it is time for some rethinking. what interests me is finding the states and the people and the folks in washington who were rethinking what the country is going to look like, what the business world is going to look like. i am very encouraged when i talk to business school students and when i go visit business schools about how much entrepreneurism

there is out there. those are the things that interests me. it's if you were advising me as a business school dean what woud you think the essential things are that we should be really trying to develop with these great young people? >> do i get a lecture? . [laughter] one have the greatest things about teaching at michigan for me e has been held bred mice in sabine. also the gaps in their knowledge. what happens to business school students is you spend so much time studying finance or international business world marketing. you don't get that broader education. it's almost like arts education

has fallen by the wayside. if i were to give you any encouragement i would say make them go to hill auditorium and hear radiohead. make them go to the festival. just let people think in a more creative way than the route that we have now in the business school curriculum. that is the only thing. one of my favorite places. >> thanks very much. we will open it up to the audience for questions. >> i am very interested in hearing what we have to say. >> i think we have microphones on either i'll. anyone would like to ask miche a question. >> start down here. >> hi, miche. the chrysler situation overlaps both of your books. do you have high hopes that a

fiat-chrysler deal is finally going to work? >> yeah. thanks for mentioning that chrysler is in both of my books good call. it is interesting. when the end of detroit came out there run by time lord, chrysler. management control has been given over to fiat's with a lot of help from our federal government. chrysler is one of those companies i talk about that is an opportunity to remake itself. it is not going to be the chrysler that once was to be did you look at the numbers. my colleague is here crunches numbers. you will see that chrysler is now smaller than honda. the two korean auto makers, they are bigger than chrysler. it can survive, but it is going to have to be a combination of the strength of chrysler-jeep

which is certainly a strong brand name, and the innovation of the gatt. i am not sure that can coexist at the moment. it could be a multi-year process. i think in five years we will know whether this has worked for not. thanks. someone over there. >> down here. >> hi. >> hi, miche. thank you so much for coming. >> my pleasure. >> i am an international student from china. in china for our auto industry actually there is a government regulation that foreign companies cannot injure our market unless less they sign. do you think that might be a

possible solution to solve the problem you mentioned about foreign investment? >> that is a very interesting problem. that is a big surprise to a lot of people. the original ventures in the united states were joint ventures. gm and toyota in california. that is just about to close. there was a ford-mazda venture that disintegrated a few years ago. chrysler and mitsubishi, that fell apart. and ford and nissan also fell apart. for the united states i think the idea is that you do a joint venture to get on your feet. then you want to be on your own. it was a very interesting time to look at these. i think the detroit companies thought they were going to learn all kinds of secrets from foreign companies. what they saw was that they were a different kind of organization.

it was not a detroit style organization. if you look at something like the toyota matrix and the pontiac vibe. it is hard to market two cars under separate brand names. i don't see that as a solution for competition. i think the detroit companies are just going to have to get stronger so that they can deal with competition on their own shores. thank you. >> you mentioned that a lot of international companies come here because of a blank sheet of paper. you also mentioned that machine may not be able to provide that blank sheet of paper because of who is here. if who is here is to is voting into is dictating policy would if michigan can't do what we as business still is very well know what should be done and

politicians know what probably should be done. they will vote those people out of office if they don't put me back to work without forcing me to get a new education. what does a state like michigan do that has a hundred years of being on top without a whole lot of effort to to get down to a competitive spot with our population? >> it will, in a sense, get down to a competitive size simply because there has been so much shrinkage. the state has to shrink and plod along for a few years this to get used to being smaller. kevin boyle is a good friend of mine. he has got amazing numbers on what the city of detroit once was. in 1950 it had 2 million people and 200,000 people were employed in the auto industry. now it is under 800,000 there are only 20,000 people in the city of detroit. i saw some numbers that the

university of michigan is now the second-largest employer in the metropolitan area. the realization has to happen first before the rebuilding can begin. i think it would take a lot of hard looks at the state, what it has, and what it can be. that takes. can't really be done by committee. you almost need a very strong governor, very strong messages to say this is what the state needs to be. if you try to give committees together to do it it is going to take another ten years. by then i worry about the future of the state. thank you. >> hello. >> high. how are you? >> i am wondering. i think it is fair to say that globalization is here to stay. it is a way of life.

