Ford was knocked from the No. 2 position in the U.S. auto market, outmanneuvered by Toyota's surging sales of small cars and gas-electric...

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Ford was knocked from the No. 2 position in the U.S. auto market, outmanneuvered by Toyota’s surging sales of small cars and gas-electric hybrids, according to year-end figures released Thursday.

Overall, annual U.S. new-car sales last year slid to 16.1 million, the lowest level in a decade. The figure fell short of the total for the previous year by about 400,000.

Industry officials said they expected even slower sales in the coming months because of the high price of oil and anxiety over falling home prices and increases in mortgage foreclosures.

At Ford, U.S. sales fell 12 percent from the year before, and December sales were down 9.5 percent from the previous year, according to research firm Autodata.

Ford’s lock on the No. 2 ranking behind industry leader General Motors dated 75 years.

Ford blamed its sales declines on decisions to discontinue the Taurus and end a line of slow-selling minivans. Jim Farley, Ford’s new marketing chief, said the automaker will continue to be less dependent on truck sales, keeping its inventories balanced and decentralizing its marketing.

Farley said Ford would “stick to its guns” by accelerating plans to bring out new models, particularly passenger cars developed in Europe, and continuing to try to reconnect with customers who no longer shop for Fords.

U.S. carmakers are under stiff pressure as the market shifts to more fuel-efficient vehicles.

Japanese companies gained market share in 2007 with improved sales of subcompacts like the Honda Fit and Toyota Yaris and gas-electric hybrids such as the Toyota Prius, which had sales growth of 69 percent last year.

For the year, Toyota’s sales climbed 15.4 percent compared with 2006. Honda’s sales grew 9 percent.

“The domestics over the past year have been late to the party — all of the domestics — with fuel-efficient vehicles,” said Mark Rikess, chief executive of the Rikess Group, an automotive consulting firm in Burbank, Calif.

“You see market share improving for Toyota and Honda, and it’s primarily among the fuel-efficient vehicles that they have marketed for years and are therefore at the top of the consideration list,” Rikess said.

At GM, sales fell 6 percent for the year and 4.2 percent in December. Though GM still ranks No. 1 in the U.S. market, it is in a heated battle with Toyota for first place in worldwide auto production.

Chrysler’s annual sales dropped 3.1 percent in 2007 but rose 0.5 percent in December. James Press, Chrysler’s president and vice chairman, said the automaker is planning for a weaker market in 2008.

“It’s still contracting,” Press said. “You have to plan for the worst and hope for the best. We are going to have to work hard to earn the customers’ business.”

Rikess said the deck remained stacked against U.S. automakers, noting Japanese companies sell many more models that consumers consider superior to what comes out of Detroit.

He said automakers need to cut back on the number of vehicles they make to better focus their marketing dollars.