The Future of U.S. Cars (Is Small)

The Fiat 500

Photo: Fiat

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After announcing plans to boost fuel economy standards for 2011 model year cars on Friday, the Obama Administration spent the weekend ousting General Motors' chairman and chief executive, Rick Wagoner, and finalizing another bailout for GM and Chrysler that comes with tougher strings attached.

For GM, the biggest string was tied at one end to Wagoner, and at the other to a lead weight. He's been pulled out the door. For Chrysler, the string would bind it together with Fiat, the Italian car maker.

One big bonus to that partnership would mean that the economical Fiat 500, the minicar that Edmunds.com likened to "an iPod on four wheels" -- because it's white, it's irresistible, and it's small (smaller even than the Mini Cooper, though not as small as the Smart Fortwo). At 40+ MPG, the Fiat 500 would easily join those two on the list of the most fuel-efficient cars and SUVs sold in America.

Meanwhile, GM has made "considerable progress in developing new energy-efficient cars," according to the New York Times account of the Obama task force's report, but it needs to cut costs and enjoy the benefits of another multi-billion dollar government loan to survive.

Both companies will have to produce considerably more fuel-efficient cars. The Obama Administration finalized a Bush Administration fuel economy rule Friday, requiring 2011 models to boost fuel economy about 2 mpg, to 30.2 mpg for cars, and 24.1 mpg for SUVs and pickups. (Also Friday, Tesla unveiled its Model S, a prototype of an all-electric mid-sized family sedan set to go on sale in 2011 and get 300 miles per charge.)

Environmental groups criticized Obama mildly for finalizing the Bush Administration regulations, which they said are based on flawed data. But the Obama Administration is expected to release more strict fuel economy rules for the 2012 model year and beyond in 2010.

The question remains whether the U.S. will still have three big automakers at that point.

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