UPDATE 3-U.S. auto sales fall in July as carmakers slash rental fleet sales

(Adds context and detail on sales declines)

DETROIT, Aug 1 (Reuters) - U.S. carmakers said on Tuesday they continued to slash sales to daily rental fleets in July as General Motors Co, Ford Motor Co and Fiat Chrysler Automobiles struggled to curb a slide in retail sales during the month.

July is on track to be the fifth straight month this year in which the annual pace of car and light truck sales declined from the same month a year ago, in part because of fewer fleet sales, analysts and industry executives said. July 2016 sales hit a strong 17.9 million vehicle pace.

GM said the seasonally adjusted annual sales rate fell to an estimated 16.9 million vehicles in July.

GM sales dropped 15 percent from a year ago, to 226,107, as the company cut rental fleet sales more than 80 percent. The automaker said inventories of unsold vehicles at month's end were 104 days, down from 105 days at the end of June. GM has promised investors to reduce inventories to 70 days by year end.

Ford said its July sales dipped 7.5 percent, to 200,212, as it cut fleet sales more than 26 percent. Inventories fell to 77 days from 79 the previous month.

FiatChrysler said sales dropped 10 percent, to 161,477, as it cut back sales to daily rental fleets.

The sales slowdown has forced the Detroit Three automakers to idle factories and layoff workers to rein in inventories.

GM, Ford and FiatChrysler have cautioned that second half financial results likely will be lower than first half results, in part reflecting production cuts in North America and pricing pressures.

The automakers this year have been deliberately dialing back sales to rental car companies, which often generate little to no profit, while struggling to keep retail sales from sagging further, according to industry analysts.

Industry consultant LMC cut its full year forecast for new vehicle sales to 17 million vehicles. Automakers sold a record 17.55 million vehicles in the United States in 2016. The difference in sales is equivalent to the output of two large assembly plants.

Colin Langan, an analyst at UBS, said U.S. economic trends remain strong and 60 percent of consumers think it is a good time to buy a new vehicle.

"The sky isn't falling yet," he said adding the "underlying fundamentals of the industry are actually much more solid than you would think." (Reporting by Joe White and Paul Lienert in Detroit and David Shepardson in Traverse City; Editing by Frances Kerry and Bill Trott)