Automobiles: Bad News For Detroit

To meet government-mandated fuel-economy standards and still satisfy drivers' demands for performance, carmakers are constantly struggling to boost mileage without cutting power. Last week in Tokyo, Honda and Mitsubishi simultaneously said they have developed engines that can increase mileage up to 20% without cutting performance. Honda's VTEC-E engine, which the company says can get up to 65 m.p.g. on the highway without sacrificing power, will be offered in the Civic Hatchback VX, which makes its U.S. debut later this year. The new engine, which will eventually be available in all Honda models, is likely to be slightly more expensive.

The breakthrough is most unwelcome news for the Big Three -- already hurting because of perceived shortcomings ranging from mileage to quality control. "It's probably giving the boys in Detroit a few sleepless nights," said Joseph Phillippi, an automotive-industry analyst at Shearson Lehman Bros. in New York City. "The Big Three say that they have similar technology, but Japan puts it in the showroom." The Japanese now command roughly 25% of the U.S. auto market, a 5% gain in three years.