Detroit's automakers bore the brunt of the sales slump, ending the year with less than half of the domestic market for the first time. But their Japanese rivals also were badly bruised by the unexpected collapse in demand.

'The best thing about 2008 is that it's over,' said Jim Lentz, president of Toyota Motor Corp.'s U.S. sales subsidiary in Torrance, Calif.

Demand weakened progressively, with sales tumbling dramatically in the final three months, including a 35.5 percent drop in December for an annualized selling rate of just 10.2 million vehicles, down from 16 million in 2007.

While all major players on Monday reported double-digit declines for December, Chrysler LLC's sales plunged 53.1 percent, likely raising fresh concerns about its survival prospects.

General Motors Corp. sales fell 31.2 percent last month and 22.7 percent for the year, while Ford Motor Co.'s sales fell 32.3 percent in December, and 20.5 percent for the year.

'The first several months of 2009 are going to feel a lot like the last three months of 2008,' Ford economist Emily Kolinski Morris said on a conference call Monday with reporters. 'The first half of 2009 will be very challenging.'

She said overall industry sales are likely to remain depressed until the second half of the year.

For the first quarter, Ford expects an annualized selling pace in the mid-10 million range, similar to the 10.6 million rate of the fourth quarter.

That was the weakest selling rate since 1981, said George Pipas, Ford's market analyst. '(And) there's 70 million more licensed drivers on the road (since then).'

Tough times stopping sales

But weakening employment figures and other gloomy economic data are likely to discourage consumers from spending.

'We have a lot of challenges out there with the economy,' said Mike DiGiovanni, GM's executive director of global market analysis. 'We are in a recession.'

But, he added, 'we are optimistic as the Obama administration comes in given that it's the first new administration in eight years and is likely to be a honeymoon period. There is going to be lot of excitement generated across the country because of the change. People like that.'

GM and Chrysler have received $4 billion each in federal loans to keep them afloat, and GM is slated to receive more aid this month. But industry analysts say loans cannot rescue the automakers unless consumer confidence recovers.

Obama hopes to boost the economy with a $775 billion stimulus package including more than $300 billion in tax breaks.

GM: Year to get better

Looking at 2009, Mark LaNeve, GM's vice president of sales for North America, said: 'We're optimistic that it'll be a year that'll gradually improve.'

The automaker expects to benefit from the launch next year of six important models, including the Buick LaCrosse sedan, the new Camaro and a new Chevrolet Equinox crossover.

It also expects a boost from a move by GMAC Financial Services to offer more car loans after receiving money from a $700 billion Wall Street rescue fund. GMAC, once owned solely by GM, is now controlled by Cerberus Capital Management LP, which has 51 percent, while GM holds 49 percent. The two owners will reduce their stakes under the terms of the federal assistance.

GMAC did not increase its lending until late last month, contributing little to the December figures. But 'it sure felt good to have GMAC back with money to help us,' LaNeve said.

But he cautioned that the start of the new year would be difficult, noting that demand from fleet customers appeared low this month. January is an important month for fleet business.

Stephen Spivey, a San Antonio-based analyst with the consulting firm Frost & Sullivan, said he believed 'this year will look a lot like 2008, but in reverse.'

Incentives are generous

The first half will be weak but the effects of easier credit and the stimulus package should reassure consumers in the second half. 'I think the stimulus is vital to any sort of the recovery for the auto industry,' Spivey said.

In the meantime, automakers are underpinning demand with incentives -- a general $6,000 from Chrysler on 2008 models and $3,000 on 2009 models.

In January, Toyota plans to increase cash rebates -- a type of direct subsidy that the Japanese automaker had previously avoided, preferring subtler measures such as dealer cash.

But Japan's automakers also are finding themselves in unfamiliar territory in this downturn. With the recent drop in gas prices, demand for their small cars has fallen along with truck sales. Toyota and Honda Motor Co. have cut production and said they are now losing money.

'We have no illusions about the coming year,' Lentz said. 'It may get worse before it gets better.'

Chrysler attributed its December sales plunge to difficulties by its customers to obtain car loans and lower fleet sales, which fell 31 percent last year.

Chrysler did not give a sales forecast for 2009 but executives said they expected the second half to be better than the first.

While there is some consensus on the overall sales outlook among auto executives, there is little agreement on which segments will recover fastest.

In 2007, cars outsold light trucks for the first time since 2000 after consumers shifted to more fuel-efficient vehicles amid gas prices above $4 a gallon. BMW's Mini was one of only three brands to increase sales in 2008; the others were Subaru and Rolls-Royce.

But it was unclear whether the car trend would continue now that gas is again below $2 a gallon.

'We're starting to see a swing back toward traditional trucks and crossovers,' GM's DiGiovanni said.

Ford's Pipas expects demand for cars to remain strong because the shift toward cars reflected several trends. 'There's more to this story than just gas prices.'

Asian carmakers cut output

Toyota and Honda have scaled back output of small cars, and Toyota postponed the start of production of Prius hybrid cars at a new plant in Mississippi.

Prius sales fell 44.7 percent in December from year-earlier levels, and analyst Jesse Toprak at auto research site Edmunds.com estimated that transaction prices have fallen around $7,000 since the summer.

But Toyota said it was not altering its strategy.

'All we know is, in the long term, gas prices will continue to rise,' Lentz said. 'That's our baseline assumption.' The automaker will introduce the all-new Prius at the North American International Auto Show next week and a dedicated Lexus-brand hybrid.

Lentz said lower gas prices will help the auto industry by leaving consumers with more disposable income in their pockets. GM's DiGiovanni agreed.

'That's like a tax rebate to consumers.'