TOKYO: Toyota slipped behind General Motors in global sales in the second quarter but retained its lead for the first half of the year, numbers showed Friday, highlighting the neck-and-neck race to be the worlds No. 1 automaker.

The figures - and sales growth rates - indicate that by year-end Toyota could overtake GM, which has been the worlds largest automaker for the last 76 years. Typically, rankings are determined by full-year production figures, not sales.

Toyota said worldwide sales in the April to June quarter totaled 2.37 million vehicles, while GM said its global sales reached 2.41 million.

Toyota sold more cars and trucks around the world in the first quarter than GM for the first time ever - 2.35 million vehicles to GMs 2.27 million.

But strong growth by GM in Latin America, Asia and other emerging markets lifted sales by 0.4 percent in the most recent quarter, again putting it ahead of Toyota.

The Japanese manufacturer said its quarterly sales rose at a much faster rate of 7 percent. Many analysts expect that Toyota will surpass GM in both sales and production for the full year. Toyota is set to announce quarterly production figures later this month.

Figures tallying sales for the first six months of the year give Toyota the edge, 4.72 million vehicles sold compared with 4.67 million for GM.

“Toyota is making a solid move to the top,” said Shigeru Matsumura, an auto analyst with SMBC Friend Securities in Tokyo. “The companys comprehensive strength in the fields of production, technology and sales has been made over a long spell. Its solid footing is stronger than that of GM.”

Toyota has snatched U.S. market share away from Detroit automakers as the surge in oil prices has increased demand for Toyotas fuel-efficient models, including the Corolla, Camry and hybrid Prius.

A decade ago, GM controlled about a third of the U.S. market while Toyota had barely 8 percent. Today, GMs share has dwindled to 24 percent, while Toyotas has climbed to more than 15 percent, a market share comparable to Ford Motor.

But Toyotas success has triggered concern among its executives of a political backlash in the United States. Lawmakers from U.S. manufacturing states claim the Japanese government has kept the yen artificially low, giving Japanese automakers an advantage.

Some U.S. legislators also criticize Toyota for importing nearly half the vehicles it sells in the United States. Last year, Toyota imported 46 percent of its U.S. sales.

To deflect criticism, Toyota has steadily expanded production capacity in the United States. In April, it broke ground in Tupelo, Mississippi, for its eighth vehicle assembly plant in North America, the fourth in five years. The factory is set to begin production in 2010.

A series of recent recalls has also raised some doubts about whether Toyota can maintain quality standards as its global sales expand rapidly. Toyota executives have repeatedly expressed concerns about sliding quality and have promised to strengthen quality controls.

GM, meanwhile, is seeing its biggest sales increases outside the United States. Its sales in Latin America, Africa and the Middle East grew 19.7 percent during the quarter, while sales in Asia rose 8.2 percent. Sales in Europe rose 4.7 percent, while sales in North American fell 7 percent, the company said.

A bomb today killed one of Lebanon’s most senior military generals and at least three others.

Brig Gen Francois Hajj, the country’s head of military operations, and his bodyguard were blown up as they drove through a Christian suburb of Beirut in the early morning, authorities said. Hajj had been mentioned as a strong candidate to succeed the army commander Michel Suleiman, who could be elected president.

The blast is the first attack of its kind against the Lebanese army, which is seen as the one force that can hold the country together. Increasingly acrimonious relations between parliament’s rival factions in recent months have paralysed the government.

The explosion was at 7.10am (5.10am GMT) on a busy street near Baabda Municipality as school buses and people were setting off for work.

More details to follow

Wall Street wants the Federal Reserve to declare war against the housing crisis. Instead, the nation’s central bank seems to be waging war against Wall Street.

The Fed cut its benchmark short-term interest rate Tuesday by a slim quarter point to 4.25 percent, less than many stock and bond traders had hoped for. Even more galling to financial pros was the Fed’s statement explaining its move - a tepid expression of concern that was far from a ringing pledge to do whatever it might take to rescue the economy as housing woes spread.

