The Detroit News reported this morning that GM has decided to kill a $300 million program for a new DOHC V8 to replace the circa-1992 Northstar engine. Rising oil prices and the new CAFE standards were given as reasons. But this will leave GM without a competitive DOHC V8. So are they just successfully reading where things are heading, or over-reacting to current events?

One thing is certain: the current DOHC V8 is not competitive. It was originally developed in the early 1990s. Newer V8s are more powerful and more efficient. These days, at least 360 horsepower are necessary to compete. The Northstar kicks out 320, at most. GM’s new direct injected V6 produces nearly as much power, and this has decimated sales of the V8 where they are both offered.

But maybe GM believes, correctly, that a gas V8, any gas V8, will no longer be viable in the near future. For those who want V8-level torque, they have a 2.9-liter V6 diesel on the way. Maybe that’s the true replacement for the Northstar?

If not, this decision may be larger than that for just a new engine. It may mean that GM won’t be fielding a serious large luxury sedan, and thus that Cadillac’s renaissance has hit a speedbump.