Auto sales rose in October due to pent-up demand for cars and trucks although the gains failed to offset concerns that financial crisis in Europe could derail the industry's slow recovery.

Shares of General Motors Co fell nearly 10 percent, more sharply than other auto stocks, as the top American automaker posted sales growth of 2 percent, slower than some analysts had expected.

Ford Motor Co's 6 percent sales growth was in line, though its shares ended 5 percent lower amid a broad sell-off in auto stocks triggered by concern about the possible collapse of a bailout deal for Greece and the risk that that could undercut a slow-but-steady gain in U.S. vehicle demand.

We don't have a strong recovery to begin with and the last thing it needs is a couple of body blows, said Paul Ballew, chief economist at insurer Nationwide. Every time this industry starts to feel better about itself, you kind of look at the world around and gulp.

The biggest year-on-year gains in October sales came for Volkswagen (+40 percent), Chrysler Group LLC (+27 percent) and Nissan Motor Co <7201.T> (+18 percent).

Nissan's gains came at the expense of Toyota <7203.T> and Honda <7267.T>, both of which were hit harder by production disruptions triggered by the March earthquake in Japan.

Honda's sales were almost flat from year-earlier levels, down less than 1 percent.

Meanwhile, Toyota sales dropped 8 percent, defying a forecast by the automaker for a sales gain because of a shortage of its Corolla small car.

I know I predicted at the start of this month that October sales would exceed year-ago levels. That was an aggressive goal, said Bob Carter, head of Toyota brand sales for the United States. I am eating a little crow for lunch.

Industrywide auto sales rose 7.5 percent. The annualized sales rate rose to near 13.3 million vehicles, the highest level since February.

It just seems that we're not going to have one of those breakout months where everything is rocking and rolling, said Jesse Toprak, an analyst at TrueCar.

U.S. auto sales, which are tracked as one of the earliest snapshots of consumer demand, slipped in the spring and early summer amid concerns about the prospect of a renewed downturn in the U.S. economy and supply disruptions triggered by the March earthquake in Japan.

Ford economist Jenny Lin said the No. 2 U.S. automaker was confident that the U.S. economy and vehicle sales would trend slowly higher in the coming months.

This is not a high-water mark, she said. We do expect it will continue to improve.


GM said the slower pace of its October sales gain reflected its progress in selling down 2011 models and throttling back on incentives. Analysts said the sharp sell-off in GM shares showed the sensitivity of the sector to concerns of a broader downturn.

Overall, GM's October sales were not a surprise to us and consistent with our (fourth-quarter) model, Citi analyst Itay Michaeli said in a note for clients.

Said David Whiston, auto industry analyst with Morningstar: The falloff is much more related to what is going on in Europe than the auto sales.

The improved results for October showed some consumers have delayed vehicle purchases for as long as they could during the downturn, industry executives said.

Used car prices are higher and the average age of cars and trucks on American roads is now about 11 years, the highest-ever reading for that indicator for pent-up demand.

Retail sales for Chrysler, which exclude discounted sales to fleet operators like car rental agencies, were up 40 percent in October, a rebound that underscored how far the weakest of the three U.S. automakers has bounced back since its 2009 bankruptcy and bailout.

Nissan's U.S. sales chief, Al Castignetti, said he expected that fourth-quarter U.S. auto sales would hit the highest level of the year as consumers shrug off the economic and financial uncertainty.

We've been dealing with this all year, he said. People have been conditioned to deal with the headlines.

Just as Toyota and Honda return to near-normal inventory levels in the U.S. market, both face the threat of limited production outages because of the floods in Thailand.

Carter said it would take until early 2012 for its U.S. dealers to near optimal inventory levels at dealerships.

Meanwhile, Honda withdrew its annual earnings guidance on Monday, citing the strong yen and floods in Thailand.

Among Japanese automakers, Honda has been hit the hardest by the supply disruptions caused by both Asian disasters. The latest floods in Thailand have caused direct damage to the company's car factory in Thailand's Ayutthaya province.

Toyota said it was curtailing overtime at four plants in the United States and Canada in order to conserve parts shipped from Thailand, a hub for vehicle electronics and other components.

GM shares closed 9.7 percent lower at $23.33 on Tuesday, while Ford shares were down 5.1 percent at $11.08. The broad S&P 500 Index <.SPX> declined 2.8 percent on the day.

Shares of Chrysler parent Fiat SpA closed down nearly 10 percent.

(Reporting by Bernie Woodall and Kevin Krolicki, editing by Gerald E. McCormick and Matthew Lewis)