The North American International Auto Show is one of the biggest events in the car industry, but at this year’s gathering in January, reporters talked less about the new models on display and more about how gruesome the Detroit economy might become. The city’s foreclosure rate hovers at three times the national average, and upscale properties are being abandoned. (Some residents joke that they track the housing market by searching on Google for “Grosse Pointe foreclosures.”) Detroit has the highest crime rate and the highest poverty rate of any city in the U.S., and unemployment is soaring.

The mayor was recently indicted for lying under oath about an affair with an aide. Even at the auto show, events didn’t come off as planned. Chrysler paraded 120 longhorn cattle in front of the convention center to promote its new Dodge Ram pickup truck, and some of the confused animals started mounting each other. One onlooker dubbed the scene Brokeback Pickup. (View an interactive feature calling out underperforming makes and models.)

Both Ford and G.M. celebrate significant anniversaries this year (the centennial of the Model T and the founding of G.M., respectively), but it’s easy to envision executives at the two companies crying in their champagne. U.S. car sales peaked in 2000 with a record 17.4 million vehicles, and G.M., Ford, and Chrysler had two-thirds of the market. This year’s sales will total less than 15 million cars, the lowest number since 1994, says automotive research firm J.D. Power and Associates. Since 2000 alone, the three Detroit companies have shed 269,440 employees, nearly a third of their combined total, and they’re still issuing pink slips in bulk. In the past three years, they have racked up more
than $67 billion in losses, a number that would be larger if Chrysler were ­included for all of 2007. (Since Chrysler was bought by private equity powerhouse Cerberus last summer, its financials are no longer public.) The automotive press used to refer to the U.S. carmakers as the Big Three, but once Toyota surpassed Ford and Chrysler domestically, a new name was needed. The Smaller Three? The Shrinking Three? They’re now simply called the Detroit Three.

How much worse can it get? Try the Dwindling Duo, in which Chrysler is sold to a foreign company—yet again—and smaller versions of G.M. and Ford remain. Or, less likely, the Sole Survivor, in which those two merge out of desperation. The market share the Detroit Three have lost since 2000 is equivalent to a Ford-size company being wiped out. You don’t need higher math to see that such losses aren’t sustainable for long. Another decade like this and the American auto industry could disappear entirely, its factories razed and turned into a lot where people can park all their European- and Asian-made cars.

Yet there is a scenario in which the Detroit companies—at least Ford and G.M.—can emerge somewhat smaller but far stronger. Their size and costs would be based on current realities instead of on pining for the good old days. And their cars would actually be products that people want to buy instead of merely settle for. I’ve been covering the car business for 23 years and have seen corporate crises, ill-conceived acquisitions, boardroom revolts, C.E.O. sackings, and more. Through it all, Detroit’s cycles have been biblical: Prosper, go astray, repent, recover. It’s repentance time now, and there are concrete reasons to believe that the Detroit Three will recover.