Tail fins and chrome grilles were once the symbols of a superpower. Now, with 36,000 jobs cut in a week and foreign vehicles filling the highways, Paul Harris in New York surveys the collapse of an industry

For John McVeigh, making cars was not just a job; it was his shot at the American Dream. He had left Glasgow a young, wide-eyed man at 21 and ended up in Detroit, lured by the huge factories churning out the cars that defined 20th century US life.

He started on the factory floor and rose through the ranks. When he retired in 1989 he was part of the management; he had brought up four good children and lived in a nice house in the suburbs. His neighbours' life stories mirrored his.

But after a week in which Ford laid off 30,000 workers and shut 14 factories, McVeigh knows his story is now part of history, like the homesteaders or the goldrushers, a way of life his grandchildren will never know. He winced at the news. 'You can't do what I did now. It just could not happen again,' he said in an accent still coloured by his Scots childhood. The statistics tell a bleak story of economic disaster that has seen a whole corner of north-east America dubbed the Rust Belt. The Big Three - Ford, General Motors and Chrysler - have declining market share, crippling pension costs and a product line reliant on deep discounts to sell. Chrysler has been taken over by the Germans and GM posted a $8.6bn loss last week, its biggest since 1992. Ford has been losing market share for 10 straight years. Last week's news was so bad that few people noticed DaimlerChrysler quietly announcing it too was axeing 6,000 staff. At the same time, foreign firms have been invading.

In 1979 the Big Three sold nearly nine out of every 10 new vehicles on US roads. By 2004, as European and Asian firms ate away at their market, only about 50 per cent of the nation's new cars were sold by US producers. By October 2005, cars made by the Big Three accounted for about 40 per cent of the US market, according to Forbes. Toyota, Honda and Korean Hyundai had all made inroads. Even that US archetype the truck saw 30 per cent of its market go to foreigners.

The US car industry is lurching into terminal decline. It means a fundamental part of America has died as well. Nothing has come to symbolise the American century more than the American car. It began with Henry Ford and the Model T and went right through the tail-finned monsters of the Fifties and the hot rods of the Seventies.

American cars were about freedom, sexual liberation and sheer confident patriotism. For young Americans a driving licence and their first Chevy or Ford was the most important rite of passage into adulthood. The car gave birth to other American icons: the motel, the advertising billboard and the diner. They were all children of the road.

Of course, the car still defines a lifestyle. Americans still buy cars by the millions, whether they are in gridlocked LA or in the middle of Kansas miles from the nearest town. But what does it mean when a country's cultural heart is now made in Japan? Or Korea? Or Germany?

On a stretch of Texas highway west of Amarillo lies Cadillac Ranch. Planted in a field of wheat are 10 rusting Cadillacs, ranging from a 1949 Club Coupe to a 1963 Sedan. All stand face down in the earth, enormous tail fins pointing defiantly at the sky. They hail from an era when the Cadillac motto was 'The Standard of the World'.

Motorists in their thousands pull off the Interstate in their Hondas and Toyotas to gawp at the sculpture that has stood there for 32 years: a row of automobile tombstones. 'When we made it, Cadillac Ranch was intended to be as much a monument to the glory of the tail fin as a burial of the gas guzzler, said Chip Lord, one of the artists behind what has become one of the most famous US public works of art. 'But that's not how people see it these days.' When Lord and his fellow artists collected the Cadillacs for their work, they toured the Texas panhandle looking for cheap deals. Driving the huge beasts to Amarillo was a 'white trash dream come true,' he says.

Back in 1974 the cars' paint gleamed under the blue Western skies. Now they are rusted and covered in graffiti. 'Perhaps it can be seen now as a sign of the decline of the American empire,' Lord mused. 'It could become a symbol for it.'

Lord now drives a Honda: 'I know the thrill of being on the road in one of those old American cars, but the fact is that if you drive one you quickly realise how archaic they are.'

The thrill used to be all anyone cared about. American cars had names such as Mustang, Charger and Javelin. They were about moving forward, at speed and damn the consequences. The size of the engine and the roar it made cruising down the road were all that mattered. The American car was the ultimate expression of the self.

