Small cars causing big headaches for carmakers

With fuel prices continuing to spiral northwards and consumers around the world adopting a new wave of environmental consciousness, sales of small economical runabouts are skyrocketing and carmakers unaccustomed to building and selling such models are starting to feel the heat. Finding it hardest to adapt to the changing trend is the Detroit 3, which are not only losing sales but are also seeing profit margins shrink.

Nowhere is this more evident than in the U.S. where vehicle sales have consistently been falling except for small cars. Also confirming the changing trend were sales of four-cylinder models, which last month accounted for 40% of the market in the U.S. – eclipsing V6 models and showing the highest monthly share since at least 2002, according to J.D. Power and Associates.

The major problem for America’s carmakers is that even if they can increase sales of small cars, they still lose out on revenue and margins from lower truck and SUV sales.

"We fully understand the days of selling 900,000 F-series trucks and 400,000 Explorers and 200,000 Expeditions are a distant memory," Ford sales exec George Pipas told Automotive News. "It will never happen" again.

Some solutions the Detroit 3 have in store include boosting their small car offering, selling more optional extras, and discounting less, but with strong competition, especially from Asia, American carmakers still face an uphill battle. Ford, for example, only has one small car in its U.S. lineup, its Focus compact (pictured), while Toyota has six such models in its lineup.