With gasoline prices sitting at record highs, and the auto industry struggling to deal with the situation, there is a new shift in the design of cars. Historically, when you bought a smaller engine car, that engine came in a vehicle that had far less in the way of comfort and amenities... well, that is changing.

Think back a few years. You went to your local auto lot to pick up a new car, and your first choice was what size engine you wanted, the heavy duty 8-cylinder, 6, or 4-cylinder car? Suppose you decided the 8-cylinder was for you, can you picture the car that supported this engine? Typically these cars had all the bells and whistles you could imagine: the sunroof, the leather seating, fancy radios, power windows, etc. Basically, the bigger the engine, the better the "packaging" that it came along with.

Now, picture the 4-cylinder car from the past. Not much to picture here. Power windows? Doubtful. Yes, the 4-cylinder cars of the past were typically your bare bones vehicle with few fewer amenities than those coming with the 8-cylinder alternatives. If you were lucky, you would at least get some power steering in the car, but that was not always the case either.

General Motors (NYSE: GM) may be faced with cutting thousand of white-collar jobs and selling or closing some of its brands. According to The Wall Street Journal, "Management may also present the board with options for raising additional cash to help GM make it through the downturn."

All of these plans, except raising money, may be a little late for shareholders. GM's stock has dropped over 75% from its 52-week high and now trades just above $10. Changing over from a product mix that is heavy in trucks to one that emphasizes light sedans with good gas mileage could take the better part of a couple of years. While GM may make money outside the U.S., that does not offset huge losses in its home market.

GM was caught flat-footed when oil prices spiked up. That might be forgiven, if competitors like Honda (NYSE: HMC) had not made certain that they had large numbers of fuel-efficient vehicles in their product mix. GM must now attack a market that is already occupied by successful competition.

With a $6 billion market cap, if GM has to raise $10 billion, the stock price is going way, way down.

Douglas A. McIntyre is an editor at 247wallst.com.

It probably should come as no surprise, but June was a tough month for automakers, and all signs are pointing to more troubles out on the horizon.

All but one major automaker saw their sales drop last month, with Honda Motor (NYSE: HMC) being the sole exception. For the month, Honda actually had a 1% year-over-year sales growth, which given the current market place was an exceptional feat.

So just how bad was June for the automakers? Pretty bad. During the month, combined auto sales fell to 1.19 million vehicles sold, a 266,000 decline from the same period last year. This just continues the trend that we have been seeing all year, amounting to roughly a 10% sales decline during the first half of the year.

The Wall Street Journal was good enough to humiliate General Motors (NYSE: GM) CEO Rick Wagoner by pointing out that he still has his job. The company's share price is down almost 85% since he took over. The newspaper writes that Mr. "Wagoner's decision a few years ago to tilt GM's product mix more toward trucks and SUVs isn't looking good."

Fair enough. But there are two critical elements to Wagoner still having his corner office. One is that the rest of the US car industry is as bad off as GM, maybe worse. The other is that no CEO in his right mind would leave a good job to take over GM. Boeing (NYSE: BA) exec, Alan Mulally, moved to Ford (NYSE: F) as the head man and he must regret the decision every day.

Wagoner is part of the "dumbing down" of the American CEO. If the man can't do well, blame it on the industry. That makes it seem that individual companies are powerless to make decisions that will put them ahead of the competition, even in tough markets.

Tell that to the guys at Honda (NYSE: HMC).

Douglas A. McIntyre is an editor at 247wallst.com.

Presumptive Republican presidential candidate John McCain's plan to award a $300 million prize "for the development of a battery package that has the size, capacity, cost and power to leapfrog the commercially available plug-in hybrids or electric cars " raises many questions.

For one thing, what does he mean by "leapfrog?" Does the McCain car have to be 10?% better? 20% better? or 30% better? Will a marginal improvement suffice? Moreover, who is going to decide whether the goal is met? environmentalists? the automakers? the government? These people can not agree on what we should do to reduce air pollution; I can't imagine the fights that will occur over what constitutes a technological "leap."

