They need to focus on what value they bring. The economical route is owned by guys like Kia and Hyundai, the fuel efficient cars are hybrids or small japanese cars like the Civic and Corolla, and European cars have dominated the "quality" market like Mercedes, BMW, etc. Then there are some of the oddball ones like Volvo = safety. American car manufacturers at one point were riding the cowboy, muscle cars thing, but now European cars are winning Americans who like the high performance market with cars like the M5.
So why buy an American car? Instead of "Safety Happens" or "Engineered to move the human spirit" we get "Heartland of America". So right now, American car manufacturers are trying to sell consumers on image (which is working with the Hummer) but honestly, Americans are starting to get really careful with car purchases and driving an American car just because it's American isn't working. Lackluster models have also plagued the American market, especially models that are supposed to compete with other brands but fail miserably, like the Chevy Cobalt.
What's really sad is I like American cars (Chevy, especially) and even I can admit when they're taking a beating. Chevy's arguably best current models right now are the Camaro and Corvette - both models that have been around for decades.
To remain globally competitive, American car manufacturers are going to have to start asking themselves what Americans want and fulfilling that need.