It was a story that begun at the start of the 20th century in Detroit, when Henry Ford, born on a Michigan farm, mass-produced the Model T. He changed not only his own life from rural poverty to urban riches, but the country's too.

In thrall to the car, America went from a farming-based society centred on small- town morality to an industrialised behemoth where the new cultural hero - personified by Ford himself - was the big city capitalist. The new frontier was not out on the open range or staking a homestead, it was on urban streets and the new horse was a car. Detroit became Motown - Motor City.

From the beginning, America's cars were just as much lifestyle as they were practical. In the Twenties, Ford Motion Pictures was the biggest film producer in the world, spewing out more than 3,000 movies celebrating the adventures to be had behind the wheel of a Ford. Product placement is no newcomer to the film industry; it was there at the birth.

In the Fifties and Sixties, brimming with post-war confidence, America entered the age of drive-in cinemas and suburbs geared around cars. James Dean drove a 1949 Mercury in Rebel Without A Cause and Steve McQueen tore through the streets of San Francisco in a 1968 Mustang in Bullitt. JFK was shot in a Lincoln Continental. Car advertisements featured open roads, blue skies and square-jawed fathers piloting wives and children along new Interstate highways (the biggest public works project in the history of the world). American cars were the best in the world because America was the best in the world.

It ended in the 1970s with the Oil Shock. Suddenly America - and its cars - were vulnerable. Rob Latham, a popular culture expert at the University of Iowa, was given his first car at the same time. 'It was a 1963 Chevy Malibu convertible. I was 16 years old, driving this huge gas guzzler right through the middle of the oil crisis when you were only allowed to buy petrol every other day. It was nuts,' he said. 'I later wrapped it around a telephone pole, but I loved that car.' He now drives a Suburu.

The same thing happened to Detroit. The 1970s triggered the decline of the American car industry and a landscape of huge factories and skyscrapers turned into an urban wasteland. Only last week, the downtown home of Motown records, whose music was born from black workers flocking to the city for the car factory jobs, was bulldozed.

America's tempestuous affair with the car has become a passionless marriage. Americans still need their cars, but the world has changed and they no longer really love them. Chrysler was taken over by Germany's Daimler. Japanese firms, such as Toyota and Honda, are opening plants as Ford shuts down. Cars are not big business. Ford as a company is worth about $15bn - Google is worth $129bn.

US car design and production values have also been criticised. For years American cars have been outperformed by their European and Asian competitors. 'Asian and European design used to be considered a joke in the 1980s. Now it is the standard for cars,' said Lord.

Many of the US cars now on the market copy modest European and Japanese designs and shun the brasher concepts. Ford has brought in two Britons to be in charge of the look of its European and US products. Future cars will also be more fuel-efficient and aware of green issues. That is probably good for the environment, but represents a huge shift in what a car actually means to Americans - and what America means to itself.

The Hollywood car of choice now is not the 1946 Fat Fender Ford Coupé of John Travolta's 'Greased Lightning' or Jayne Mansfield's Buick Electra. It is the Toyota Prius, an energy-efficient hybrid driven by Cameron Diaz and Leonardo di Caprio. And the king of the recent SUV craze is the far from sexy Hummer, a boxy military-style vehicle, inspired by the 1991 Gulf war, that encloses its owner in a protective shell. A car born of looking for enemies, not rolling down the windows and hitting the road.

Latham says his students no longer see their cars as an essential expression; their Toyotas and Hondas are just vehicles. They boast of iPods or computer games, not their 'wheels'.

'They are like walking cyborgs with all these things attached to them. Cars have become functional. They are not statements anymore. Electronics are,' he said.

Lord agrees: 'Young people do not have that same set of cultural signs. Their cultural landscape is about technology and the internet, not about convertibles and driving across America.'

The Age of the American car is passing into nostalgia. Latham once studied a slew of road movies from the early 1990s in which old American cars were nostalgically treated. The most famous was Thelma and Louise, in which two put-upon women find freedom in an open-top T-Bird. At the end of the film, the heroines hold hands and drive off the edge of a cliff.

It is a fitting image for the death of a slice of the American Dream. After decades of the car being so much more than just a mode of transport - of symbolising industry, art, freedom, sex, a triumphant America - it has now become simply a way of getting from A to B.