The issue is multifaceted as folks have alluded to.
In no particular order, other than what pops into my head
1. Gas has been relatively cheap in the US for years, for a number of reasons. Lower fuel taxes, a strong dollar, etc, have largely kept fuel prices down.
2. The typical American likes space, large cars, large homes, large yards. There are exceptions in places like NYC, but even there, most folks would like to have a larger apartment.
3. CAFE treated a symptom, but not the cause. The push for higher CAFE averages simply moved how the cause manifested itself. Trucks had a lower target (and I believe at some point, NO target.) So many vehicles were classified as light trucks. Most minivans and even the PT cruiser to name a few are classified as light trucks, subject to different fuel economy standards compared to cars.
4. Many folks are trapped, financially in what they own. So if they bought a Durango with 60 month financing, and they are 24 months into the note, unless they made a big down payment, they are probably upside down, and can't get out of what they own. Or they bought with a HELOC, and now their home is dropping in value, so their personal piggy bank is empty. It wasn't real money, but the obligation to pay is real, and being felt in our economy today.
So while the big three learned to make more fuel efficient cars, that's not what the typical American wants.
My family is fortunate that we can afford to own two fuel efficient sedans for the work commutes, but still have the minivan for those times when we all will travel together.
Many folks do not have the luxury to do this for many reasons.
There is no reason domestic car makers cannot make more fuel efficient vehicles, based on European technologies already in use. However, for the most part, it's been demonstrated that the American consumer doesn't want those cars.
There have been a few exceptions. However, I think of how the Ford Contour failed here, while it is a huge success in Europe as the Mondeo. Basically the same car, but a much different sales story here, compared with Europe.
I don't think Saturn or Cadillac enjoyed much success with their first Opel based vehicles either. I believe the L200/L300 (IIRC) were Opel based, and never did well here. Ditto for the Catera.
There have been successes as well. I think the Ford Focus is largely a success, but I don't know how profitable it has been for Ford. Also, Ford has not brought the European re-designs here, again IIRC. So Ford soldiers on with what is largely the first generation Focus.
I haven't been able to find figures, so I can't tell if Ford Focus sales are doing better or worse. However, my ample gut leads me to believe that it's not the sales hit it once was.
Speaking of Ford, they also have Mazda to draw from in terms of engineering technology. The Mazda 3 is a success, relatively speaking for Mazda, so that technology could/should find it's way into a new Focus for American consumers.
In North America, thats one way to make the cost of bringing smaller, less profitable cars to our market, by spreading out engineering and tooling costs across several models and markets.
However, all of this only addresses the supply side, the car makers. If consumers here in the US still want large vehicles, then it will not matter much how good the small, more fuel efficient vehicles are, they will not sell.
I like small cars, yet I also realize I'm in the minority here in the US.
