By Poornima Gupta

DETROIT (Reuters) - U.S. auto sales plunged to a 16-year-low in July, led by a 27 percent drop at General Motors GM.N, as high gas prices and tight credit sent the industry into a tailspin.

The sales decline was steeper than analysts had expected and showed an accelerating downturn in the world's largest vehicle market as Americans abandoned the SUVs and trucks they had favoured for more than a decade.

July sales marked the ninth straight month of declining sales in the U.S. auto market, making it the longest such downturn since the 2001 recession.

Automakers struggled to meet demand for fuel-efficient small cars and hybrids, only to see those gains wiped out by a 25 percent drop in sales of light trucks in July.

Ford Motor (F.N: Quote, Profile, Research) sales were down 15 percent. Toyota's sales fell 12 percent.

Nissan Motor (7201.T: Quote, Profile, Research) surprised investors by posting an 8.5 percent increase. Honda Motor (7267.T: Quote, Profile, Research) reported a weaker-than-expected 1.6 percent drop in sales, but outsold Chrysler for the third straight month.

The results cast a pall over Detroit's struggling automakers as they grapple with diminished cash holdings and the costs of a downturn now widely expected to run into 2009.

GM's showing came as the No. 1 U.S. automaker posted a $15.5 billion (7.8 billion pounds) quarterly loss, attributable to a combination of meagre sales and writedowns in its auto finance business.