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U.S. auto giants race to go small

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In May, it became clear that this could be a crossover year in other ways as well. If sales patterns for that month continue for the rest of the year, it's possible that Asian brand names alone could outsell Detroit-based Ford, GM, and Chrysler.

It's also possible that Toyota could capture the top spot in global car sales from GM.

Moreover, May marked what could be a crossover moment in consumer preferences. Car sales moved decisively higher than light-truck and SUV sales – which plunged after months of slowly cooling.

"It seemed to us that we reached a tipping point where customers began shifting away from these vehicles at an accelerated rate," Ford chief executive Alan Mulally said in a recent conference call with analysts.

As if the pressure from consumers isn't strong enough, new automotive technology is rising on the Washington political agenda for environmental and energy reasons. Sen. John McCain, the presumptive Republican nominee for president, proposed Monday that $300 million in federal prize money go to whoever can develop a leapfrog improvement in electric-car batteries.

Even as large and small companies push for breakthroughs, automakers' near-term plans are fairly straightforward: Emphasize the most fuel-efficient cars they can produce now.

"It is very important ... for all manufacturers to have hybrids in their lineups," says Mike Omotoso, another analyst at J.D. Power.

Here are some of the product-line shifts under way at major automakers:

•Honda announced a month ago that it will launch a new gas-electric hybrid model, like Toyota's Prius, in 2009. It also plans new hybrid versions of the Civic and Fit, and is ramping up production of the gas-only Fit. A key Honda goal, according to news reports: keeping the extra cost of the hybrids below $2,000 per car.

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