Getty Images

FOR ALL the woes of the city that hosts it, Detroit's annual motor show is still a bellwether for America's car industry. Last January, as the industry grappled with its biggest crisis in living memory and at least two of Detroit's Big Three carmakers teetered on the brink of collapse, the usual razzmatazz was replaced by fear and foreboding. This year hope had returned, but accompanied by deep uncertainty.

Hope, because both Ford, which avoided bankruptcy, and General Motors, which did not, had attractive new vehicles on display amid signs that the market is picking up, and could reach sales of 12m vehicles in America this year. Uncertainty, because the vehicles on which Detroit is pinning its future, and which dominated the show, are smallish cars of the kind that have long been the bedrock of the European market, but which Americans have always regarded as poor man's vehicles.

There are several reasons for Detroit's conversion to small cars. The biggest is the pressure that every big carmaker is under to meet increasingly tough rules on fuel economy and emissions. In the middle of last year Barack Obama announced that the new 35mpg CAFE (corporate average fuel economy) standard would come into force in 2016 rather than 2020. Instead of protesting noisily, as in the past, Detroit praised his wisdom. With their survival dependent on federal bail-out funds, GM and Chrysler had little choice other than to grin and nod, but Ford was just as keen. All three had been badly burned by the near-doubling of petrol prices in 2008 and were convinced that even though gas was cheap again, a business model built on it staying that way was broken.

That led to another inescapable conclusion. Although some Americans will refuse to be parted from their pickup trucks and muscle cars, catering to American automotive exceptionalism was no longer an option. The new CAFE standard meant that cars would have to be hitting 42mpg (26mpg for trucks) in less time than it typically takes to develop new car models. The carmakers would have no choice but to try to sell Americans cars developed for Europe and Asia. Furthermore, only by using the same platforms all over the world could the carmakers begin to compensate for the loss of the fat profits that used to come from selling big vehicles.

That is why Ford's chief executive, Alan Mulally, set out in early 2007, controversially at the time, to remake the firm around his “One Ford” global design and development strategy. That is also why GM belatedly realised that selling its European arm, Opel/Vauxhall, would have been a fatal error. And that is why the idea of Fiat saving Chrysler is not as crazy as it first seemed. But the question which nobody can yet answer is whether Americans will pay enough for smaller cars to make them even modestly profitable.

The first company to find out will be Ford. Having just bagged both the North American car and truck of the year awards with, respectively, the Fusion Hybrid and the Transit Connect van, it unveiled the star of the Detroit show, the new Focus (pictured above). It is a handsome and technology-laden compact car that will be sold (and made) in every big world market from next year with only small tweaks to suit local conditions and tastes.

However, whereas the Focus that Ford currently sells in America for around $20,000 is a stripped-down version of a car that was replaced in Europe five years ago, the new Focus will have to sell for prices closer to those that Europeans are accustomed to paying if it is to make a profit for Ford. That suggests a sticker price of at least $30,000 before taxes for a mid-range version.

Well before the Focus hits the market, Ford will launch the new Fiesta in America this summer. This slickly styled subcompact has been a top seller in Europe since late 2008. There is a lot riding on the Fiesta, not just for Ford but for the whole industry. Jim Farley, the marketing guru Ford poached from Toyota, has been planning its launch for nearly two years. Mr Farley has used social media and viral-marketing techniques to generate excitement and name-recognition. But even he does not believe Ford will be able to sell the Fiesta for anything like the kind of prices—€17,250 ($24,700) for the top-of-the range versions that accounted for 30% of sales last year—that Europeans are willing to pay.

The Fiesta may set new class standards for refinement and handling, but it is still a small car and some industry observers fear that it may be too sophisticated for the market. Although BMW's ultra-premium Mini fetches over $30,000, Ford will offer the Fiesta from about $14,000 for the basic version to $20,000 with all the extras—around the same prices Honda charges for the Fit, a capable but less dynamically accomplished subcompact. At those prices, Ford will struggle to make much profit even if buyers choose lots of extras.

Ford is on a roll thanks to its improving product quality and the halo effect of having avoided bankruptcy. But the Ford brand is still best-known for rugged F-150 pickup trucks and hulking SUVs. The company has not even bothered to offer a subcompact in America since 1997, when it dropped the wretchedly mediocre, Korean-built Aspire. Critically, it is far from certain whether Ford's dealers will even know how to sell such a car.

A wave of great small cars is about to hit the forecourts of American dealers—none better than the European-developed cars that Ford will be offering. The big question now is whether Americans can be persuaded to pay enough for them to give the industry a viable future.