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VOL. 126 | NO. 42 | Wednesday, March 2, 2011

GM Leads Auto Sales Jump With 49 Percent Increase


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DETROIT (AP)General Motors Co. led automakers with a 49 percent U.S. sales jump last month, aided by sweeter financing and lease deals and strong demand for newer models.

Chrysler Group LLC reported a 13 percent gain compared with February of last year, while Ford Motor Co. saw a 10 percent sales increase as automakers heralded a continued gradual economic recovery.

All automakers report U.S. sales on Tuesday.

GM’s big increase was due in part to rising incentives. Several major automakers followed its lead. But industry analysts said it was too early to tell whether a price war would break out.

The auto industry website TrueCar.com estimated that automakers raised incentives 5 percent from January to February to an average of $2,708 per vehicle. Chrysler, Ford, Hyundai/Kia, Nissan and Toyota all sweetened deals by more than 6 percent for the month, the site said.

GM started the increases in January by raising incentives $400 per vehicle from December, mainly with low-interest financing and lease deals in Northeastern states. It stuck with the deals in February, leading to sales of more than 207,000 cars and trucks.

Industry analysts expect overall U.S. sales to rise about 20 percent from February of last year.

Don Johnson, GM’s vice president of U.S. sales, said the company wanted to get off to a fast start and catch competitors off guard by boosting deals early in the year. But he predicted GM would back off on incentives later in the year.

Automakers have tried for the past year to wean themselves of incentives, trying to sell cars and trucks based on how much they improved quality, not how much they shaved off the sticker price. Incentives on average had been falling since the industry ran into financial trouble in 2009.

Johnson said GM did targeted incentives, mainly in the Northeast, during January and February. It offered to buy drivers out of leases and to give cash to loyal GM customers for trade-ins. Lease deals from the company’s newly acquired GM Financial unit started in Ohio in December and spread to 15 other states.

Yet Johnson vowed that GM would not return to its old ways of offering huge incentives just to move cars and trucks to keep factories running. As recently as March of 2009, GM’s average incentive spending was $4,750 per vehicle, the highest level in a decade, the website Edmunds.com said.

Johnson said GM won’t stick to large incentives because it no longer has to unload a big inventory due to over-production in its factories like it did before entering bankruptcy protection in 2009.

The company has 60-day supply of vehicles, which is considered optimal for an automaker.

“We are managing our inventory very well. So we’re not out there to drive sales to match production,” he said.

He said GM’s sales increase was driven by its products, not by a $400 increase in incentives.

“A $400 increase doesn’t drive these kinds of share gains and sales gains,” he said.

Johnson said GM has noticed customers looking at small cars more often since gas prices have gone up, but he said consumers have not yet changed their buying habits.

Ford, however, said it was seeing evidence of a shift to smaller cars as gas rose well above $3 per gallon nationwide on turmoil in the Middle East.

“With oil nearing $100 per barrel and gasoline prices continuing to rise, consumers’ consideration for fuel economy once again is taking top billing,” Ken Czubay, Ford vice president, U.S. sales, said in a statement.

Ford sales were led by the redesigned Explorer sport utility vehicle, a car-based vehicle that gets better gas mileage than its truck-based predecessor. Explorer sales more than doubled in February.

Chrysler said its sales were led by the Ram truck brand, which was up 81 percent, and the entire Jeep lineup, which saw a 23 percent increase.

GM said sales of its full-size pickup trucks, the Chevrolet Silverado and Avalanche and the GMC Sierra, rose 65 percent compared with February of last year, another sign that businesses are starting to make purchases again.

Crossover vehicles, which are like sport utilities but more efficient because they’re based on car frames, also saw big increases, led by the five-passenger Chevrolet Equinox, which was up 98 percent.

GM also said its passenger car sales rose 40 percent in February, led by the new Chevrolet Cruze small car that was introduced late last year.

Copyright 2011 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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