You are correct about the government forcing Detroit's hand of course. But I disagree about market forces pushing Detroit to make bigger gas guzzlers. Ford is on the verge of collapse because they bet the farm on gas guzzlers when fuel was cheap. Chrysler is junk, GM is the same. I believe the market is pushing Detroit to make more fuel efficient vehicles, but Detroit doesn't realize it yet.
The reality is, fuel economy can be improved without simply dropping weight. Lets face facts.
I own a 1996 Chrysler Sebring Convertible, it gets about 25-28 MPG highway... the brand new 2008 Sebring Convertible, has the EXACT same MPG rating.... 12 years difference between the two. Please don’t tell me that there has been ZERO improvement in fuel economy in over a decade.
Counter this to my full size van with a 351 5.0L V8, it gets 14 MPG highway, a brand new van with a v8 gets about 18 MPG highway, with a smaller 4.6L V8 and it has a higher towing capacity as well! The body styles are nearly identical between the two vehciles, and the overall weight of the vehicles is not much different... and in spite of this, the newer vehicle has a 28% improvement in fuel economy!
Now whats the difference that 1 vehicle where the newer model is actually smaller and lighter, but has ZERO improvement in fuel economy in 12 years, and another vehicle that actually has a smaller engine, is more fuel efficient, has greater towing and power and has virtually the exact same exterior styling as the predecessor but has nearly a 30% improvement in fuel efficiency over 14 years? Simple, the manufacturer made fuel efficiency an issue during design of the engine and vehicle. The other did not.
I don’t believe you will see system wide fuel economy changes without mandates, just like you didn’t in the 70s until they had to do it. The idea that the only way you can get improvement in MPG is simply dropping weight, or giving up horsepower, is nonsense. Yes those are quick and easy ways to do it, but with the best gasoline engine only turning about 38% of the energy of gasoline into actual power the other 62% being lost to heat and friction, there is a ton of room for improvement.
Hell, just converting from Gasoline to Desiel based engines gives the automotive manufacturers an instant 12% gain in efficency and fuel economy, because Diesel engines only lose about 50% of the total energy in fuel to heat and friction... So at the very least a 10% improvement in fuel economy would be system wide if a major conversion to Diesel was made in the US.
I know I’ll get flamed, but those are the facts.