Major stock indexes fell by more than 2 percent, with the Dow Jones industrial average off 294.26 to 13,432.77 and the Nasdaq composite index down 66.60 to 2,652.35. Meanwhile, investors flooded cash into the safe haven of U.S. Treasury securities, pushing prices up and yields down sharply.

“The market thinks maybe the Fed is losing control,” said Ian Morris, a U.S. economist with the British bank HSBC.

The Fed trimmed the federal funds rate, the amount banks charge each other for overnight loans, which serves as a baseline for many types of short-term credits. The move will push down interest costs on some consumer and business loans, such as adjustable-rate mortgages, depending on what benchmark they are linked to.

In part, Tuesday’s Fed moves and the market’s reaction reflect different views about the severity of threats to the economy. Some financial pros warn that the combination of a collapsing housing market and tight credit puts the economy in grave danger.

“The downturn is broadening beyond housing to an economy-wide credit crunch,” said Nigel Gault, chief U.S. economist for the consulting firm Global Insight.

That could lead to a recession that would pull housing prices down further and threaten the jobs and incomes of ordinary people.

The Fed’s statement struck Wall Street as too blase. The central banks’ release simply noted that housing and credit have “increased uncertainty surrounding the outlook for economic growth and inflation.”

That put the central bank in the camp of those who see residual strength in the economy, citing strong economic growth this summer and a still-robust job market. They argue that the Fed’s response to housing should be measured.

“They acted appropriately,” said Wells Fargo & Co. economist Eugenio Aleman.

Much of Wall Street’s fury at the Fed reflected a separate interest rate cut Tuesday. In addition to trimming the widely watched federal funds rate, the central bank also cut its discount rate, what it charges banks for loans it makes directly itself, by 0.25 of a percentage point to 4.75 percent.

That wasn’t enough for some in the financial world who wanted the Fed to cut the discount rate more as a way to flood the banking system with easy money and soothe the credit crunch that is making many kinds of loans more expensive and harder to get.

“The markets were trying to bully the Fed,” Aleman said. “But the Fed wanted to send a clear message that they are the ones in charge.”

The spat over Fed policy revolves around some arcane arguments about things that ultimately could have very real and very important effects on economic conditions, and the financial health of American households and businesses.

Analysts point out that banks and other lenders are steering money into only the safest investments, such as government securities, and avoiding risk. That is pushing up interest costs on a range of credits from jumbo mortgages, to loans to builders of offices and stores, and much more, even as the Fed pushes its benchmark rates down.

“There’s less money available, and it’s at higher rates and terms are tougher,” said Sung Won Sohn, an economist and chief executive of Hanmi Bank in Los Angeles.

Credit is the basic fuel of economic growth. If a wide range of borrowing is becoming tougher, that threatens to stall the economy. Many financial pros say that only dramatic action by the Fed can loosen credit, stabilize housing and limit economic damage.

The problem is that there are too many uncertainties in the economic picture to know how much damage housing is doing and what the right level of response might be. For example, economists are uncertain how much the collapse of the housing market will trim the sails of consumers, whose spending represents roughly two-thirds of all economic activity.

“We just don’t know how far (housing) has to fall, and where the bottom is,” Gault said. The fight over Fed policy: What it means to you

As housing crumbles, Wall Street and the Federal Reserve disagree over how aggressively to cut interest rates. Here is what’s at stake for ordinary people:

– Interest rates. The Fed is cutting rates more slowly than traders want. Loans directly affected by Fed rate cuts include business loans and some variable-rate mortgages. In addition, tight credit is making many kinds of loans more costly and harder to get.

– Jobs. Forecasters predict a slowing economy will boost unemployment. More aggressive rate cuts could stimulate the economy and limit job losses.

– Inflation. While inflation overall has been subdued, the prices of food, gas and other forms of energy have risen steeply. If the Fed pushes interest rates down too fast, that could fan inflation pressures.

– Stocks. Stock prices rise when the Fed takes aggressive action to boost the economy. But that might not protect investors if stocks suffer more housing-related losses.

Source: Chronicle research

E-mail Sam Zuckerman at szuckerman@sfchronicle.com.