Feb. 1 (Bloomberg) -- General Motors Corp. and Ford Motor Co.'s U.S. auto sales plunged in January as the two U.S. automakers yielded market share while scaling back on low-profit deliveries to rental-car companies.

Ford sales fell 19 percent, and GM dropped 17 percent, prompting a deeper cut in GM's North American production. A 9.5 percent gain at Toyota Motor Corp. and 3.2 percent increase at DaimlerChrysler AG pushed Ford to No. 4 behind those automakers in the U.S. for the second month ever; the first was in November. Total U.S. vehicle sales fell 4.6 percent.

GM and Ford ``are finally taking the medicine and cutting their sales to rental-fleet companies,'' said John Casesa, an analyst at Casesa Strategic Advisors in New York. ``These are low-margin sales. Those cars go to Hertz and Avis, then come back and wind up as used cars, undermining the selling of new cars.''

The January results showed the price in sales and market share that the U.S. automakers may have to pay to sustain profits. Last year, GM and Ford announced plans to close a combined 28 plants and other facilities in North America as they align their production base with shrinking consumer demand.

GM's share for the month sank 3.2 points from a year earlier to 22.4 percent, according to preliminary sales results from Autodata Corp. of Woodcliff Lake, New Jersey. Ford dropped to 15.2 percent from 17.9 percent, while Toyota gained 2 points to claim 16.1 percent.

Asian automakers captured a record share of the U.S. auto market, at 42.1 percent, The share of the U.S. brands of GM, Ford and Chrysler fell to a record low 50.6 percent.

The annualized sales rate for January slipped to 16.7 million vehicles, from 17.5 million in January 2006.

Honda, Nissan Up

Honda Motor Co. and Nissan Motor Co., the second- and third- biggest Japanese automakers behind Toyota, also reported sales gains for the month. Honda was up 2.4 percent, without adjusting for one additional selling day last month. Nissan gained 8.9 percent.

Hyundai Motor Co., South Korea's largest automaker, reported an 8.2 percent decline. Steve Wilhite, Hyundai's U.S. chief operating officer, said in a statement he was ``disappointed'' with the January numbers, down in part on lower than expected sales in California and in portions of the U.S. South.

GM, which sold 244,614 cars and light trucks in January, today said it will cut 40,000 more vehicles from first-quarter North American output than initially planned, for a 14 percent reduction from year-earlier levels.

Chrysler Production Cuts

Chrysler is also planning to make a ``significant'' production cut during the quarter, spokesman Jason Vines said during a conference call today.

Chrysler is trying to keep its inventory in step with demand after the automaker angered dealers last year by allowing the number of vehicles built and not assigned to dealer lots to grow to more than 100,000.

GM, Ford and Chrysler are trimming sales to so-called fleet customers to help stem losses. Ford last week reported a $12.7 billion loss for 2006, its worst year ever. GM lost more than $13 billion in the seven quarters through last Sept. 30. Chrysler lost $1.5 billion in the third quarter of last year.

`Last Chance'

GM and Ford ``have one last chance'' to fix the business, Casesa said.

``These companies have used fleets as ways to dump cars and keep the factories running,'' Casesa said. ``Up until now, they have said we really can't fire people, but they're rethinking that strategy.''

GM cut January sales to rental companies almost 40 percent to 56,000 vehicles from 90,000 a year earlier, sales analyst Paul Ballew said on a conference call. Ford said it had a 65 percent reduction.

Chrysler sales chief Steve Landry also has said he wants to reduce sales to fleet customers.

The Chrysler unit was led by a 19 percent gain in Jeep brand sales, boosted by such new models as the Compass, Patriot and a four-door Wrangler. They are part of a new-product plan comprising 10 new models last year and 8 this year.

Mercedes, with 17,069 sales, had its best January ever.

Individual vs. Fleet

The U.S. automakers want to focus on more-profitable individual customers as fleet buyers typically get discounts because they buy in quantity. The discount ranges from a few hundred dollars to well over $1,000 a vehicle, said Robyn Eckard, a spokeswoman for Kelley Blue Book in Irvine, California.

U.S. auto incentives fell 4 percent from December to $2,276 in January, Edmunds.com, a Santa Monica, California-based Web site that estimates vehicle pricing and rebates, said today. Chrysler incentives dropped 8.7 percent to $3,853.

``Chrysler is offering better incentives than GM or Ford because they are really trying to bring down their 2006 inventory,'' John Wolkonowicz, an analyst with Global Insight Inc. in Lexington, Massachusetts, said in an interview. ``What they are offering makes the other automakers' deals look pale in comparison.''

Ford incentives fell 8.3 percent to $3,502 and GM rebates and other perks dropped 1.7 percent to $2,365, its lowest since April of 2002, Edmunds.com said. Honda had the only increase among the six largest automakers in the U.S. from December to January, rising 79 percent to $854 from $477.

Unadjusted

Some of the automakers' reported sales are adjusted for 25 selling days in January, one more than in January 2006. Without the adjustment, the figures would be about 4 percentage points higher. The figures in this story are unadjusted.

Sales of Ford's passenger cars in January fell by 33 percent to 55,842. The decline stemmed, in part, from Ford's decision to end production of the Taurus sedan, sold almost exclusively to rental-car companies, last year.

Also contributing to the slide was a 36 percent drop in sales of the Focus small car and a 19 percent decrease in Mustang sports car sales.

The company's truck sales fell 9.7 percent, including a 26 percent plunge in the Explorer sport-utility vehicle and a 15 percent drop in F-Series pickup trucks.

Ford's U.S. sales may fall almost every month this year because of its plan to reduce sales to fleet customers by 175,000 during 2007, said George Pipas, the company's sales analyst, in an interview yesterday.

Ford's shares rose 16 cents, or 2 percent, to $8.29 on New York Stock Exchange trading today. The stock has gained 10 percent this year. GM's shares increased 19 cents to $33.03 in New York Stock Exchange trading. Its stock has gained 7.5 percent this year.

To contact the reporters on this story: Jeff Green in Southfield, Michigan, at jgreen16@bloomberg.net; Alan Ohnsman in Los Angeles at aohnsman@bloomberg.net

Last Updated: February 1, 2007 21:47 EST