Corporate Average Fuel Economy (CAFE) really did a number on pretty much everyone. It's astounding the impact that poorly written, outdated oil crisis era legislation had on the automotive landscape. The entire reason why SUVs took off was because they are considered "light trucks" and are therefore given lots of extra leeway compared to normal, sensible cars, which are forced to become tinier and incorporate more bullshit technology ridden to meet the fuel economy requirements. That was a major reason behind why Japanese and European cars stole the USDM market in the 1980s, as American manufacturers were used to building large vehicles. You could say that the 1970s cars were too large, and yes they were (which was not helped by the 5 mph bumper regulations; which were not bad, just unexpected and resulted in reinforced bumpers being tacked on to cars which were already as big as practically possible), but the first wave of downsizing (1977 for General Motors, our relative benchmark) brought these traditional American vehicles back to the levels of popularity they deserved.
Later, in the mid 1980s, fuel prices actually went down and due to new technology, it was entirely possible to make larger, more powerful cars again (which is what the Germans did) without guzzling excess amounts of gas. Lower fuel prices (which lasted into the 1990s and beyond) also made consumers highly willing to buy these larger vehicles again (hence the rise of SUVs as we will get to later). Unfortunately CAFE regulations tightened year-by-year, and did not take into account these factors, which forced the companies to downsize their vehicles even more to compact and sub compact sizes. These new small cars were often too narrow to comfortably sit 6 like the original full-size cars which were dead for Mopar by the mid 1980s, dead for GM by the mid 1990s, and dead for Ford after selling them in low volume until the very early 2010s. American makes were used to making vehicles like that, and were not structured to adapt to make these new small cars (as the new "economical" cars were often front wheel drive, unit body, and used 4 and 6 cylinder engines) unlike the Japanese and German makes which were able to take high quality vehicles they had been making for years in their insular, protected home markets and bring them to the US with clever marketing. By the 1980s American makes had the reputation of being poor quality, low class for the luxury models, and no longer had size and traditional burly American engineering to fall back upon. Now as the American makes were playing second fiddle in regards to high-volume cars, they shifted to SUVs which were far less damaged by CAFE regulations and could be sold to consumers who by this time genuinely desired larger vehicles (as aforementioned due to general prosperity & lower gas prices). They marketed these glorified agricultural machines (SUVs) as "hip" and really did improve how civilized they were (starting in the 1990s, around the GMT400 generation Chevrolet Suburban). At their core these vehicles were still gussied up work trucks though, and came with the disadvantages that entailed; worse performance than an old body-on-frame car, were less comfortable as you sat up higher and got more leverage from bumps in the road, and had worse visibility except for the woman cope of "oh well I sit up higher so I can see everything".
Now, speaking of that cope, it came in full force when crossovers came into the market. A crossover is just a lifted lightweight hatchback, unit-body construction, 4 cylinder transverse engine, optional AWD, which has been designed to just barely count as a "light truck" for CAFE regulations. You still sit up high, but now because the vehicle is lightweight the ride quality becomes even worse, your 4 (or optional 6) cylinder engine gives you middling performance, the raised suspension height for nothing more than to meet that light truck standard kills handling capabilities (unless you stiffen the suspension, which sacrifices ride quality even more), etcetera. There are plenty of complaints about those vehicles but they still remain at the top of the market because they provide something more roomy than the average sedan, and as women make up most consumer spending here in America, that "I need to sit up high to feel safe" standard kicks in quite hard. Of course, Japanese companies pioneered the idea and continue to pump crossovers out such as the Honda CR-V & HR-V & Toyota RAV4. German makes, which in the past (1960s-1980s) wouldn't be caught dead selling trucks as "luxurious", began to pump them out (BMW crossovers, Benz crossovers, and Benz's famous traditional, body-on-frame G-Wagen). The same factors that had American makes playing second fiddle in the compact-car business had them doing even worse with crossovers as they had nothing to fall back upon but pickup trucks & huge truck based SUVs. Ford today only produces pickup trucks, SUVs, and crossovers with only the low volume Mustang as an exception. Same thing with GM, as the only true cars they produce these days are the Corvette and various low volume Cadillac sedans. Now, those two of the big three are shells of their former selves, but the third, Mopar, is pretty much dead. Chrysler only sells one legacy minivan, and while Dodge and Ram seem to be hanging on they are all owned by Stellantis, a foreign company that owns Fiat, among other European makes. The American car industry is undeservedly dead & dying.
