Consider the mindset that gave billions of dollars in mortgages to people without requiring any legitimate proof that those borrowers could pay the money back.

Consider the mindset that allowed hundreds of dubious companies to raise money in the publicly traded stock markets simply because those companies’ names ended in dotcom.

It’s essentially the same mindset that pushed countless expensive, gas guzzling SUVs and pickup trucks onto U.S. roads in the past decade despite glaring signs that global trends were shifting away from these behemoths.

“It’s short-sighted management,” said Jesse Toprak, executive director of industry analysis at Edmunds.com, which tracks auto sales.

Toprak said the salaries and the bonuses of the top executives at each of the big three U.S. auto makers – Ford (F), Chrysler and General Motors (GM) – have historically been tied to short-term performance goals, thus the short-sighted approach.

And, for nearly a decade, big sales of SUVs and trucks helped the companies achieve their short-term goals.

But now with the credit crunch heading into its second year and gas prices hovering at $4 a gallon nationwide, that short-sighted business model has collapsed in a heap, leaving U.S. auto makers in their most precarious positions in two decades.

Just yesterday, Ford, Chrysler and GM had their credit ratings slashed to an even lower grade of junk based on Standard & Poor’s fear that a dropoff in U.S. sales will hurt cash flow.

In desperation, the auto makers are now trying just about anything to adapt to the new reality – people want smaller, more fuel efficient cars.

Ford, for instance, which lost $8.4 billion in the second quarter, has announced a dramatic overhaul of its product line to reflect the shift in consumer demand. Chrysler and GM are following suit.

And all three are all scaling back their leasing programs, which for years helped move expensive vehicles off the lot but ultimately wound up hurting the companies bottom lines.

Meanwhile, extraordinary -- albeit temporary -- financial incentives are being offered to help dealers unload stockpiling inventories of SUVs and trucks.

The question is whether these moves are too little too late.

Dave Magee, author of “How Toyota Became #1,” believes the domestic auto makers’ efforts are certainly late. “That’s why they’re getting clobbered now and will continue to for the next several years,” he said.

Explaining their tardiness, Magee said the domestic car companies grew addicted to the profits they were making off the big vehicles. Yet despite the popularity of the SUVs and trucks, the companies were still bleeding money.

“They were in a major state of denial. Even as profitable as those SUVs were, in most years they were losing money in U.S. operations,” he said.

That addiction led them to ignore signs that public sentiment was moving away from huge gas guzzlers. “They should have moved away earlier. The signs were all there. Any body in America could see the writing on the wall,” said Magee.

Not least of these signs was a growing concern for the environment, which preceded by several years the recent explosion in gas prices.

Instead, the companies maintained financial incentives put in place after the Sept. 11, 2001, terrorist attacks – employee rates, no money down, zero percent financing – which helped sell lots of cars. And as long as the vehicles were moving off the lots, the car makers kept rolling them off the production lines.

But, in a shift that directly mirrors the mortgage market, credit is expected to tighten considerably once the car makers unload their unwanted inventories of SUVs and trucks.

In fact, Magee believes the credit crunch may eventually have a bigger impact on how Americans buy cars than $4 a gallon gas.

“That customer that was driving off the lot in that $40,000 SUV is no longer going to be able to afford the financing for that vehicle,” he said. “And that’s a direct reverberation from the housing bust.”

Car buying -- just like house buying -- will return to practices not seen in a decade – buyers will either pay cash or get conventional bank loans, which could mean 14% interest rates.

Late perhaps, but Magee believes these moves are not necessarily too little.

The shift away from leasing is “long over due,” he said, and shows a new concern for “prudence in how they sell vehicles.” The companies were losing countless millions on the resale value of leased cars, he explained. Meanwhile, consumers were getting a new car every two or three years.

Magee said it will take two or three years before the auto makers start rolling out new, more efficient cars.

Even so, Magee expects one of the car makers, possibly privately-held Chrysler, to be a takeover target by a profitable foreign company, perhaps Nissan.

However this all plays out, Magee said U.S. car makers have no one to blame but themselves. The sea change now at hand should have occurred years ago, but was put off because the car companies lacked “the courage” to make needed changes.

“It was classic corporate procrastination,” he said. “They just wanted to put things off as long as they could, and now they are really paying the price.”