if you look at what was said today we are going to have continuing recession. that means we are going to turn more inward. how is that going to impact immigration? all these people. if we continue to turn inward. >> well, i agree with you. i agree that if we turn inward again and become its visionary again it will hurt us. i think what may work in the favor of keeping an open mind and open market is the fact that this is a much more diverse country and it was 20 years ago. we have had immigration. we have had all kinds of folks from south asia, mexico, other countries of around the world to came to the united states. you cannot think in one particular way. it does not represent the united states. foreign companies have made enough of a foot hold. look at cash for clunkers.

this is a really good example. i think the detroit car companies. instead it became everybody's car is qualified for it. that is a pretty important moment. when you said everybody gets to participate. now if you look at japan, japan has a cash for clunkers program. they tried to have it be only japanese cars. the american companies said wait a minute. the japanese government announced that they would be. so clearly this atmosphere is there. i have some optimism. even if these continue to be bad we want to turn in the way we once had. thanks. >> hi. >> hi. it seems like with the recent election in massachusetts it has brought up a lot of second-guessing from the papers, media, and so forth, about the

overall approach of the obama administration on many of these issues including the bailouts. i am just wondering, as you look back now, talk about what the government did in terms of bailing out chrysler and gm? a good idea? a bad idea? was it done well? was a downpour early? >> great question. how much time do we have. i actually got a lot of heat because i wrote an analysis in the new york times around the early part of december, 2008, a light i said why would bankruptcy be so bad. at the time i was thinking about regular chapter 11 bankruptcy where you go through the regular process of renegotiating contracts, rejecting leases. the dealerships that are now rising up and saying, hey, you pulled the plug on us. it was an industrial policy

decision. i have been saying for years that we don't have an industrial policy in the united states. if you want to protect american companies have an industrial policy. otherwise be free traders. in this instance we had many industrial policies that benefited the of the industry. it is absolutely fascinating that president obama made it one of his first priorities and that no other industry has gotten the same kind of bailout. was it a good idea? it was a pretty serious time. when you go back and look at car sales we were at almost depression very levels. if the companies had collapsed, which i don't think they would have done, it would have taken a lot of jobs out of the american economy. we would not have been without choices in the market. we would have had foreign nameplate cars to buy. we have this other auto industry. it was a decision to do it. he did it for political reasons.

in my own view as someone who has covered all of the airline bankruptcies and someone who has covered supplier bankruptcy's, you can get through bankruptcy. you can restructure. you can come out the other side. general motors and chrysler bankruptcy's lasted a little over a month apiece. i am not sure you get the lining in does bankruptcy's that was necessary to really transform these organizations. look at what happened at general motors with the removal of rick anderson. he was put in there after rick wagoner was removed. he was supposed to be a change agent. he wasn't enough of a change agent. now rick whitaker is the ceo. the obama administration made it possible for this to go so quickly. i think as we look back on it the bankruptcy law folks are going to question whether it didn't move too quickly and

whether it should have dragged on of little bit longer and more thought given to it. thanks. >> experimenting on the battery cars, electric cars, and the solutions, you are happy with the go green climate change. what are your thoughts on how they are going about it? what do you envision for the future? >> a couple of thoughts on that. i remember back in the year 2000. toyota brought the prius over for auto writers in detroit troo test drive. the tv guys were taking pictures. well, it is a nice golf cart with the roof. i could not imagine anybody would buy one. well, i'm driving one. so it just goes to show you that

it can take awhile for people's attitudes to change. they can adopt. now, what will happen? we have hybrids, electric cars, derek to diesels? that is all up in the air. it is very clear that we will have more efficient vehicles simply because it will be federal law. i am not ready to say what the mix will be. i read the story today where someone said no one will ever buy electric vehicles, even in 2030. i would never say anything like that because in ten years to reel toyota has sold something like 1 million hybris worldwide. general motors has hybrids. everybody will have them. the question will be whether the vehicles will meet people's needs. there is a lot of talk about the chevrolet faults and the idea

