Detroit's Gamble
When I suggested a few years ago that Detroit was taking a big risk by remaining so focused on increasingly larger SUVs, while Japanese carmakers were pioneering hybrids and more flexible conventional vehicle types, people regarded me with amusement. At the time, I wasn't even thinking about high gas prices, but rather that all trends eventually end, and ones related to fad and fashion often end more abruptly and expensively than others. I saw hybrids as a contender for the Next Big Thing.

Now we are starting to get a sense of the possible exposure this strategy has created for Detroit, as described in this Business Week article. It doesn't have to result in a decade of pain like the 1980s, when Detroit offered few of the good small cars that the public demanded and the Japanese had perfected. However, I suspect that the only thing that will prevent such an outcome is some fairly nimble thinking by GM, Ford, and Chrysler, along with a willingness to lead the way in undercutting their own cash cows.

That is never an easy decision, especially when it appears so risky, but the alternative could see a further dramatic erosion of market share of the Big Three in their home market, since it is not only Toyota, Honda, and Nissan they must worry about, but also the newly respectable Hyundai and Kia. If gas prices are this high a year from now, Detroit will need a solid alternative to its largest SUVs.