WRAPUP 2-US Sept auto sales plunge; GM, Chrysler hit hard

* Sept sales down by 23 pct as 'clunker' hangover hits

* Ford down 5 pct, smallest decline of major automakers

* GM, Chrysler sales down by more than 40 percent each
(Recasts first sentence, adds final industry figures, adds
analysts' comments, other details)

By Kevin Krolicki and David Bailey

DETROIT, Oct 1 (Reuters) - U.S. auto sales tumbled by 23
percent in September as showrooms emptied after the
government-funded boom from the "cash for clunkers" program,
with General Motors Co [GM.UL] and Chrysler hardest-hit.

Sales for General Motors Co [GM.UL] and Chrysler -- the two
U.S. automakers struggling to regain momentum after emerging
from bankruptcy -- dropped by 45 percent and 42 percent,
respectively.

Ford -- the only U.S. automaker to have avoided bankruptcy
-- managed to hold its sales decline to 5 percent from a year
earlier despite low inventories and reduced incentives for car
shoppers.

Automakers had braced for a sharp pullback in September
after the clunkers program and taxpayer-funded credits of up to
$4,500 drove sales sharply higher the month before.

The overall result was in line with those forecasts as
industry-wide U.S. auto sales dropped 41 percent from August,
according to Autodata Corp.

On the annualized basis tracked by analysts, industry-wide
U.S. auto sales dropped to 9.2 million vehicles in September,
the weakest sales rate since April.
(here)

In a reversal of fortune that underscores how deep the
decline in U.S. auto sales has cut over the four-year-long
slump, China's overall vehicle sales for September were almost
twice as large as the industry-wide U.S. tally, according to an
estimate provided by GM.

Meanwhile, U.S. sales for the three major Japanese
automakers were also lower in September after gains in August
during the short-lived cash-for-clunkers boom.

Honda Motor Co (7267.T) sales were down 20 percent in the
month. Toyota Motor Co (7203.T) sales fell almost 13 percent.
Nissan Motor Co (7201.T) sales were down 7 percent.

"Consumer traffic at dealerships evaporated in the absence
of the incentive program, which ended in August," Standard &
Poor's equity analyst Efraim Levy said in a note. "However, we
expect the September lull to be temporary, as the comparisons
get easier and we see the economy improving."

Hyundai Motor Co(005380.KS), which has taken market share
through the U.S. recession on a growing reputation for low-cost
and high-quality vehicles, was the only big winner. Its sales
jumped 27 percent in September.

Combined with its affiliate Kia, Hyundai now ranks as the
sixth-largest automaker in the U.S. market, having outstripped
Nissan over the first nine months of the year.

'FITS AND STARTS'

Major automakers held out hope for a gradual recovery in
sales in the fourth quarter once dealer stocks of cars and
trucks are built back up in the coming weeks and showroom
traffic recovers from the slow pace of early September.

Sales in September 2008 were rocked by the collapse of
Lehman Brothers and the financial crisis, events that pushed
both GM and Chrysler to seek a federal bailout. With consumer
uncertainty rising, sales in September a year earlier had
dropped to a 12.2 million unit rate.

Ford economist Emily Kolinski Morris said the automaker
believed that recent economic indicators and the monthly sales
figures pointed toward "continued gradual recovery albeit with
some fits and starts."

Ford said it would step up its leasing program with
dealers. Analysts said they expected the No. 2 U.S. automaker
was poised to take more share from its rivals in the months
ahead.

"In the short term, I don't see much of change for GM and
Chrysler in terms of sales declines. The No. 1 reason really is
their product lineup," said Jesse Toprak, an analyst at
Truecar.com.

"The bigger question is whether they can restructure
themselves to make money at lower sales levels -- it's going to
be tough, obviously," he said.

Morningstar analyst David Whiston said the auto industry
would face continued economic uncertainty in the months ahead.

"With no government stimulus, you have a weak consumer who
is reluctant to make a big-ticket purchase unless they have
to," Whiston said. "It's not just a Detroit problem."

'WE ARE NOT BLEEDING LIKE PEOPLE THINK'

Fiat SpA (FIA.MI) Chief Executive Sergio Marchionne, who
has taken charge of Chrysler's turnaround plan after the
Italian automaker took management control at the U.S.
automaker, said reduced incentive spending had contributed to
the depressed sales result for September.

"We are not bleeding like people think we are," Marchionne
told reporters.

Marchionne, who is due to detail his plans for a revival of
Chrysler's vehicle line-up to Obama administration officials
this week, said Chrysler would bounce back stronger, just as
Fiat did five years ago.

"The future is going to be a lot better," he said.

GM said it was sticking with plans to increase production
in North America by 20 percent in the fourth quarter compared
with the third quarter.

GM, which launched an ad blitz in September challenging
consumers to compare its cars to rivals, remained the largest
automaker by U.S. market share at 21 percent compared with 17
percent for Toyota, now No. 2 in the United States.

"Clearly, the economy is starting to gain some momentum,"
said GM sales analyst Mike DiGiovanni. "But we know it's still
going to be bumpy and clearly the economy is still dependent on
policy stimulus."

Auto industry tracking firm Edmunds.com estimated that the
average discount on a new car was $2,557 in September, down
about 12 percent from a year earlier.

That incentive spending is closely tracked by analysts and
investors as a measure of the industry's pricing power and the
pressure to move inventory.
(Reporting by Kevin Krolicki and David Bailey, editing by
Matthew Lewis)