Fans of Volkswagen products who hoarded canned goods and ammunition in anticipation of the VWpocalypse – the launch of “Americanized” versions of the Jetta and Passat – may be unhappy with how their new product lineup is shaking out. But the market is responding favorably. The Volkswagen Jetta outsold the Hyundai Elantra in January (the two finished 11th and 10th in 2011 respectively) and the Passat spends half as much time on dealer lots compared to the industry average.

The United States has long been the key to Volkswagen’s goal of becoming the largest, most profitable automaker, due to its size and Europe’s increasingly unstable future. Domestic production and the “prestige” associated with German vehicles is helping Volkswagen, but their strategy of unseating Honda, which seems to be predicated on the company continuing to falter, may be flawed; the 2012 Civic, which has been pilloried in the automotive press, outsold the Jetta by a 2:1 ratio in January. Both models have endured criticism from the automotive press, though consumers have yet to adjust their buying habits accordingly. Honda’s poor showing in 2011 (with market share dropping from 11 to 8 percent in 2011) was attributable to disrupted production in Japan and Thailand, but those issues should sort themselves out in 2012.

An Automotive News article on the topic suggests that one way VW may be able to make up some market share is through the sale of TDI diesels if gas prices hit $5/gallon. But with diesel market share resting comfortably at 0.5 percent in 2011, it looks like TDIs will have a negligible impact on VW’s sales.

We have been saying for quite a while that Honda looks a bit pale around the nose. The Nikkei [sub] agrees. According to the Tokyo business paper, Honda blew it by relying too much on the U.S. market, by ignoring the emerging markets, and by disregarding the fact that Japan has a love affair with 0.6 liter midget-mobiles, a.k.a. kei cars. All of this has to change in a hurry, and Honda’s turn-around hinges on the success of a new kei car, the N Box. Says The Nikkei:

“While it is true that last year’s quake and the floods in Thailand dealt a blow, the carmaker has deeper structural problems. Honda let its success in selling expensive cars in the North American market go to its head, failing to notice changes in the global auto market. As other major carmakers shifted their strategic focus to emerging markets after the 2008 financial crisis, Honda saw its competitiveness wane and it was overtaken by South Korean rival Hyundai.”

“This is also apparent in the minicar segment. As it focused resources on its North American operations, Honda’s minicar engineering team was stretched too thin. Now minicars account for roughly 40% of the domestic market and Honda has taken a beating in the segment, tumbling to fourth place behind Nissan.”

On the kei car front, Honda’s counter attack looks promising. End of last year, Honda introduced the N Box, and Honda still can’t make it as fast as it sells. There is a two month wait for an N Box.

For the car, Honda revamped its production process for the first time in 10 years. Instead of the traditional monocoque method, an inner frame is built, and outer panels are welded on afterwards. This new process had teething problems, which delayed delivery. Now, Honda says it has mastered the production of N Boxes.

Mastering success in emerging markets will take a little longer.

When the stock markets close in Europe today, PSA Peugeot Citroen and GM should announce that they are going ahead with the plan of GM buying seven percent of PSA. That according to “sources with knowledge of the discussions” that talked to Reuters.

GM and Peugeot will pool R&D, vehicle platforms and technologies, Reuter’s sources say. PSA hopes to save $2 billion in 4 years through the deal. What GM is hoping is anybody’s guess.

In the morning, The Detroit News reported that Sergio Marchionne also would not mind taking a stake in PSA. Depending on how that announcement is coming along, all Sergio can do is stand and watch while GM and PSA are doing the alliance.

PS: After the close of the market, the deal was announced.