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Detroit Markets Smaller Cars For High Gas Prices

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Detroit Markets Smaller Cars For High Gas Prices

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Detroit Markets Smaller Cars For High Gas Prices

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MICHELE NORRIS, Host:

NPR's Sonari Glinton reports on what that means for the recovering U.S. auto industry.

SONARI GLINTON: The American auto industry is very different now than the last time gas prices took a steep climb. To find that out, all you have to do is go on a test drive of a brand new car.

LEW ECHLIN: Let's get you behind the wheel.

GLINTON: All right. Let's, all right, so...

ECHLIN: Do you actually want to drive or do you want to be a passenger?

GLINTON: I want to drive if that's all right.

ECHLIN: OK. And I'll hold the mic.

GLINTON: Yeah, you can be the interviewer.

ECHLIN: Excellent.

GLINTON: Lew Echlin is one of three Ford executives, who on a rainy day, went with me on a test drive of the new Ford Focus. It's a compact car that comes with all the bells and whistles: navigation system, moon roof, leather seats, 11 different sets of rims, no spinners yet. It's the kind of car none of the U.S. automakers made very well, if at all, a few years ago.

ECHLIN: What we're finding is customers are paying higher transaction prices for nicer cars. And so, we're making vehicles that we've invested mightily in technology and fuel economy and as a result, we are...

GLINTON: This must be, like, the worst road ever.

ECHLIN: I think you did pick the worst road ever.

GLINTON: And slowly but surely, Detroit is shifting its attention from SUVs to cars. For instance, in 2004, 65 percent of vehicles Ford sold were trucks and SUVs. In 2011, that number dropped to 40 percent. So, as gas prices go up and people begin to look for more efficient cars, Echlin says...

ECHLIN: We're prepared for it. And I think largely, the industry has been prepared for it. Not to toot everybody's horn, but corporate fuel economy has gotten generally better.

GLINTON: Michelle Krebs is an analyst with Edmunds.com. She says with the high cost for pensions and retiree health care, the Detroit automakers could not make real profits on anything but big cars and SUVs. But that was before the recent bankruptcies and restructuring.

MICHELLE KREBS: All of the automakers - Ford, General Motors, Chrysler - pushed their break-even points way down. And so they're much more able to weather downturns, whatever they're caused by - gas prices - than they were before, because they've cut costs so dramatically.

GLINTON: Nigel Gault is an economist with IHS Global Insight. He says while Detroit may be poised to handle a gas price increase, there is still the overall economy to think about.

NIGEL GAULT: I think the big question is whether people who have jobs start to fear that maybe even though they survived so far, they might be at risk of losing their own job.

GLINTON: Sonari Glinton, NPR News.

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