Watch a flexible economy re-price capital in real time. A subcompact is renting for more than an SUV in Boston from Avis according to WSJ. This is a strong signal (though not the first) that it is time to retool. Honda is building new plants to churn out hundreds of thousands of hybrids that will hit the market in a few years.

I would think that the recent introduction of the Honda Fit and the Toyota Yaris would fall under this category. And they're being released to market NOW, instead of a few years down the road.

Japan has already re-tooled. The Big 3 are still way behind, or if they're making sub-compacts, they're certainly not doing anything to advertise them.

A few weeks back there was some news report on fuel prices around the world. In USA they were interviewing people at a gas station, and there was some fat woman sitting in her SUV, explaining in frustration: "I just paid [insert half the price we pay here] for [a big amount of gasoline]! It's ridiculous! I say! Ridiculous!"

Indeed, it was.

Japan and the European makers haven't "retooled"; they've been making subcompacts for ages.

The only change is that they're selling them in North America now (at least the Japanese are). (Hell, at this rate, DaimlerChrysler might resume trying to import the Smart... and Volkswagen might try importing the Lupo.)

It's the hybrid and the on-location that comprises the retooling. Or if you prefer, upping capacity on the same sort of stuff they were already pretty good at.

Telecommuting works wonders on gas costs.