General Motors Corp. (GM) and Ford Motor Co. (F) posted weaker U.S. sales for August Wednesday and both cut planned fourth-quarter production as their aging vehicle lineups lost ground to rival Chrysler and some foreign brands.

GM and Ford, whose production cuts could hurt profits, capped a weak summer with their third straight month of lower sales, despite higher consumer incentives. Hurricane Charley's damaging path through Florida, high energy prices and falling consumer confidence also hurt sales results.

GM said it was disappointed with its 7 percent drop in sales. Ford reported a 5.9 percent drop in results for its U.S. brands. The results sent shivers through the industry including auto parts makers who could be hurt by the production cuts.

"Disappointing job gains over the last few months, combined with higher energy prices, is making life difficult for consumers just as the benefits from last year's tax cuts fade," Ford economist Jarlath Costello said on a conference call.

Industry sales fell about 5.4 percent, dropping to a seasonally adjusted annual rate of 16.6 million vehicles, down about 5 percent from year-ago levels. Sales slipped from a strong rate of 17.2 million in July, and from 17.9 million in August last year.

The Chrysler side of DaimlerChrysler AG (DCX) reported its fifth-straight month of stronger results with a 1 percent rise in August on the strength of new models such as its Chrysler 300 sedan and the Dodge Magnum wagon.

Toyota Motor Corp. (search) beat Chrysler for the second straight month, even though its sales fell 2.8 percent. Toyota sold 180,394 vehicles in August compared with 178,034 for the Chrysler brands. Including Mercedes, DaimlerChrysler outsold Toyota by a wide margin.

Results for foreign brands were mixed. Nissan Motor Ltd. (search) sales rose 7.3 percent, BMW AG climbed 6.2 percent and Mercedes rose 10.5 percent. However, Honda Motor Co. Ltd. (search) sales dropped 7.1 percent, Mitsubishi Motors Corp. (search) plunged 57.7 percent, and Volkswagen AG fell 24.2 percent.

All sales figures are adjusted for two fewer selling days in August this year compared with August 2003.

Both Ford and GM have lost market share this year, as foreign automakers launched new models.

GM and Ford, struggling with excess inventories of unsold cars and trucks, set targets for fourth-quarter vehicle production in North America that were 6.8 percent and 7.8 percent below year-ago levels, respectively. Earlier this week, Ford's Jaguar brand said it would cut production in Britain due to slack demand.

"I think the market was taken aback" by the Ford and GM production cuts, said David Littmann, chief economist at Comerica Bank. "I think they thought these production cuts were more than expected."

Some analysts said they expected even deeper cuts in the first half of next year, however. Production cuts can hurt earnings because Ford and other automakers count profits from vehicles when they are shipped to dealers, not when they are sold to consumers.

One Wall Street analyst said it would be difficult to predict the impact of the production cuts on GM and Ford earnings, but they were more than Ford's largest supplier Visteon Corp. had expected.

Visteon will have to cut its earnings outlook, Prudential Securities analyst Michael Bruynesteyn said in a note to clients.

Visteon shares closed down 23 cents, or 2.5 percent, at $9.10 on the New York Stock Exchange Wednesday.

"We're starting to see a slowdown," said Jim Sourges, vice president with the automotive practice at consultants Capgemini. "I think there are going to be deals on the table for the consumer, as the inventory sits there, and they have to move that metal."

Car companies raised incentives in August to about $4,200 per vehicle, but the offers are proving less alluring to consumers, analysts said.