Compact cars on the rise + Hummer reader

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Audio Transcript:

Even in the middle of recalls and a struggling economy, car companies around the world are looking to the future. And many of them are doing so by putting out smaller fuel-efficient models. Anchor Marco Werman speaks with Paul Eisenstein, editor of, who says America's attitude toward small cars is changing.

MARCO WERMAN: Now it's definitely a rough period for Toyota right now, but also for the auto industry as a whole. The recession has meant missed sales and profit targets all across the auto industry. But even in the midst of the current troubles, or maybe because of them, car companies are looking ahead to the future. What many companies see in their future are smaller cars. That's also the case here in the U.S. where car buyers can expect to see more small models in showrooms in coming months. Paul Eisenstein has been reporting on the auto industry for some 30 years. He is the editor of the online magazine The Detroit Bureau dot com and he joins us from Detroit. Mr. Eisenstein give us some examples of the shift in favor of small cars in the U.S.

PAUL EISENSTEIN: We've seen a lot of new products getting into the segment. Not just from the imports, which have dominated small cars for a number of years, but from Detroit we're seeing, for example, Ford come out with their sub-compact Fiesta, a product that they have done very well with in Europe and other parts of the world, but had not brought to the United States. General Motors is getting into the segment with very small vehicle called the Spark as well as upgrading their older model the Aveo which used to be sort of this cheap and cheerful product that you bought only if you really couldn't afford anything else.

WERMAN: It makes me kind of scratch my head because just over a year ago gas prices went way up and now they're down again. Why are American auto makers changing their tune now?

EISENSTEIN: Well that is a big question. In fact, we have seen that people tend traditionally to go back to larger vehicles when prices do fall. But the industry is betting that what we've seen since the big fuel price run up in mid 2008, this is the exception, not the norm going forward. And that they have to start preparing for a market that will shift to more fuel efficient and smaller vehicles. And if nothing else, they have the government breathing down their neck. Certainly with a big bump in fuel economy standards over the coming years through 2016, they've got to find ways to get better mileage.

WERMAN: Do you think there's also cultural shift happening? Some politicians practically have derided small cars as un-American. Do you think there's something else going on here?

EISENSTEIN: Oh I think that if anything, you're seeing the political powers start to promote small cars. at least for everybody else, they still like their limos. But we're starting to definitely see a cultural shift. Part of that is that younger people are becoming more environmentally sensitive and they look at Europe and to Japan as well where eco means small and that's certainly driving things. But there's also something more significant happening and that is there's a change in the small car itself. I used to like to describe these small cars as cheap and cheerful with a polite way of saying they were stripped down eco-boxes; didn't offer very much except a low price tag and reasonable fuel economy. But if you look at some of the new cars that are out there right now, they are coming in with surprisingly sophisticated design, both in and out. New engineering methods allow for a much roomier interior than the cramped sardine cans we used to think of when we'd say a sub-compact. And they typically are delivering a lot more in the way of standard features that you wouldn't have expected in anything that small. You may not have even expected to get on a mid-sized model going forward. So what we're getting now is a lot more car and a lot more fun car for the money.

WERMAN: Do you think that that fun package and that sophisticated design, though, will be enough to lure Americans away from the vicissitudes of the numbers at the gas pump?

EISENSTEIN: Well I think that the gas pump is probably going to be the all-ruling factor and if we start to see prices that approach what we have seen in Europe, where today you can spend eight dollars a gallon in some markets, that's going to make people really rethink what they want to drive. And at some point, you just simply can't stay with the big old cars. Your thoughts are dominated by one thing and that is fuel economy. But barring that, I think you will see certain cultural and social shifts that will push more people into small cars, down to the sub-compact and even smaller models, the micro-cars like the Smart for two. But you will see this segment still not take over completely. You won't see people completely give up their trucks, big crossovers and big sedans.

WERMAN: Paul Eisenstein, editor of The Detroit Bureau dot com, speaking to us from Detroit. Thank you so much.

EISENSTEIN: Oh it's my pleasure to be with you.

WERMAN: Well, here's a quick reminder that bigger is not always better. Today General Motors announced that it's shutting down its Hummer line of gas guzzlers. This after GM's planned sale of the brand to a Chinese company fell through. GM says it will now work to end the Hummer brand. Stay tuned though, GM said the same thing about Saab, but in the end GM did find a buyer for the Swedish brand.