Last Friday, the WSJ reported that Microsoft and Ford are set to announce Sync at the Detroit auto show and the Consumer Electronics Show in Las Vegas in the second week of January.

What is Sync? The WSJ calls it

A hands-free Bluetooth wireless system and in-vehicle operating system developed by Microsoft that will eventually be an option for its entire Ford brand lineup, according to people familiar with the matter.

The WSJ sees this as a necessary move for Microsoft to combat the lead Apple has with its in-car iPod connectors. But there is another motive for Microsoft to invade the car cockpit — one that’s just as good, if not better than a defensive move in the iPod stakes:

Localized search with in-car navigation.

Google and Volkswagen announced their collaboration on a navigation system based on Google Earth at last year’s Consumer Electronics Show, and had something to show for it by March, though it continues to be in development. (Some enthusiasts couldn’t wait and made their own.)

Microsoft finds it imperative to have a presence in cars, to keep both Apple and Google in check. But it’s not clear yet just how extensive the navigation functionality of Sync will be — the WSJ says only that “In many cases, the technology will be integrated into a navigation system.”

What is clear, however, is that if Microsoft comes up with something next week that does not in any way leverage its Virtual Earth 3D and/or Live Local capabilities, then it will have dropped the ball. Google Earth and Virtual Earth are like TomToms on steroids, and there is evidently strong demand for in-car navigation of this sort. Putting the map where most people use it (in the car) is obviously a good idea.