General Motors Corp gained ground against rivals in September with a 4 percent U.S. sales increase while Ford Motor Co sales plunged 18 percent and Toyota Motor Corp sales were off 1 percent for a third monthly decline.

Overall U.S. auto sales steadied in September after adjusting for the number of sales days. That bucked Wall Street expectations for a decline in the closely watched indicator of consumer demand, sales results released on Tuesday showed.

The adjusted 1 percent gain in industry-wide sales came despite a housing downturn and a tightening of credit blamed for driving lower income buyers out of the market for new vehicles in recent months.

It's very difficult out there for a lot of families, said Aaron Bragman, an analyst with industry tracking firm Global Insight. You've got high gas prices. You've the risk of foreclosures.

Led by GM, major automakers with newer products on offer did well despite the weaker economy. Honda Motor Co posted a gain of nearly 14 percent, boosted by the strong launch of its new Accord sedan.

Sales at Nissan Motor Co were also up 11 percent, driven in part by gains for the company's Altima Coupe in its third month on the market.

But for Toyota, now No. 2 in the U.S. market, the sales decline marked its most protracted slump since early 2003.

Ford's retail market share slipped to near the 13 percent level targeted by the company under a sweeping restructuring plan, according to data compiled by Autodata Corp.

Ford said it was on track hold sales at that level for the year as a whole despite the weaker September results.

Chrysler sales fell almost 2 percent, giving it a 12-percent U.S. market share, behind GM, Toyota and Ford.

Despite the mixed results and an industry headed for its weakest full-year sales in a decade, auto executives noted that many had expected September sales to be worse.

Industry executives credited the U.S. Federal Reserve's decision to cut interest rates on September 18 for helping to settle credit markets and boost confidence.

We're certainly in a growth recession, and it's not surprising that the Fed would act and act decisively, said GM sales analyst Paul Ballew, adding that he expected another 75 to 100 basis points in easing without giving a time frame.

Industry-wide U.S. sales were 1.31 million vehicles for September, up 1 percent on an adjusted basis from 1.35 million a year earlier, according to sales results compiled by Reuters. Without that adjustment, sales were down almost 3 percent.

HEADING IN DIFFERENT DIRECTIONS

Several luxury names outperformed the lackluster broader market in September with sales for brands such as BMW, Mercedes-Benz and Land Rover all higher.

Jesse Toprak, an analyst at Edmunds.com, said that showed that wealthier Americans were feeling less constrained by economic uncertainty than those with lower incomes who had been hit harder by higher gas prices and other factors.

We're dealing with extremes in the marketplace, he said.

The monthly results also pointed to diverging trends for No. 1 U.S. automaker GM and Ford, now No. 3 in the market.

GM said it cut back incentive spending but still managed to trim inventories by 100,000 vehicles as showroom sales gained 7.5 percent. GM's retail market share was 25 percent, up from 24 percent a year earlier.

By contrast, Ford's sales decrease deepened a downturn that started last year. The automaker has not had a year-on-year sales gain since October 2006.

To use a metaphor from golf, I think the industry parred a difficult hole ... and I don't think we were quite up to par, said Ford's chief sales analyst George Pipas.

Although Ford had success in September with new offerings like the Edge and Mercury MKX crossover utility vehicles, sales for its core truck franchise dropped sharply.

Sales of Ford's market-leading F-series pickups were down almost 21 percent in September and 13 percent year to date.

The weaker sales results follow the late September resignation of Ford's North American sales and marketing chief, Cisco Codina, and come as the automaker gears up for a crucial round of contract talks with the United Auto Workers union.

Ford has said it needs to slash costs to compete with the likes of Toyota.

Chrysler is gearing up for its own contract talks with the UAW with a goal of cutting labor costs and boosting cash flow for new private equity owner Cerberus Capital Management.

In the highly competitive full-size truck market, Toyota kept the pressure on Ford and other Detroit automakers with a 61-percent sales gain for its Tundra.

Despite a sales slump that has run through two consecutive quarters, Detroit-based automakers have not offered the blowout incentives they relied on in recent years.

Edmunds.com estimated average incentive spending for the Detroit-based automakers was $3,156 in September, down almost 6 percent from August.

September had one fewer selling day than the same month a year earlier, accounting for a roughly 3-percentage-point difference between the adjusted results tracked by Wall Street analysts and unadjusted totals.

(Additional reporting by Poornima Gupta and Jui Chakravorty)

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