The risk that General Motors will ramp up incentives to regain market share in North America poses danger for European rivals like DaimlerChrysler and Volkswagen, analysts have told the Reuters news agency.

But the agency noted that other European companies with less direct exposure to the mass-volume market across the Atlantic - for example Fiat and the big French carmakers - have more scope to dodge the fallout from any all-out US price war.

Reuters said GM's slashed 2005 earnings outlook announced on Wednesday amid slumping North American car sales swamped car shares around the world, although the DJ Stoxx European car sector index was steady early on Thursday.

Suppliers Trelleborg and Valeo were the biggest decliners, each down more than 1%, the report added.

"The extent to which people feel the fallout from GM will depend on the strength of their products. I think it is a worry, and it's a bigger worry for Chrysler than anyone else," Sanford Bernstein analyst Stephen Cheetham told Reuters.

Morgan Stanley reportedly agreed that DaimlerChrysler's US arm "faced the most direct threat from a competitive backlash", noting the one factor Chrysler management has highlighted as the biggest near-term threat to profitability was stepped-up GM incentives.

"Following yesterday's announcement, these risks appear to be on the rise," the bank said in a note to clients cited by Reuters, adding it saw Chrysler profits slipping 10% in 2005 on flat sales.

Reuters noted that Chrysler, which went through its own earnings slump in 2003, rebounded last year thanks to hot products like the Chrysler 300 sedan and minivans with stow-flat seats - it has been expanding US market share while GM and Ford decline.

Analysts reportedly said many of GM's woes were company-specific rather than sector-wide, but its efforts to grow its way out of a slump had wider implications for rival carmakers and suppliers.

"Amongst the other Europeans, VW stands closest to the competitive fray while the traditional German luxury brands (Mercedes, BMW, Audi and Porsche) have little competitive overlap," Morgan Stanley said, according to the news agency.

"Given VW's current forex exposure, we do not believe the company has significant opportunity to keep up with incrementally higher levels of discounts in the market and would likely suffer share losses were GM to pour on significantly more incentives to correct ballooning inventory", the bank reportedly added.

Although PSA Peugeot Citroen and Renault have no direct exposure to the North American market, Cheetham pointed out that Renault Japanese affiliate Nissan makes the bulk of its profits in North America, Reuters said.

Among European tyre makers, Michelin and Continental have relatively little exposure to GM's original equipment business, while Autoliv was making faster gains selling to Japanese car makers' US plants, Morgan Stanley said, according to the report.