I am familiar with the concept of white flight & highways destroying neighborhoods, but not with respect to LA. Additionally, I thought it was interesting that a movie made in the 80s would so directly make a reference to the public transportation of the 40s or 50s. In hindsight, this seemed like a reference that I would not have understood as a kid, but adults living in CA would have some preexisting notions about.
Surprisingly, this question has already been posted with a good answer from /u/fiftythreestudio :
That particular line, and the parts of the plot related to it, seem to spring from the oft-told (but easily disproven) urban legend that shadowy forces, including General Motors, oil companies, and tiremakers, conspired to buy and put out of business America’s streetcar companies.
By the 1950s, LA did not have a particularly good public transportation system—in fact, the streetcar network was rather puny compared to other cities of its size. The “Yellow Car” streetcar network of Los Angeles Railway had been adequate at the turn of the 20th century, but had failed to grow very much as LA rapidly expanded in the 1920s-1950s. However, LA was also served by the “Big Red Cars” of Pacific Electric, an interurban rail network that extended throughout Southern California, knitting together an archipelago of independent agricultural market centers into a single region and bringing less-than-carload freight to the national rail network. Interurbans were, I sometimes say, the dot-coms of the 1890s, a technology irrationally expanded in the years between invention of electric railroading and widespread auto ownership. But, like dialup internet, they were not quite convenient enough once alternatives became available.
Though the details are probably best left to a discussion in /r/transit, I should note that neither LARy nor PE were in any way modern light rail systems—nor could they easily become such. PE did have several stretches of private right-of-way, including a short subway into downtown LA, a four-track corridor to Long Beach, side-of-road running through West Hollywood and Beverly Hills (visible even today), and even a short section through Cahuenga Pass where it was in the median of the future Hollywood Freeway. But the vast majority of the network ran in the middle of the street, subject to traffic delays and crashes.
Although old Los Angeles was served by the Yellow Car network, PE had important lines on Sunset, Hollywood, and Santa Monica Boulevards, and elsewhere on the Westside, that made it foremost in the minds of the movie community: it’s PE cars that were often seen in silent movies and in “Singing in the Rain,” and it’s what a full-size mockup was made of for Bob Hoskins as Eddie Valiant to "skitch" a ride on (embarrassingly, at the end, with both trolley poles up) in “Who Framed Roger Rabbit.”
Los Angeles citizens and leaders made several decisions in the 1910s and 1920s that their city should grow in a different way from older, Eastern big cities full of multifamily buildings. Instead, a city of small owner-occupied homes, with individual gardens, was desired. In addition, Southern California’s climate was ideal for early auto use, and car ownership soared. Soon, some of those auto owners began to pick up folks waiting at the streetcar stops, and for a nickel would take them further down the road. These “jitney” operations soon threatened street railway profitability, already shaky. State regulators would not approve fare increases or line abandonments, public subsidy was decades in the future, and so Los Angeles Railway was purchased in 1945 by National City Lines, the “villain” at the center of the Great Streetcar Conspiracy, about which I’ve written previously. NCL had rescued public transport operations in other cities by substituting buses for expensive-to-run streetcars. Notably, however, in LA, they continued to run some lines with streetcars until public ownership came in 1958.
Meanwhile, Pacific Electric gave nearly all of the Southland hourly or better connections to downtown LA and with other centers such as Long Beach, Pasadena, and the beach towns. However, postwar growth in auto use was substantially slowing PE operations, making it increasingly unattractive to commuters. Running times grew longer and less reliable, and the late 1930s saw a number of bustitutions and abandonments. Financially, PE was propped up by its connections with the Southern Pacific Railroad—but the SP had few friends in California, and public assistance to the hated railroad was politically impossible. PE, logically enough, began substituting buses on its routes, and that bus operation was later sold off. Neither GM nor National City Lines was ever involved.
The larger story of the auto-oriented and spread-out city choices made in LA is told in Inventing Autopia: Dreams and Visions of the Modern Metropolis in Jazz Age Los Angeles by Jeremiah Axelrod.
Details of Pacific Electric, including photos that railfans drool over, can be found in Spencer Crump’s book Ride the Big Red Cars: The Pacific Electric Story. The demise is recounted in Eli Bail’s From Railway to Freeway: Pacific Electric and the Motor Coach.
The streetcar conspiracy, at least as it relates to Southern California, is well refuted in: Bottles, Scott L., Los Angeles and the Automobile.
Chapter 3, "The Conspiracy Evidence," is well footnoted in: St. Clair, David James, The Motorization of American Cities
For more on Los Angeles, see: Adler, Sy. "The Transformation of the Pacific Electric Railway: Bradford Snell, Roger Rabbit, and the Politics of Transportation in Los Angeles." Urban Affairs Quarterly 27 (September 1991): 51-86. Of the conspiracy, Adler begins by flatly stating “Everything Bradford Snell wrote in American Ground Transport about transit in Los Angeles was wrong.”