Toyota Motor Corp, Honda Motor Co and other Japanese brands collectively boosted their share of the world's largest car market by 2.6 percentage points to a record 39.5 per cent in 2008, adding 9 points in just four years at the expense of the local Big Three.

But with the overall pie shrinking by 3 million vehicles last year and projected to contract even further, no one is celebrating. Carmakers across the board have been forced to slash production plans and brace for historic losses or dire profit falls, showing just how dependent they are on the US market.

'I think we're going to have a very tough first quarter,' Jim O'Sullivan, head of Mazda Motor Corp's US operations, told Reuters at the auto show this week.

'We're going to have an industry that's going to be floating somewhere around the lows we saw in October, November, December,' he said, expressing a view common among his peers.

Executives were united in their expectations for the incoming Obama administration to swiftly pass the promised economic stimulus package to seek to heal battered consumer sentiment.

Attractive new products may create some buzz, but are not enough to stimulate actual demand, they said.

'The economy is just going to keep getting worse and worse,' Credit Suisse analyst Koji Endo said. 'There's just no way that car sales are going to recover in that environment.'

Scarcity of credit was the other part of the equation, keeping the few who are actually looking to purchase a car from easily doing so.

'The credit situation really hasn't improved,' said Richard Colliver, executive vice president of Honda's US sales arm.

'The US$350 billion (S$521 billion) bailout money to the financial industry ... it really hasn't hit the lower end of the market. That hasn't gotten to the streets.'

Analysts also blamed the dearth of financing for consumers on more stringent screening by automakers and banks, which is eliminating an increasing number of shoppers from the market.

Mr O'Sullivan said he was confident that Mazda would pick up more market share due to its strong credit positioning through a deal with JPMorgan Chase Bank, and the imminent launch of the popular, mass-volume Mazda3 compact.

But others refrained from making grand predictions, saying only that new products such as the next-generation Prius hybrid due in May for Toyota and the low-cost Insight hybrid coming in April for Honda should be well-received once economic conditions stabilise. Both made their debut at the Detroit show this week.

'We take a look quarter by quarter now because of the tremendous volatility in the marketplace,' Jim Lentz, president of Toyota's US sales operations, told Reuters on Tuesday.

With Toyota's inventory of passenger cars still at unhealthy levels, Lentz said production cuts have been mapped out through April, at which point the automaker is hoping that consumer sentiment will have turned up under the government's initiatives.

'I can't rule out any further production cuts because it'll all depend on where the market heads,' he said. 'But right now we're confident that by spring we'll be in good shape.' Rivals are also looking to lure consumers with innovative new vehicles, with Ford Motor Co unveiling the Fusion hybrid to go on sale this year and announcing plans for plug-in hybrids and pure electric vehicles over the next three years.

But Akihiko Otsuka, chief engineer of the new Prius, said Toyota expected to remain a solid leader in the hybrid field armed with a 10-year lead in mass-producing the fuel-sipping vehicles.

'The hybrid system is a bundle of accumulated know-how,' he told Reuters. 'The difficult thing about it is once you adjust one part of the multitude of controls, it messes something else up. The experience in dealing with that goes a long way.'

While the industry-wide woes are hitting everyone at present, many analysts expect Japanese brands to be in better shape than their US rivals, possibly picking up more market share because of better quality and value.

'Brands that have a consumer base with higher purchasing powers will naturally fare better in this market,' UBS auto analyst Tatsuo Yoshida said. 'And in that respect Japanese brands are in a superior position.' -- REUTERS