By James Arnold BBC News Online business reporter

Are US car makers heading for the scrapyard?

The American car market, by far the biggest in the world, has proved remarkably robust.

At least 16 million vehicles will be sold this year - over 1.6 million in August alone - and demographic factors are likely to take that figure above 20 million in the next decade.

A combination of slicker production, cannier marketing and - most important - more lavish incentives has helped the industry weather what could have been a nasty downturn.

Not-so-big three

So why the long faces in Detroit, America's automotive capital?

For the "Big Three" US car makers, General Motors (GM), Ford and Chrysler - now part of Germany's DaimlerChrysler - August's heady sales figures conceal some horrible truths.

Japan's Toyota has outsold Chrysler, pushing the US firm into fourth place for the first time.

And the Big Three's overall market share has fallen to 57.9%, a historic low.

The humiliation caps two decades of steady declines in the face of foreign competition, primarily from nimble Japanese rivals.

"For years, the industry was waiting for the time when Toyota would overtake Chrysler," says Micheline Maynard, a New York Times reporter whose book, "The End of Detroit", is published later this month.

"Now, the question is when it will overtake Ford."

Selling out

The twilight of the Big Three looks grimly inevitable.

Part of the problem is what Ms Maynard calls Detroit's "short attention span".

Detroit can no longer second-guess a changing market

When sport-utility vehicles became hot in the early 1990s, the Big Three diverted precious resources away from unglamorous mass-market cars.

This produced huge profits in the 1990s, but allowed makers such as Toyota, Honda and Nissan quietly to colonise the small-car segment.

And US firms can no longer rely on patriotic consumers overlooking their cars' shortcomings.

US vehicles remain worryingly glitch-prone; just this week, GM has had to recall 783,000 cars over a problem with their electrical systems.

No right turn

The Big Three are not unaware of their predicament, but have little room for manoeuvre.

Since September 11, they have all poured money into incentives programmes, offering cheap prices and favourable financing plans for purchasers.

Now, the average Detroit car is subsidised to the tune of $3,600 in the form of incentives, while Japanese car makers spend less than $1,200.

Buyers have lapped up these deals, helping keep unit sales buoyant, but analysts warn that that the effective deflation of car prices will cost manufacturers dear in the longer term.

Money worries

Worse, all three Detroit firms are saddled with crippling structural costs.

Capacity in the US industry is reckoned to be about 30% above demand; worldwide, some 30 plants may have to close to bring the market back into equilibrium.

Producing too much, too expensively

US car makers face unusually high welfare and healthcare bills for their employees and pensioners.

Ford spends an annual $2.8bn on healthcare; GM is the country's single biggest purchaser of pharmaceuticals.

Foreign-owned car plants in the US, which employ few unionised workers, have no such headaches.

The Big Three are hoping to squeeze some concessions out of the United Auto Workers trade union in talks over new contracts, which are supposed to take effect from 15 September.

But the UAW, which represents almost all the Big Three's production workers, has already ruled out any changes to its members' healthcare perks.

Three become two

The combination of secular decline in sales and stubborn fixed costs is obvious, critics say.

Ms Maynard predicts that, by 2010, at least one of the Big Three will no longer exist in its present form - whether through restructuring, merger or bankruptcy.

The last possibility is, she says, a remote one, given the industry's strong cash flow and modest debts.

But some analysts argue that, if the real costs of the companies' non-manufacturing activities - pension-fund deficits, for example - were taken into account, their shares could lose as much as two-thirds of their value, calling their financial viability into question.

And if bankruptcy is avoided, the coming change will nonetheless be a drastic one, involving at least a series of cost cuts on an unprecedented scale.

Nice bank; shame about the cars

So is this cataclysmic news?

Certainly not for the US consumer, who has put up with second-rate products for too long.

The sun may be setting on Detroit

And the companies themselves may not be in such dire straits.

Unlike the financially fragile US airlines, car makers are cushioned by healthy profits in non-core businesses such as financial services.

GM, which makes twice as much money from its finance arm as from making cars, is probably better understood as a first-rate bank with a third-rate car company attached.

The beautiful south

And most of the bad news is concentrated within a few square miles of Detroit.

Three-quarters of those fast-selling Toyotas are made in American plants by American workers.

The market shifts of the past 20 years have largely been a redistribution of manufacturing muscle within the US, rather than any serious disappearance of jobs overseas.

Now, some 85,000 Americans work in foreign-owned car plants, largely in poorer southern states - plants which are in many cases among the most sophisticated and productive in the world.

"The line between American cars and foreign cars is blurring rapidly," says Ms Maynard.