Western Europe may not be the most controversial of auto sectors, but the region is keeping local carmakers on their toes.

The market was set for another record year, but rising fuel prices have kept customers home, and pressure from Japanese and Korean competition has put a further crimp in sales of European manufacturers.

In addition, a weakening euro - sliding 25% against the dollar since its debut 20 months ago - is beginning to put the squeeze on company profits, particularly for suppliers. Michelin, for one, blamed its 29.1% drop in first-half profits in part on the anemic euro.

"Things are still rough," admits General Motors Europe President Michael J. Burns, citing diminishing demand and challenging fuel issues.

Even though some analysts still expect sales to finish slightly above last year's 15 million units, the market is unlikely to hit original forecasts made at the start of the year that called for an up to 5% gain. By September, sales throughout Western Europe had fallen 5.7% from 1999 levels.

"(While) the underlying economic statistics still show a quite favorable environment, it may be that recent developments are beginning to erode consumer confidence," says the ACEA, the European car manufacturers' association.

Some countries once considered hot now are cooling off. The usually strong, reliable German market, in particular, has struggled. Sales there for the first nine months have dropped 11%, with automakers once again pointing to fuel prices and taxes as the culprits. Production, off 3% to 3.8 million units, also is headed downward.

Deliveries are slowing in France, as well, where analysts say final numbers will be above 1999 levels but not close to the 7% increase projected for the year.

For most automakers struggling to increase profitability in Europe, the local sales decline spells big trouble - even more so in light of increasing competition on the way from Asia.

Japanese and Korean manufacturers continue to capture a bigger share of the market, and that is likely to increase as more and more imports pour in and local production capacity is added.

The Koreans, now with a 3.4% share of sales, are well on their way to cornering more than 4% of the West European market by 2005, says a Standard & Poor's DRI industry forecast. While not a huge volume, it still represents some 610,758 units - two or three assembly plants' worth - that will be denied traditional European manufacturers each year.

Despite its current financial troubles, analysts see most of that volume going to Daewoo Motor Co. Ltd., which has carved out a niche in Spain and Italy - markets not dominated by German or Japanese automakers. Daewoo has its eye on tripling its current 1% share of the European market, says Patrick Farrell, director of sales and marketing operations for Daewoo in the U.K. The company has challenged both Fiat SpA and SEAT SA at their own game in focusing on the market for small, economical fuel-efficient vehicles. "Daewoo has been able to exploit that (segment)," Mr. Farrell says.

Toyota Motor Corp. is mirroring that strategy with its small car plant in Valenciennes, France. Set to open in January, Valenciennes will build the highly successful Yaris, currently imported from Japan. Some 70,000 to 80,000 units will be built at the plant next year, with a quick ramp up to 150,000 units planned. The new plant is expected to help the automaker reach the 800,000-unit sales mark in Europe, about 5% of the market, by 2005.

"We are actually this year a bit ahead of plan," says Tadashi Arashima, senior vice president of Toyota Motor Europe.

The new facility puts to rest charges from local automakers accusing Toyota of dumping vehicles in Europe. Those are accusations the Koreans still are dealing with.

Critics say that when Korea's economy crashed, that it's automakers began flooding Europe with cheaply built, inexpensive vehicles.

But Daewoo's Mr. Farrell takes exception to that. He admits the automakers offer value but denies the vehicles are cheap. He adds that the Korean automakers have invested in offices, plants and dealerships throughout Europe.

Says Mr. Farrell: "Our route into this market has not been cheap."