Toyota loses ground as U.S. auto sales gain

DETROIT (Reuters) - U.S. auto sales hit their highest growth rate of 2010 in October while the largest automakers Toyota Motor Corp <7203.T> and General Motors sputtered behind rivals amid the gradual industry recovery.

Still reeling from the aftermath of a wave of safety recalls earlier this year, Toyota posted a 4 percent sales decline. The top global automaker was the only company to report a drop in sales for the month.

GM , which is expected to provide pricing details on its planned IPO as soon as Wednesday, reported a 3.5 percent sales increase overall supported by its pickups and SUVs.

Other major automakers all posted double-digit gains.

Ford Motor Co continued to gain share in its home market with a 19 percent sales increase overall, supported by pickup trucks. Ford trailed GM for the U.S. top spot in total sales, but widened its lead over the No. 3 seller in the U.S. market, Toyota.

J.P. Morgan analyst Himanshu Patel called the Ford result "better than expected." Ford shares were up more than 4 percent on Wednesday afternoon, hitting their highest level since 2004.

U.S. auto sales sank to the lowest levels in more than a quarter century in 2009 under the severe recession and so far this year have been recovering at a slower pace than the industry or its analysts had expected.

October auto sales reflected a slow recovery in consumer spending that has fallen short of initial expectations for the year, Nationwide chief economist Paul Ballew said.

"It looks we're going to be here at the end of the year where we thought we would be at the beginning of the year," Ballew said of auto industry sales.

Toyota has recalled more than 14 million vehicles worldwide over the past 12 months, a record for an auto brand once considered the gold standard for quality and safety.

Toyota's lingering image problems from those recalls and aggressive discounts the automaker enlisted earlier in the year appear to have cut into sales in the fourth quarter, analysts said.

"Even though Toyota would probably disagree, we definitely still have some concerns about the impact of the recalls," IHS Automotive analyst Rebecca Lindland said.

GM's sales were about in line with expectations and rose 12.8 percent for Chevrolet, Cadillac, Buick and GMC, the four brands that survived its 2009 restructuring in a bankruptcy funded and directed by the Obama administration.

With very little remaining inventory of 2010 models, GM was also able to push average sale prices higher by about $3,100, it said.

"We don't see a big risk at all of a double-dip," GM's U.S. sales chief, Don Johnson, told reporters on a conference call.

Johnson said consumers have begun to hold on to vehicles longer than in the past in a fundamental shift in buying habits, but GM is confident it has restructured its business to run profitably even in a slower-growth market.

Johnson declined to discuss GM's IPO plans.

Chrysler's sales rose 37 percent, the seventh consecutive month of year-on-year gains from the prior year when it emerged from its government-funded bankruptcy under the management control of Italy's Fiat .

Honda <7267.T> and Nissan Motor Co <7201.T> sales rose 16 percent each.

'CONSUMERS LIKE CERTAINTY'

Ben Poore, who heads U.S. sales for Nissan's luxury Infiniti brand, said the October sales reflected a waning of the deep uncertainty that had overshadowed the U.S. market.

"Consumers like certainty and that's starting to happen and should continue now that we have the election out of the way," Poore said.

South Korea's Hyundai Motor Co <005380.KS> said its U.S. sales rose nearly 38 percent while its Kia Motors <000270.KS> affiliate posted a nearly 39 percent increase.

Volkswagen , Audi , BMW , Subaru <7270.T> and Porsche also reported sales increases in October from a year earlier on Tuesday.

Overall, the seasonally adjusted annualized sales rate was expected to top 12 million vehicles in October for the first time since the Lehman bankruptcy in September 2008, excluding the August 2009 sales that were boosted by the U.S. government's "cash for clunkers" incentive program.

"It's a welcome data point as we close in on 2010," said George Pipas, Ford's U.S. sales analyst. "We appear to have broken above the glass ceiling."

Sales remain well below the pre-recession levels of 2007 when annualized sales rates were in the 16 million range most months and are expected to continue a slow pace of recovery along with the U.S. economy.

For 2010 overall, the industry is expected to post U.S. sales of about 11.5 million light vehicles, up from 10.4 million last year. The industry is expected to have moderate gains from there in 2011, to about 12.8 million vehicles, according to IHS Automotive.

(Reporting by David Bailey, Kevin Krolicki, Bernie Woodall and Deepa Seetharaman, editing by Matthew Lewis)