Oct. 3 (Bloomberg) -- Ford, BMW and Volkswagen announced plans to increase sales of more efficient small cars after consumer spending slumped, showing that improving gasoline- powered vehicles will come before alternative-fuel solutions.

U.S. carmakers are cutting emissions by turning from trucks and SUVs to smaller cars, as rapid advances in alternative technology may be delayed by the global financial crisis. Along with European carmakers, they're pushing to make the most of the combustion engine, improving turbochargers for example, to boost efficiency while still burning fossil fuels.

``There's too much hype about the electric car,'' BMW Chief Executive Officer Norbert Reithofer said this week at the Paris Motor Show. Electric vehicles may make up 5 to 10 percent of new car sales in 2020, ``but not more,'' he said.

U.S. auto sales tumbled 27 percent last month, extending the industry's slide to 11 consecutive months, the longest in 17 years. Tightening credit is discouraging buyers as the U.S. and European countries shovel money to bail out banks. At the same time, the streets won't be filled with electric cars until ``colossal'' investments are supported by governments, said Carlos Ghosn, CEO of Renault SA and Nissan Motor Co.

The green ideas sprouting from booths at the Paris show can't obscure the forest that automakers find themselves in -- a less dreamy place where slowing car sales mean attention to the basics of selling gasoline-burning vehicles is paramount.

Ford Switch

Ford Motor Co. CEO Alan Mulally said he came to the Paris show, his first European motor conference trip, because the automaker wants to switch U.S. production as quickly as possible to smaller cars developed by the European division, which has made money while the parent company has racked up losses.

``We're going to be there for our customers'' as demand for small cars increases, Mulally said. Ford used the show to introduce a redesigned Ka small car.

Earnings at BMW, or Bayerische Motoren Werke AG, have been boosted by its turn to small cars, including the trendy Mini brand. The German automaker plans to boost sales in part on an updated model of its luxury compact line, the 3-series.

And even as it studies plug-in hybrids, Volkswagen AG, Europe's biggest carmaker, is relying on the new model of its Golf bestseller to boost earnings. The car is more fuel efficient than its predecessor.

Mini Exalted

While European deliveries dropped 16 percent in August, the biggest monthly decline since 1999, sales of cars in the ``mini'' category rose 14 percent in the first half of the year, according to researcher J.D. Power. Luxury car sales slumped 13 percent and deliveries of minivans and SUVs declined a combined 5.5 percent.

``Despite efforts in the direction of both electric and hydrogen on display here, continued development of gasoline and diesel powertrains will still make these largely viable options in years to come,'' Ian Fletcher, a London-based analyst at Global Insight, said today in a report.

Some trends in the auto-parts business support the idea that carmakers are pushing better gasoline engines rather than moving rapidly to alternative fuels.

Demand for turbochargers, which force air into the engine to boost power and decrease fuel consumption, is robust, market leader Honeywell International Inc. says.

``For at least the next 10 to 15 years, the future for the combustion engine is very bright,'' said Alex Ismail, Honeywell Transportation president for passenger vehicles.

Boosting Performance

Sales of turbochargers are growing three times as fast as the overall auto market and use of the devices may rise to 35 percent of new cars in five years from 24 percent, Ismail said.

While Toyota Motor Corp. executives at the Paris show touted a research lab meant to provide a quantum leap in batteries and Fiat SpA sang the praises of Eco Drive software that gives drivers tips on motoring more efficiently, others were openly defiant.

``Do you believe people will actually switch to smaller cars?'' Porsche SE Chief Wendelin Wiedeking said in discussing the imminent release of its larger Panamera model.

``This car fits into these times,'' Wiedeking said. ``You should go on a journey in a small car with your four-person family. What will happen is you will have had enough when you get to the border after a couple of kilometers.''

Even as BMW tests an electric Mini in New York, London and Berlin, CEO Reithofer said some moves away from burning gasoline won't necessarily help the environment. Electric cars, for example, may not reduce emissions if more power is generated by coal.

Fuel Costs

German automakers are trying to gain incremental advantages from traditional engines, said Shai Agassi, who is developing electric-car networks in Israel and Denmark. Refining the combustion engine is the wrong approach because gains will be subsumed by fuel costs, he said.

``German carmakers missed out on hybrids,'' he said. ``They're still under 1 percent in hybrids 10 years later.''

Toyota led the way on hybrids, which burn fuel and rely on alternative energy for some power, with the Prius. Agassi also praised General Motors among U.S. automakers. Its Volt, an electric model that can be recharged at home or with a gasoline engine, may be certified as the first 100 mile-per-gallon car.

Still, General Motors is intent on mere survival since accumulating combined losses of $69.8 billion since 2004.

``The ordinary guy has to be able to afford these technologies, and the technology in the beginning will be quite expensive,'' said Carl-Peter Forster, GM's European chief.

Toyota leaders in Paris are among the most bullish proponents of shifts away from gasoline, saying environmental advances are no longer a luxury. Gas will be too expensive by 2030, with electric motors and fuel cells taking its place, said executive vice president Masatami Takimoto.

The Japanese company's executive vice president for strategy, Mitsuo Kinoshita, was more blunt about a world without low-emission technologies that supplant gasoline. In that scenario, ``There is no future for automobiles.''

To contact the reporters on this story: David Risser in Paris via drisser@bloomberg.net; Chris Reiter in Paris via creiter2@bloomberg.net.

Last Updated: October 3, 2008 13:36 EDT