McCain wants the car to deliver a power source at 30% of the "current costs." Does that mean costs as of 2008 or whenever this wonder car is ready to be sold to consumers? How does he define "costs?" Is it the total cost of ownership or a reduction in the sticker price or something else entirely? Why limit it to batteries? What about hydrogen fuel cells whose only pollution is water vapor?

In a speech he delivered today, McCain pointed out that "right now we have a hodgepodge of incentives for the purchase of fuel-efficient cars." Indeed, purchasing a hybrid only makes economic sense for the most die-hard of tree huggers. But is the answer to skyrocketing gasoline price to be found in a contest? I am not so sure.

GM (NYSE: GM) has decided that it will come close to suspending development of new SUVs. The market for the trucks is so bad that even Toyota (NYSE: TM) thinks it will lose money on the beasts in the US this year.

The Wall Street Journal reports "General Motors Corp. is delaying the redesign of SUVs and full-size trucks as part of a wholesale review of its product." For those not watching the car business over the last year, GM's decision comes way too late.The company should have cut back SUV development some time ago and made an attempt to get more of the mid-sized sedan market controlled by the Japanese.

It is easy to say that GM could not have seen the future, but that would be slighting companies like Nissan and Honda (NYSE: HMC) which was early in marketing more fuel-efficient cars.

GM is paying dearly for its mistake. Its shares hit a multi-year low at $14.75 in trading yesterday. They have not been so low since the Arab Oil Embargo in 1974.

How ironic.

Douglas A. McIntyre is an editor at 247wallst.com.

Ford Motor Co. (NYSE: F) has decided to take even more costs out if its operations. Where it will find the people and extra expenses is almost impossible to imagine. According to The Wall Street Journal (subscription required), "with more than half of Ford's plant saddled with excess capacity, Ford officials believe the push to control overtime is paramount."

The car company is also sending signals that it will have to take out more people.

Ford has almost certainly reached the fork in the road. At some point, the company will not have the capacity to rebuild its business when the domestic market begins to come back. The real competitors in the market, Toyota (NYSE: TM)and Honda (NYSE: HMC) will keep investing in new development and marketing, and will keep their abilities to manufacture new products at reasonable levels.

Ford may be able to save its present by sacrificing its future. And, if things go badly, it will not matter how much the company cuts. The U.S. car market is that bad.

Douglas A. McIntyre is an editor at 247wallst.com.

The annual JD Power Initial Quality Survey is always a big deal. The research looks at how buyers view problems with their cars during the first 90 days they own them. The results get picked up in almost every newspaper, internet news outlet and TV station in the US.

In this year's poll, GM (NYSE: GM) and Ford (NYSE: F) picked up ground. Toyota (NYSE: TM) and Honda (NYSE: HMC) lost a little. But according to The Wall Street Journal, "It can take a while for improved scores to change consumer perceptions. Despite improvements in vehicle-quality ratings in recent years, the U.S. auto makers continue struggling to overcome the assumption among many American buyers that foreign companies produce better products."

Unfortunately for Detroit, the results may do little or nothing for the U.S. car companies. That is not just because they are losing money from relying too heavily in the past on pick-ups and SUVs, which use too much gas.

The fact of the matter is that it's because most brands are better at building cars, all get relatively good scores. Mercedes, No.4 in the survey, had 104 complaints per 100 vehicles. Cadillac, in spot No. 10 had 113 complaints based on the same measurement.

As quality becomes a given, style, handling and features, like navigation systems, are more important. When no one has a big edge, incentives, which cost the car companies hundreds, if not thousands, of dollars are critical in making buying decisions. That cost all of the companies money.

Douglas A. McIntyre is an editor at 247wallst.com.

