People want SUVs and Trucks. The most popular selling vehicle in America is a pickup truck. With CAFE requirements, you have to induce people to buy smaller cars to offset sales of larger ones, and the only way to do that is by lowering your prices. If you lower your prices far enough, you are losing money on each sale. The only way to alleviate this effect is to lower the cost of production - somthing the Unions are loathe to do.
UPDATE: A reader notes that "foreign" car manufacturers make "small cars" here in America, citing the Nissan Altima, Toyota Corolla, and Honda Civic as examples. The problem with this argument is twofold. First, these are fairly LARGE cars, not sub-sub compacts. Second, they are made at NON-UNION Plants where wages are far lower, benefits far less, and work-rules more lax. As a result, these plants CAN compete with overseas or Mexican factories.
But of course, companies like Nissan do build cars in Mexico for export, and in fact are making the next-generation Frontier there, while we Americans are stuck with the previous-generation model made in Mississippi. And maybe one reason the rest of the world has the "next Gen" Nissan Navarra/Frontier is that in order to keep costs down, Nissan is flogging the old platform of this compact truck for a few more years.
You can't build small cars - or even small SUVs - at union plants in America using Union labor. That is why the "Big-3" are importing these vehicles from Mexico or overseas. And if the blue-collar union man thinks Republicans are going to turn pro-union..... well that would be a first!