God bless the Chevrolet Camaro. If it weren't for the 2009 revival of the General's muscle car, we might still be driving Mustangs saddled with old, underpowered engines.. But last year, the Camaro's V-6 was just 11 hp shy of matching the Mustang's V-8 output. Ford had to respond, because Chevrolet hadn't simply won the spec-sheet battle; both six- and eight-cylinder Ford engines were unreasonably crude for duty in anything claiming to be a sports car.

Action comes in the form of two new engines for the 2011 Mustang that pit Blue Oval versus Bowtie as never before. The new 305-hp V-6 rings in exactly one horsepower stronger than the Chevy six-cylinder. It also produces 95 hp more than the outgoing V-6 Mustang. The headliner, however, is a new V-8 that brings back Ford's famous 5.0 badge.

A new V-6, too
While the 5.0 is the big news, the base Mustang actually receives a greater number of significant updates. In addition to the new 3.7-liter engine, the V-6 car now includes a limited-slip differential, a cold-air intake, and dual exhaust as standard equipment. There's also a new performance package, which Ford hopes will appease young enthusiasts who can't afford insurance on a GT. Upgrades include a numerically higher 3.31:1 rear axle, the Mustang GT suspension, a strut-tower brace, nineteen-inch wheels, Pirelli summer tires, and a stability control sport mode.. Our V-6 tester didn't have the performance package, but it was equipped with the 3.31:1 final drive as a stand-alone option to deliver more eager acceleration. Yet within a few miles of driving the V-6, we were underwhelmed by the power delivery. The engine is slow to rev and acceleration feels more anemic than you'd expect from 305 hp and 280 lb-ft of torque. Still, it's a much better feel than the crass truck-engine character of the old 4.0-liter. The new engine is better described as a passionless, mainstream wheel-turner. Perhaps that's a function of the 3.7-liter's other duties in the Ford Edge crossover and Lincoln MKS and MKT. Whereas the Camaro led many to say that a V-6 needn't play second fiddle to a V-8, our recommendation for the Mustang is quite the opposite: find a way to get into the V-8.

The transmissions in both base and GT Mustangs have an additional cog over last year's gearbox, totaling six forward gears for automatic and manual units. The experience, though, is largely unchanged from last year's car. The short stick topped with a ball-shaped shifter requires firm throws to move through a tight and notchy pattern that's fitting for a muscle car. The more efficient engines and wider gear spreads result in fuel economy increases across the range. The most frugal V-6, an automatic coupe, returns 19/31 mpg. GTs are rated at 18/25 with the automatic and 17/26 with a manual.

Chassis changes
The switch from hydraulic steering assist to an electromechanical setup also improves fuel economy. Ford uses five different steering calibrations for the Mustang, depending on whether the car is a coupe or convertible, V-6 or V-8, or if it's a GT with the Brembo brake package. We weren't able to sample all five flavors, but we did detect a noticeable difference between a Brembo-equipped GT and the V-6 coupe. In our GT, the steering was so good - so even, precise, and communicative - that it drummed up thoughts of BMWs. The Brembo-package calibration isn't as heavy as the Bavarians would require, but it's just as consistent. The V-6 coupe's steering is also quite good, but it feels marginally overboosted and just slightly vague off center around 30 mph.

With new engines - and the resulting weight changes - engineers had to retune the spring and damper rates. Additionally, they've stiffened the front end with a Z-brace, tweaked anti-roll-bar diameters, and mounted firmer and grippier bushings front and rear. Relocating the mounts for the upper control arms also reduces axle hop during smoky launches. Of course, the Mustang stubbornly continues with its live rear axle, and Ford's best efforts will never conquer physics. The V-6 we drove transitioned between a jarringly stiff ride at low speeds and loose control at higher velocities. The GT, however, was much more constant in its responses and was composed over all but the harshest roads. If the wheels find a calm surface, handling is exceptional, with quick turn-in and flat body control.

Last year's looks
The Mustang received a significant face-lift for the 2010 model year, so the few subtle changes for 2011 (a brighter pony emblem on the GT, for example) are trivial and difficult to spot. Ambitiously - and somewhat oddly - Ford displayed an Audi A5 as the company's chief benchmark for interior quality. The GT features a wide span of genuine aluminum on the dash and attractive leather seating options. However, the Audi bogey is still a bit of a stretch for Ford's utilitarian radio and climate controls and dash plastics. Seat time in the Mustang did reconfirm, though, that the Mustang is the most comfortable and natural of the muscle car trio, with unparalleled visibility and a sporty feeling of compactness.

Mustang prices see modest increases for 2011, but the latest pony is well worth the extra cost. A V-6 coupe now starts at $22,995 including destination. That's up $750 from last year, but still $535 cheaper than a Camaro. V-8-powered GT models start from $30,495 to the Camaro's $31,795.

The good war
The 2011 Mustang delivers quicker acceleration, sharper handling, and a better driving character, yet its best quality may be that it's an agitator. By taking such a direct shot at the Camaro, Ford has forced Chevrolet to return fire. A mild power increase that will put V-6 Camaro output ahead of the Mustang should come soon, and you can bet that's not all Chevy is working on. The war is on, and it's shaping up to be a good one.

Carmakers bring out a flurry of new small entries in response to a sudden rush of demand driven by spiking gas prices. TV talking heads intone that "gasoline is not going to get any cheaper," but then it does, and U.S. car buyers, whose collective memory is about as long as a snail darter's, revert to form and embrace size and power again.

But it really does seem different this time. While most international auto shows have pushed a green theme recently, at the Detroit auto show in January, it was all about small. Noting the lack of truck and SUV debuts, Audi chief designer Stefan Sielaff said, "I have a feeling that there is a paradigm shift."

With gasoline prices well off their historic highs - which were nearly two years ago - why are carmakers so eagerly jumping on the small-car bandwagon? Well, there are new Corporate Average Fuel Economy (CAFE) standards - 35.5 mpg by 2016, although that's not a hard-and-fast figure, as it will vary for each carmaker depending on the size of its vehicles (bigger vehicles get lower standards). More significant is that the slice of the new-vehicle pie taken by small cars has grown by 50 percent over the last five years, and nothing attracts automakers' attention like a growing market.

B- and C-size passenger cars have gone from 14 percent of the market in 2004 to 21 percent in 2009. Sure, they got a boost by the $4-a-gallon gas panic of 2008 (although prices later dipped below $2 in many places by the end of the year) and by "cash for clunkers" in the summer of 2009, but we're still talking about five years of annual market-share growth. Clearly, larger forces are at work..

Baby boomers and the generation aged 15 to 30 are the two biggest demographic groups, and they've both been driving this growth. Boomers, now often empty nesters and entering retirement, are trading down in size. Meanwhile, half of first-time buyers under age thirty are choosing small cars. Another demographic shift favoring small cars is the urbanization of America: in 2009, according to Ford, we saw more people living in cities than in suburban/rural areas.