Having a lot of small cars in the line-up has turned out to be a massive blessing for Japanese car companies. Honda (NYSE: HMC) and Nissan (NASDAQ: NSANY) did well in May US car sales. They have very few huge SUVs and pick-ups in their model lines. By contrast, Detroit's big auto companies have had their sales bolted to the sales of trucks. Consequently, their sales were murdered in May.

Honda's shares moved up a remarkable 8.6% overnight in Tokyo, a reward for being in the right place at the right time. But, that underestimates what Honda has done by sticking to selling small cars in America during the years when pick-ups were doing so well. Other Japanese car companies benefited, but to a lesser extent. Shares in Nissan rose 5.3% and Toyota (NYSE: TM) was up 3.2%. Honda and Nissan were the only major car companies that had sales increases in the US for May.

The news is more than a changing of the guard from Detroit to Japan. That has been going on for more than a decade. It is also a sign that Honda and Nissan are beginning to best Toyota, their larger rival, because their models mixes are more suited to a $4-per-gallon gas environment.

Toyota has been the major threat to US car companies. That may be changing.

Douglas A. McIntyre is an editor at 247wallst.com.

With gasoline prices going through the roof lately, the main question on every motorists' mind has been how to save some money at the pumps. The obvious answers are to either drive less, or buy a car that uses less gas, preferably a gas-electric hybrid. Hybrids, unfortunately, are pretty expensive, but Honda (NYSE: HMC) has announced plans for releasing an affordable gas-electric hybrid next year.

Honda plans on this new hybrid to be a brand new car model for the company, and the model will only come in the hybrid version. In addition, it will also be coming out with new hybrid versions of its already popular Civic and CR-Z.

The company's President, Takeo Fukui, stated that there has been a lot of attention placed on hybrids recently, and that now was the time to "go to the next step." He did not make any predictions on just how much the new hybrid-only model would cost, other than it would be affordable. There was also no mention of the name for the new model, but some descriptions were given, including that it would be a 5-door sedan with new weight reduction technology to help improve the vehicle's efficiency.

Nissan Motor Corp. (NASDAQ: NSANY), Japan's third-largest automaker, announced this morning higher fourth quarter profit, but forecast a decline in profit for the current year, blaming an unfavorable rising yen and soaring material costs.

Nissan Motor announced that its profit during the quarter jumped 67% to 137.6 billion yen ($1.3 billion). And its income figures were definitely something to cheer about. During its fourth quarter last year, the company had a profit of 82.2 billion yen. Excluding one-time "fifth-quarter" numbers, the company's earnings figures would have showed a surge of 95%.

Despite the positive results, the automaker isn't optimistic about its future earnings and issued a gloomy outlook. The company expects net income for the current year to drop 30% to 340 billion yen ($3.3 billion), which is below the 368 billion yen that analysts at Factset Research predicted. Nissan cited unfavorable currency exchange, higher commodity and energy prices, and increased material expenses.

Gasoline prices continue to increase along with crude prices, and the latter seem to find a new record every single day. Wasn't it just a few months ago that the media was going crazy about oil reaching the $100 per barrel mark? It hit $122 this week. Now, that's not a year later; that's less than half a year later. It's not surprising then that automakers with an inflexible SUV-selling strategy are getting pummeled, while automakers with a decent offering of gas-efficient vehicles are seeing product mix changes in retail sales.

Ford Motor Co. (NYSE: F), which showed a surprising profit in its most recent quarter, said that it plans to really up the presence of gas-efficient six-speed transmissions by the end of 2009, and wants to have these transmissions in 98% of its North American vehicles by 2012. If Ford follows through with this commitment, it'll be a game-changer for the industry. And, it will force General Motors Corp. (NYSE: GM) to do the same thing. Ford stated that the newer 6-speed automatics will get 4% to 6% better gas mileage than the standard 4-speed and 5-speed automatic transmissions.

