Products like the 2010 Fusion could put Ford on a path to overtake its cross-town rival, GM.

Perennially the number two domestic automaker, Ford Motor Co. could be on a path to catch its long-time rival General Motors, according to a new report.

Ford and the Japanese maker Honda are the two likely winners in the increasingly bitter battle for U.S. market share, according to the annual “Car Wars” report published by Bank of America Merrill Lynch.

The two makers’ aggressive product programs are expected to pay off, suggests the report, by increasing their shares by about 2 percentage points between now and 2013.  That’s a huge jump in an industry where makers will do almost anything for a tenth of a share point.

In the case of Ford, the company could see its share rise as high as 18%, suggests Merrill analyst John Murphy, which would position it right about on par with GM.  Following its bankruptcy, and the decision to eliminate four of its eight North American brands, Murphy expects GM will see its own share of the U.S. market dip to somewhere between 18% and 19%.

“Ford’s recent gains should continue,” said Murphy, “supported by a solid product cadence.”

The number two domestic has been steadily gaining on its rival, and after a 43% jump in volume, topped GM on a monthly basis in February, the first time that has happened since 1998.  But Ford is still expected to remain second among Detroit’s Big Three for the year as a whole.

That has been the way of the automotive world for more than three-quarters of a century.  Though Ford was the industry’s earlier leader, the decision by founder Henry Ford, to stick with the increasingly outdated Model T gave his cross-town rivals the opportunity to take over the market.  GM quickly became not only the best-selling auto manufacturer in the U.S., but until 2008, the world’s largest carmaker, a position since then grabbed by Toyota.

In the new Car Wars report, analyst Murphy stresses that the key to victory is fresh and appealing new product.  But the pace is picking up, he pointed out.  Between 1992 and 2010, he noted, manufacturers replaced about 13% of their product – on a volume basis – each year.  Through 2014, however, that’s expected to jump to 27%.

Murphy’s study, if proven right, will mean bad news for Chrysler, which he expects to continue losing share.  It’s projected to dip 2 point by 2013, to just 6.9%, despite the helping hand of the U.S. maker’s Italian partner, Fiat.

Meanwhile, Murphy also expects to see Hyundai and its Korean sibling, Kia, slow down their own market share gains in the next few years.