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A gloomy rain was falling outside when Nissan/Renault chief executive Carlos Ghosn startled us by saying he could not tell if this is the beginning of the end or the end of the beginning — yes, he actually said those words to reporters — but everyone at the Paris auto show agreed that the world's auto industry is moving fast to get smaller.

The fall shower, by the way, were apropos of the mood at this year's biennial show. Let's not kid ourselves. The world's auto industry is in a big, deep funk and change — massive, wrenching change — is coming. Fast.

For starters, the industry is getting smaller, as in its sales are shrinking globally. Many on the floor of the Mondiale de l'auto — a massive auto showplace used for major new-model introductions — also believe that at least one of the world's established auto makers will disappear or be swallowed up by a larger, richer, more stable car company.

Finally, the car business is downsizing in terms of the actual cars soon to be coming across the Atlantic, into a showroom near you. Big is not beautiful any more — not with high and volatile fuel prices, concerns about global warming, stringent new fuel economy and emissions regulations around the world, and a credit crunch that is hurting new-car sales from Europe to North America to Asia to South America.

Citigroup, in fact, is predicting that 2008 will be the first year that global car sales will decline since 2001. Sales in Canada may still be strong — up 1.7 per cent in September and up 1.4 per cent on the year — but almost everywhere else the world's auto industry is headed for double-digit sales declines this year and next.

In the midst of this, Detroit's auto makers are turning to Europe and Asia for answers and they showed many of them here in Paris. Ford, for instance, unveiled a new version of the tiny Ka city car built in co-operation with Italy's Fiat.

"The future of the auto industry is on display at the Paris auto show, and the future is now," said Ford CEO Alan Mulally, referring to the Ka and so many other small and smallish new models unveiled at this show.

"The requirements of customers around the world are coalescing," Mulally added. "They want quality and fuel efficiency with no compromise on comfort and performance. That's the world we live in."

Of course, Ford and Mulally have literally bet the farm on this. Ford has mortgaged virtually all its assets save Volvo to pay for making over not just Ford's product line in ways that reflect this world view, but also the way Ford designs, engineers, builds and markets cars.

Ford won't say if the cheeky little Ka city car will come to North America, but it certainly seems a natural for Canada. A small, fuel-efficient two-seater with both style and charm, the Ka here in Paris will replace a model introduced 12 years ago. Some 1.5 million Kas have been sold since.

If it comes to Canada — and we're rooting for it — the Ka would slot in below the new Fiesta subcompact going on sale in 2010.

Another hint that Ford sees the car as a global product: the Ka will be featured in the upcoming James Bond film A Quantum of Solace. To underscore the point, actress Olga Kurylenko, who plays Bond girl Camille in the movie, drove the Ka on stage at its introduction.

Then there is the European Focus compact Ford is bringing to Canada and the United States in 2010. It, and very likely the Ford Kuga crossover wagon and the C-Max minivan, will form the backbone of Ford's small-car lineup. Ford is dedicating four North American assembly plants to produce small cars for Canadians and Americans.

"We are reinventing how Ford Motor Co. does things," says Marin Burela, the head of development for the Fiesta and Ka.

None too soon, either. But reinvention is a theme that ran straight through Paris this year. Crisis, it seems, is the mother of invention in the car industry.

That brings us to Honda Motor Co. Stung by its failure to crack the gasoline-electric market and overshadowed by Japanese rival Toyota's success with hybrids, Honda unwrapped a new five-door hybrid hatchback that will likely sell in the $20,000-$22,000 range when it arrives next April.

The Honda Insight borrows many styling cues from Honda's FCX Clarity hydrogen fuel-cell vehicle and is about the same size as Toyota's hybrid Prius. Not surprisingly, Honda officials expect it to challenge the hybrid Prius, the world's best-selling hybrid model.

Honda says its edge is pricing. The Insight will be cheaper than any other hybrid car on the market. The idea is to make low-emission technology affordable for the masses. At that price, Honda aims to sell 200,000 Insights a year, half of them in North America, the rest in Japan and Europe.

To keep the Insight priced for big sales numbers, Honda is going with a "mild" hybrid system. That is, the Insight will have a small gasoline engine do all the heavy lifting — the Insight cannot run on battery power alone.

The battery in the Insight will run accessories when the engine shuts down at stoplights and the like, as well as provide extra oomph for acceleration. Full hybrids like the Toyota Prius allow driving by battery power only, or a combination of gas engine and electric drive.

Fuel-economy figures are not available for the new Insight, but the Insight is powered by the same gasoline engine with an electric motor that is in the Civic Hybrid ($26,350), so fuel economy should be similar — 4.7 litres/100 km city, 4.3 highway.

"This new Insight will break new ground," said Honda CEO Takeo Fukui, "by providing an affordable hybrid to an expanded number of customers craving great fuel economy and great value."

April is many months away, however, and there is no guarantee that Toyota won't lower the price of the Prius ($27,400) between now and April, 2009. Moreover, Toyota is expected to show a new line of Prius models in January at the Detroit auto show, so the hybrid game is on.

In the meantime, the Europeans have much to teach us about small cars and these are good lessons to learn. Europe is home to a whole universe of stylish, fuel-efficient runabouts that are a response to high fuel prices, subsidized diesel fuel and the tight confines of crowded cities like Paris, London and Rome. Euro-bred small cars will soon be taking our showrooms by storm.

General Motors, like Ford, is turning to its large European subsidiary for small-car answers. Thus the European-developed Cruze. It will offer more passenger space and better fuel economy than any compact on the road when it goes on sale in spring 2010, say GM officials.

GM also showed a concept wagon called the Orlando. This seven-seat compact minivan shares a platform with the Cruze and seems like a natural for Europe, Canada and the United States. The trick for GM is to sell them all at a profit.

"The American companies will need to make money on these cars," said industry analyst Joe Phillippi. "They've got to get a higher price for them."

But not too high a price. Consumers today have a firm grip on their wallets and chequebooks. Auto makers are walking a fine line here in terms of pricing — especially given that we won't know the actual prices of these new models for months to come.

The Cruze, a compact car with an arched roofline, slanted headlights and a two-tier grille has been designed to sell without costly sales subsidies and incentives. Engineered and designed in Europe and Asia, the Cruze is also being developed with resources from the former Daewoo Motor, which GM acquired in 2001.

The car will be built in South Korea as well as in St. Petersburg, Russia and Lordstown, Ohio. Chevrolet plans to start selling the car in Europe next year, with other regions, including Canada and the United States, to follow in 2010. The Cruze, then, is truly a global Chevy.

In a shrinking world, globalization is a sign of the times and it may also be a saving grace for a struggling auto industry.