GM is not sitting idly by at the same time, though. It debuted a 6-speed automatic transmission in the popular 2008 Chevy Malibu, which it is pitting as a strong competitor to market leaders Honda Motor (NYSE: HMC) Accord and Toyota Motor Corp. (NYSE: TM) Camry. Will the new trend in the consumer vehicle market be smaller 4-cylinder engines with advanced, fuel-efficient 6-speed automatic transmissions? You can count on it until oil prices fall to $50 a barrel. And, that'll be when pigs fly.

So what do you do if your company produces mostly heavy, inefficient vehicles as gas soars past $4 a gallon? Some might say you should produce more efficient cars. But not Chrysler, which has instead opted to make gas cheaper, guaranteed!

Today, Chrysler CEO Bob Nardelli announced that anyone crazy enough to buy a heavy, high-horsepower, low-mileage Chrysler product before May 31 will be able to buy gas for no more than $2.99 a gallon for three years. Just take your shiny new Aspen or PT Cruiser to the gas station and use your special gas card; Chrysler will pick up the cost over $2.99 a gallon.

Some critics are calling this plan a cheap gimmick. But there is no denying that Chrysler is at a disadvantage relative to General Motors (NYSE: GM) and Ford (NYSE: F) when it comes to offering new cars that get decent mileage. And it is light years behind the auto design leaders, Toyota (NYSE: TM) and Honda (NYSE: HMC). So it needs some kind of gimmick to help its dealers clear out the cobwebs that are quickly forming on their lots.

In recent years, Chrysler has relied heavily on trucks and SUVs for sales, and its hot new cars like the Challenger are gas guzzlers. (Hey, your Hemi sure is fast! Sorry about the 11mpg!) Its lineup is in desperate need of an overhaul and products that offer decent mileage. But developing new cars is difficult and very expensive, and it's not clear that Chrysler's owner, Cerberus Capital Management, has the money to do it. The alternative -- advertising and sales gimmicks, long favorites in Detroit -- is cheap by comparison.

This promotion might work, at least for a few weeks. But it points to much larger problem: Chrysler doesn't have the goods to compete right now, and it's not clear when it will, if ever.

Today, in a headline ripped from the 1970s, the front page of The New York Times announced: "As Gas Costs Soar, Buyers Flock to Small Cars." In the immortal words of Yogi Berra, it's deja vu all over again.

A lot of people moan and wail about the tough times in Detroit, but it's not as if the American automakers didn't have plenty of time to prepare for the current market. They were warned, over and over again, that they needed to develop better small cars and more efficient vehicles. But they did nothing. Instead, they focused on wasteful but high-margin SUVs. Well, now the time has come to pay the piper.

The Times reports that in April, 20% of new vehicle sales were compacts or subcompacts. That's the first time this has happened in the American market. In another first, more cars with four cylinder engines were sold than cars with six cylinders. Clearly, as gas approaches $4 a gallon, Americans are looking for more efficient cars.

This post is part of our Battle of the Brands feature. Let us know which brand you prefer, and check out other Battle of the Brands posts.

For two companies with similar backgrounds, Toyota Motor Corp. (NYSE: TM) and Honda Motor Co. (NYSE: HMC) have grown markedly different. Toyota has taken a vertical approach to become arguably the world's premier brand in combining high volume sales with high-quality products. Honda has taken a much more horizontal route, dipping its feet successfully into a wide range of products.

In 2007 Toyota passed Ford Motor Co. (NYSE: F) as the world's second largest auto manufacturer. However, some question whether this victory came at the sacrifice of quality; Consumer Reports, which had consistently rated the company's cars at the top of its quality rankings, declined to recommend many of its models due to concern about slipping reliability. Its secondary line of autos, the Scion, which is targeted to a younger driver, is still scrambling for traction in this crowded field.

Honda's horizontal approach has taken it into farm and garden equipment, lawn mowers, motorcycles, even airplanes and soybeans. However, four-wheeled vehicles remain its core industry. Toyota's quality stumbles have opened up the field for Honda's reliable, affordable if unsexy lineup. The new subcompact Fit has replaced the Civic at the bottom of its price structure.