V-8 makes comeback in demand for power over thrift. Carmakers retool engine plants; can they meet fuel economy rules?

Only a few years ago, the V-8 engine was fading into oblivion, a victim of two oil shocks and federal fuel economy standards. Although the V-8 isn't likely to dominate the market again, the auto industry is reviving its long-term love affair with big engines.

In the years leading to the first oil shock, cars such as the Pontiac Firebird and GTO and the Chevrolet Corvette dominated the highways. In 1973, Detroit built nearly 8.4 million V-8s, or better than 2 out of every 3 passenger cars sold that year.

Then gasoline prices quadrupled, and by 1982, V-8 sales had shrunk to just 1.6 million. ``Conventional wisdom said we were going to be out of V-8s entirely,'' recalls General Motors Corporation president Robert Stempel.

But American drivers have grown tired of the fuel-efficient but slow 4- and 6-cylinder models, and the V-8 has hung on.

When the Ford Motor Company reintroduced a V-8 to its Mustang line several years ago, it expected to find a market only among dedicated performance aficionados. Instead, demand has been exceeding supply. Last year, 22 percent of all Mustangs were equipped with V-8s. So far this model year, the figure is nearly 46 percent.

Within just the last month alone, both Ford and GM have announced costly new V-8 projects.

Ford will spend $1 billion to retool an old plant in Romeo, Mich., and design a new 4.6-liter V-8 for its large and luxury models, including the Lincoln Continental. Meanwhile, GM will invest $80 million in its Tonawanda, N.Y., engine plant to produce the Mark V, a new V-8 designed for light truck and marine applications. GM is also developing new V-8s for its Cadillac division.

``Cadillac needs to make some dramatic changes to attract younger buyers, and the competition is going to have large V-8 engines,'' says Chris Cedergren, a consultant with the market research firm J.D. Power & Associates.

Automakers in the United States aren't the only ones interested in V-8s. Large-block engines are commonplace in European luxury sedans. And even the Japanese - long noted for their highly fuel-efficient, sewing-machine-size 4-cylinder engines - are jumping on the bandwagon. Mazda, Nissan, Toyota, and Honda all have versions under design for their new luxury vehicles.

Though he is pleased with the V-8 revival, Mr. Stempel says, ``It's a balancing act. You still have to have a fuel-efficient engine to make the corporate average fuel economy. If we don't, [V-8s] will be the first engine to go away.''

In 1985, Detroit automakers fell short of the 27.5-mile-a-gallon fuel economy standard, and they faced hundreds of millions of dollars in fines. Lobbying efforts persuaded Washington temporarily to trim the standard to 26 m.p.g., but GM has been pushing to have the standard killed altogether.

GM has the support of the Reagan administration and several members of Congress, including Rep. Robert Carr (D) of Michigan, who calls the federal fuel economy rules ``counterproductive, altering the balance between domestic and import manufacturers.'' Representative Carr acknowledges that his repeal bill is ``certainly not'' going to pass in this Congress.

More likely, the National Highway Traffic Safety Administration, which enforces the standard, will again roll back the standard for at least the 1989 and 1990 model years.

Another threat to the V-8 is foreign oil. Though another oil crisis is considered unlikely, at least in the next few years, no one rules it out. Industry planners painfully recall how rising prices and long fuel lines in 1979 cut the demand for V-8s by nearly 60 percent, sending many American car buyers to the Japanese and leaving domestic manufacturers with sorely underutilized engine plants.

Despite the revival, the V-8 isn't going to completely replace the smaller engines that have become so popular in the 1980s. Indeed, some of the current generation high-tech V-6s and turbocharged 4-cylinder power plants can generate almost as much horsepower as some of the smaller V-8s of yesteryear, with far greater fuel economy.

Meanwhile, the average car has shrunk to the point where a V-8 could not fit under the hood. Even in today's luxury cars, it is tough to find room for a V-8, says Elio Lori, Ford's modular program operations manager.

``The real estate is becoming smaller and smaller,'' he says.