Aug. 3 (Bloomberg) -- Ford Motor Co.’s July U.S. sales rose 2.3 percent while General Motors Co. and Toyota Motor Corp. pared declines as the government’s so-called cash-for-clunkers incentive stoked the strongest demand for new autos this year.

The annual sales pace was 11.2 million, the highest for any month in 2009. Total sales fell 12 percent to 997,824, the smallest drop since May 2008, according to Autodata Corp. in Woodcliff Lake, New Jersey.

The July results may signal the start of a recovery for the industry, which has been in the worst slump in demand since at least 1976. Automakers have struggled as average U.S. gasoline prices surged to a record $4.11 a gallon in mid-2008 and as credit tightened and unemployment rose in the recession.

“We’re past the worst in the auto market, and I think we’re going to have a gradual improvement here,” said Maryann Keller, president of consulting firm Maryann Keller & Associates in Stamford, Connecticut, in a Bloomberg Television interview. “Ford is coming out of this recession as a brand winner.”

GM, with a 19 percent slide, and Toyota, with an 11 percent decrease, posted their smallest drops of 2009, as did Honda Motor Co. at 17 percent and Chrysler Group LLC at 9.4 percent. Nissan Motor Co. reported a 25 percent decline.

Industrywide sales have fallen for 21 consecutive months. The annual pace for July was down from 12.7 million a year earlier, Autodata said.

The government program, which offers as much as $4,500 for trading in older, less fuel-efficient vehicles, has run through the $1 billion available in about a week, and the U.S. Senate this week may consider an additional $2 billion passed by the House last week.

Ford, Toyota

Ford, the second-largest U.S. automaker, hadn’t reported a monthly increase since November 2007. The Dearborn, Michigan- based company said it sold 165,279 cars and trucks in July, compared with 161,530 a year earlier. Sales excluding heavy and medium-duty trucks rose 2.4 percent to 164,795, according to Autodata.

Ford’s Focus small car is the top-selling vehicle under the government incentive program, known as the Car Allowance Rebate System, according to the U.S. Transportation Department. Focus sales surged 44 percent in July to 21,830, the automaker said.

Toyota said it sold 174,827 vehicles, falling from 197,424. The July total beat Ford, which had outsold the Toyota City, Japan-based company in the U.S. for the previous three months. Toyota is the world’s biggest automaker.

Clunkers’ Effect

The sales last month from the federal incentives may result in fewer buyers later this year after the program ends, George Pipas, Ford’s sales analyst, told CNBC today.

A similar program in Germany won’t sustain sales growth into 2010 as those incentives expire, said Matthias Wissmann, president of the German carmakers, today at a Frankfurt news conference. Germany’s car market expanded by 26 percent from a year earlier in the first half, propelled by increases of at least 40 percent in May and June.

U.S. Transportation Secretary Ray LaHood told C-SPAN yesterday that the Obama administration will continue the program until the Senate acts this week on more funding. The program recorded 80,500 sales through Aug. 1, an administration official said.

August Outlook

This month will be better than July should the U.S. Senate approved the additional funding for the federal incentives, said Al Castignetti, vice president for Nissan’s North American unit.

“August historically is the best month of year, and it’s a five-weekend month,” he said. “I think it will be the best month of the year.”

GM, the largest U.S. automaker, said its sales of cars and light trucks fell to 188,156 in July from 233,340 a year earlier. The Detroit-based company exited bankruptcy July 10, with government assistance.

GM will offer leases through a pilot program with U.S. Bank on “critical products,” Mark LaNeve, vice president of U.S. sales, said on the automaker’s conference call. The Cadillac CTS and SRX, the Chevrolet Malibu and Traverse, the Buick Enclave and LaCrosse and the GMC Acadia are among those to be included, he said.

The automaker is resuming leasing after halting such financing a year ago.

Chrysler reported a July sales decline to 88,900 vehicles from 98,109. The Auburn Hills, Michigan-based automaker emerged from bankruptcy in June, also with federal aid.

Honda, based in Tokyo, posted sales of 114,690 cars and light trucks, down from 138,744 a year earlier. Nissan’s sales dropped to 71,847 from 95,319, according to a statement from the Tokyo-based company.

Hyundai Motor Co. reported a 12 percent increase to 45,553 from 40,703 a year earlier.

Volkswagen AG’s namesake brand reported a sales increase of almost 1 percent to 20,590.

Daimler AG said combined sales of Mercedes-Benz and Smart fell 24 percent to 17,646. Bayerische Motoren Werke AG’s sales, including the BMW and Mini brands, declined 27 percent to 21,253.

To contact the reporters on this story: Mike Ramsey in Southfield, Michigan, at mramsey6@bloomberg.net; Alex Ortolani in Southfield, Michigan, at aortolani1@bloomberg.net

Last Updated: August 3, 2009 17:16 EDT