(Updates with Chrysler figures and updated stock prices.)

DOW JONES NEWSWIRES

U.S. auto sales fell sharply again in July, kicking off the second half of a dismal year as sales of trucks and sport-utility vehicles continued to sink, highlighted by Ford Motor Co.'s (F) SUV sales being halved and Chrysler LLC reporting sub-100,000 sales in a month for the first time in recent memory.

No near-term rebound is seen for what is expected to be the worst sales year for the industry since 1993. Ford's Jim Farly said the rest of 2008 "will be more challenging than the first half as economic and credit conditions weaken."

General Motors Corp. (GM) posted a 26% slide in total sales, with the news following the disclosure hours earlier of a $15.5 billion net loss in its latest quarter. Chrysler's 29% decline highlighted its woes as the auto maker most tied to trucks and SUVs - vehicles buyers are increasing turning away from amid a period of $4-a-gallon gasoline.

Ford and Japan's Toyota Motor Corp. (TM), which has started pulling away from GM in the race to be the world's top-selling auto maker despite problems, also reported double-digit drops. As in June, Honda Motor Co. (HMC) was a bright spot, with its U.S. sales declining just 1.6% and truck sales falling less than rivals.

But Honda's Civic and Accord, like Toyota's Camry and Corolla, after doing so the past two months, failed to outsell Ford's F-series pickups.

Nissan Motor Co. (NSANY) reported an 8.5% increase in July sales.

GM and Nissan shares were recently down about 6%, while Ford dropped half that amount. Toyota and Honda were off about 1%.

Besides plummeting SUV and truck sales tied to gas prices, the industry is being dragged down by a persistent decline in retail sales for individual dealerships due to the weak economy and a soft housing market.

GM also blamed its sales results on "inventory shortages in critical segments such as compact cars." However, it said it has "aggressively managed inventories to low levels." In July, inventories fell 21% to hit a three-year low.

In July, GM sales of cars and light trucks totaled 233,340, down from 315,870 a year earlier. There were 26 selling days in July, compared with 24 a year earlier. Sales of light trucks slumped 35%, while car sales fell 12%.

North America sales chief Mark LaNeve said despite "the weakness in the truck market" in July, "we continue to hold (market) share due to our fuel economy leadership in many truck segments despite dramatic competitive incentive spending increases."

GM recently announced production cuts and sweeping incentives on many 2008 models - a reversal of recent strategy and a fresh sign of how badly rising gasoline prices are slamming auto makers. Third-quarter projection estimates remain at 900,000, down 12% from a year earlier. July production fell 6%.

Toyota's third straight visit to negative monthly sales territory shows how the Japanese giant - once considered almost immune to the economic forces that have battered its Detroit-based rivals - is now also suffering.

The company, which is closing in on GM for the crown of the world's best- selling auto maker, sold 197,424 vehicles last month, down 12%, as car sales dipped 0.6% while SUVs dropped 26%. Sales of Toyota's Sequoia, however, surged as the large SUV continued its unlikely winning streak among the gas-guzzling behemoths.

Ford sales dropped 15% to 160,990 from 188,767 as truck and van sales slid 18% and F-series truck sales slumped 21%. The vehicle had until recently been the top-selling U.S. model, but it lost that title in May. Weak truck and SUV sales recently led Ford to push back the launch of its redesigned F-150 pickup truck that once was expected to drive the company's recovery.

Total Ford, Lincoln and Mercury car sales fell 7.8%. Retail sales of the Focus, a hot-selling small car, rose 16%.

Chrysler's sales slumped to 98,109 from 137,728, with car sales down 25% and truck sales off 30%. As of Friday, the company stopped offering leases, a dramatic move made necessary by the steep declines in residual values of pickups and SUVs in recent months. The Wall Street Journal reported this week that dealers said showroom traffic and sales have soared in recent days, with nearly all sales done with leases.

-By Mike Barris, Dow Jones Newswires; 201-938-5658; mike.barris@dowjones.com

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  (END) Dow Jones Newswires
  08-01-08 1555ET
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