Well, it finally happened: Ford's (NYSE: F) run of year-over-year sales increases came to an end, thanks to an industrywide decline. Ford's U.S. sales in August were down 10.6% year-over-year, the company announced on Wednesday.

That's not much of a surprise, given that last August's numbers were juiced by the government's "Cash for Clunkers" program, but what is a little surprising is Ford's August sales were down over 5% versus July's (discounting Volvo).

That's worse than some expected, and it's a sharp drop in a short time. What happened?

It's both good news and bad news
To be fair, the drop wasn't due to anything Ford did wrong. On the contrary -- U.S. auto sales got clobbered across the board in August, and while it looks ugly out of context, Ford's sales decline actually outperformed the market. As the Blue Oval's PR crew hastened to point out, the company's share of the U.S. market rose to 15.8%, its 22nd monthly increase in U.S. market share in the last 23 months. Sales of the company's F-series pickup, Taurus, and Mustang were cited as particularly strong.

PR crews at most of the other automakers had less to work with. Toyota (NYSE: TM) and Honda (NYSE: HMC), both of which saw strong Cash-for-Clunkers activity last year (the program accounted for half of Toyota's August 2009 sales, said a spokesperson) announced year-over-year declines of 34.1% and 32.7%, respectively.

General Motors' were down 24.5%, but there's arguably an asterisk on that number: At this time a year ago, GM was winding down the Saturn, Pontiac, and Hummer brands. Comparing GM's "surviving" brands -- Chevrolet, GMC, Buick, and Cadillac -- to year-ago numbers gives a Ford-like 11% decline and a gain in market share. Likewise, Hyundai's decline was ahead of the market, and the up-and-coming Korean automaker saw a gain in U.S. market share on the month.

Of course, autos aren't the only sector suffering from what looks like a slowdown in customer spending. Luxury homebuilder Toll Brothers (NYSE: TOL) reported a profit for the second quarter, but saw fewer buyers signing contracts and said that demand had declined since May. Likewise, while August results for retailer Nordstrom (NYSE: JWN) looked solid (at least in comparison with 2009), Target's (NYSE: TGT) results came in below expectations -- possible further evidence of softening consumer spending.

The overseas picture is rosier
Ford didn't have much of a presence in China until recently, but sales have been ramping up: The company and its joint-venture partners sold 44,047 vehicles in China in August. That's still paltry compared to GM's August total of 181,625, but Ford's growth is outpacing GM's at the moment -- Ford's China sales total represents a 24% year-over-year increase, versus 19.2% for the General.

In India, Ford sales are positively booming, led by strong results for the Figo, a small car based on the last-generation Fiesta that has proven popular with value-conscious Indian buyers. August sales were up a whopping 220% year-over-year, and year-to-date sales are up 195%.

This is the region that will drive Ford's growth for the foreseeable future -- the company said that it expects 70% of its sales growth over the next decade to come from what it calls the "Asia Pacific and Africa" region, where it has invested over $3 billion since 2006 in an effort to catch up to big regional players like Toyota, GM, and Volkswagen.

Long story short
Ford shareholders -- full disclosure: I'm one -- still have a lot to keep an eye on, despite the emphatic success of the company's turnaround efforts to date. Barring a dramatic economic downturn, the company should be able to stay profitable (and stay well ahead of payments on its still-massive debt) -- but if U.S. market sales shrink much further, its margin for error could start to shrink as well.

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