For the first time in its 50-year history in the United States, the Japanese automaker was confronting the same challenges that Detroit's automakers face on a bigger scale. 'This is a shift of monumental proportions that we have never seen before,' said Jim Lentz, president of Toyota Motor Sales USA, in an interview.

Toyota's experience and its response reveal much about the company, reinforcing some perceptions but challenging others. Japan's biggest automaker didn't foresee the dramatic changes in the market any more than rivals did. And its factories were not as flexible as many believed. It was running out of small, fuel-efficient models, while dealers were saddled with trucks that weren't selling.

But within six weeks of concluding that it needed to adjust its output, Toyota had revised production plans for at least four factories, including the Mississippi plant, which will now make the popular Prius hybrid.

Toyota has halted large truck and SUV production at its plants in Princeton, Ind., and San Antonio, Texas, for three months but has not laid off any permanent workers. The 4,500 idled workers will receive more training in vehicle-assembly techniques, and some Texas team members may end up removing graffiti from walls in downtown San Antonio.

The tooling for the Highlanders will be shipped to the Indiana plant. The factory will build the Highlanders, as well as big Sequoia SUVs and Sienna minivans. It had produced Tundras, but Toyota is scaling back assembly of big pickups to a single plant, in San Antonio. 'It's a segment that's going to be in difficulty for some time to come,' Lentz said.

Dealers, analysts, and even employees were surprised at how fast the company moved. 'It was nice to see Toyota respond so immediately,' said Dianne Whitmire, Internet and fleet sales manager at Hooman Toyota in Long Beach, Calif.

Compared with Japanese rivals Honda Motor Co. and Nissan Motor Co., Toyota is typically more cautious and deliberate -- often the last to enter a market or a new segment. The production adjustments announced July 10 required close consultations and cooperation among Toyota's U.S. manufacturing executives in Erlanger, Ky., its U.S. sales managers in Torrance, Calif., and manufacturing and top executives in Toyota City, Japan.

'Toyota was probably making sure that the changes in the market had a high probability of being structural as opposed to being cyclical,' said Michael Robinet, vice president for global forecasting at CSM Worldwide in Northville.

In its first-quarter results issued Thursday, Toyota said it was spending $95 million to cover most of the cost of the adjustments. But the changes will pay off in the future. By reducing its bulging truck inventories, Toyota will spend less on incentives.

More important, it will save money because the changes will raise the output of the factories. Analyst Takaki Nakanishi at JP Morgan Securities Japan estimates the moves will increase their capacity-utilization rates to 86 percent from 65 percent.

Toyota officials said falling U.S. sales and discounting contributed to an earnings decline this year. Toyota's profit for the April-June quarter fell 28 percent to $3.2 billion. Its earnings fell in the previous quarter, too, and Toyota expects annual profit to decline for the first time in seven years.

But some longtime Toyota watchers say the experience may be salutary. 'In the case of Toyota, the slowdown is essential. Since their mad dash to become No. 1, they've been making ever larger and more expensive vehicles,' said Maryann Keller, an auto analyst and head of Maryann Keller & Associates of Stamford, Conn.

However, 'for the rest of the auto industry, it's daunting to have Toyota rethinking its strategy when they have time and cash,' she said.

Now the No. 2 player in the U.S. market behind General Motors Corp., Toyota expects its sales to fall this year -- but not as much as the market as a whole. So far, Toyota's U.S. sales are down 7.6 percent, compared with the overall market's 10.5 percent decline. 'The priority is that we will continue to grow share,' Lentz said.

But the automaker is not touching its permanent work force, which includes some 40,000 plant workers in North America. Toyota easily retains and sheds contract workers and has let go of around 750 temporary workers at its U.S. truck plants and at an engine factory supplying them, but it is historically reluctant to cut permanent employees.

Toyota still regrets the last time it laid off employees, in 1950, when it was close to bankruptcy and its lenders insisted on job cuts, said Hirotaka Takeuchi, one of the authors of the book 'Extreme Toyota: Radical Contradictions that Drive Success at the World's Best Manufacturer.'

Toyota fired 1,500 people in Japan, a fourth of its work force at the time, he said. 'That memory still sticks with them. The management has vowed since then that they would never touch people, even in a downturn.'

Other Japanese automakers have laid off U.S. workers and Nissan recently offered buyouts to workers in Tennessee. But Lentz said he did not expect Toyota to resort to cuts or buyouts. 'Layoffs result when you have too much capacity,' he said.

'We have the right amount of capacity. We just have to be building the right products in those plants. In my view, we need to improve our flexibility.'

That is now happening in Indiana, where the automaker is preparing for the challenging task of building frame-based Sequoias and car-based Highlanders on the same assembly line.

'The overall fundamentals of the industry are still strong,' Lentz said. Toyota officials expect the prospects for the U.S. auto industry to brighten starting next year.

'We foresee in this next decade an industry that will probably be in excess of 18 million' vehicle sales a year, he said. 'We're going to grow as the market grows.'