Reuters reports that Detroit’s rush to bring out new small cars may lead to a glut in the market place. American auto makers will need cars such as the Ford Fiesta and Chevrolet Cruze to meet more stringent CAFE standards but buyers already have plenty of choices which means these new models will face stiff competition and profits may be elusive.

That may be true, but Detroit needs to be competitive in this segment. Gasoline is selling for well below its 2008 peak, so the winners in this segment will have to offer more than just high MPG ratings. By all accounts, the Fiesta and, to some extent, the Cruze are more exciting to drive than the typical Asian econo-box and have more distinctive styling, to boot. Those factors combined with unfavorable currency exchange rates for the Japanese could give the home team the advantage. Moreover, with the Korean brands nipping at Japan’s heals, Toyota and Honda may have more to fear from a small car glut than Detroit does.

--M.D.