It's true that the big three were building cars that people wanted. But most people realized that market was going to go away in time. The big three's mistake was in assuming they'd have plenty of time to change later.

They now have two problems: the market changed FAST and it takes probably 6 to 8 years to get a car from drawing board to the showroom. The other is that they are not known for building small, fuel efficient vehicles. If you're looking for a 45 MPG car, you don't generally start out by going to the GM dealer.

If they had any sense (people have been saying this for 20 years) they would have continued to build those big cars that many people were buying, but pumped some of that money into researching and designing smaller cars. There has always been a market for small cars, they just weren't interested in it, even though everyone realized that someday the small car market would be the only way a big company could survive. They just never planned more than about 2 years ahead.