that it is s a perfect car for n urban environment. you live in new york city, what are you supposed to do? throw a big extension cord out the window to mac we still havt the infrastructure. i am firmly in the camp that says there will be more of them hi. >> hello. i work here in ann arbor and a local manufacturing plant. a couple of thoughts. i have been intrigued. very excellent business articles. today in the "wall street journal" for is hiring to roughly 1200 people in chicago. at the new two-tier rate. >> right. >> one question. how do you feel the union can move forward and companies can move forward? can we really compete and get

our minds better rounded? the second question, health insurance. that whole debate. as a manufacturer frankly i would love to get out of that business and not have to offer its two employees at. provide cash and then we go buy it on our own as individuals. what do you think is the future through business of health insurance? >> let me take the first part of your question about the future of the union. what happens, the contracts that were signed before the bailout was that the uaw agreed to a two-tier wage system in which continuing workers would get $28 an hour, but new hires would come in at about 14. now this will be the first big crop of people coming in at about $14 per hour, which is what toyota pays its workers down in san antonio, but it pays

25 down in kentucky where there are a couple of plants right nearby. you know, bob king is in line to be the new head of the uaw. he has always been progressive. he has always been someone who has seen that you can't just stick to the old treaty of detroit contracts that was signed in 1950. i think with leadership like that. as a great friend of doug fraser died doug really got it. unfortunately from doug to bob it has kind of been this uaw leadership that was planning to the past. i don't blame them for trying to protect their workers. but there should have been a moment may be ten years ago where everybody sat down and had a come-to-jesus moment and said we need a new model.

so i am hopeful that with this that the new work rules and hires will be successful. on health care, you know, maltster proposed national health care in 1946. the uaw wanted to come back and have national health care. i don't know if that would have been the answer. i am not sure whether those measures that out before congress now will be the answer. something has to be done. i am very sympathetic with organizations that have a heavy burden. on the other hand this is why we have jobs. it is why a lot of people take jobs at companies, because they can get the benefits. if you no longer offer the benefits you have to think, what if i am going to lose some of my best people to my competitive because my competitor offers health care. i am hoping the market will make sure that benefits are available. i also know that the burden has

to be on this. >> okay. >> last question. >> okay. >> a little bit more comfortable changing the subject. at the beginning he introduced you as the experts in the airline industry. i would like to, i read some of your articles. i would like to take this up to the test you about what you think about the current situation with the airline industry and trade is going and have it is going to affect folks like me traveling all over the world. there seems to be an airline industry that has gone. there has been a lot of alliances which kind of keep

them warm market powered. we are affected by the mergers. i just wanted to, you know, i am asking you really, get the latest that you have. >> okay. now, that is something i will toss off in a minute or so. the airline industry. people in the airline industry think we are doing to the end of the first phase of the regulation. in 1978 we eliminated controls on the marketing side. what was thought that we would have cheaper air fares, a lot more competition. we ended up with six major airlines. some competition. cheaper than they were.

of a very unpleasant. a lot of people are complaining that what they used to get as recently as two years ago is going away. they are unhappy. am very interested to see a southwest airlines which still does not charge for bags. it picked up market share. they get a point of market share because they are not charging you to check-in bags. what is going to happen next, the next phase will be the global deregulation of the airline industry. american airlines and delta airlines have competed very vigorously to do an alliance. and the reason is that we are going to see these alliances become more and more important. if you're going to be a major player internationally you have to be in on it. i believe there is going to come

a point. it looks like delta is a very serious about their venture with japan. if there was a delta link then delta already has a link with klm and air france. they are not interowned, but that will be a big test to see how that works. you know, people who fly northwest out of detroit know that it is not nordstrom's. it is a company that has challenges. so to think of a six times larger northwest airlines is kind of scary to allow the people. on the other hand i think that their managers are working very hard for this global future. i am willing to give them the benefit of the doubt. >> okay. well, miche, congratulations. it really does need a lot of people to a much improved understanding of a vital issue

for us in the united states these days. thank you so much for coming and sharing your thoughts with us this afternoon. we have -- miche will be sending copies of the book. we are going to move it insight here, as i understand that. thank you all very much for coming. >> thank you so much. [applauding] >> micheline maynard is a senior business correspondent for the new york times and the author of "the end of detroit." for more information visit michelinemaynard.com. while congress is in recess book tv comes to you live in primetime. starting this tuesday join us at 8:00 p.m. eastern for hour-long live call-in programs on the significant books and issues of

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