GM sales surge 46% as incentives catch fire

Company officials acknowledge the role of incentives in the automaker's recent bankruptcy and vow to adopt a 'disciplined approach' to doing business.

By MSN Money Partner Mar 1, 2011 1:22PM

By Reuters

 

General Motors (GM) said sales in its home market surged 46% in February as sales incentives, including lease deals and cash offers for existing GM owners, drove shoppers to dealerships.

 

The sales gain was higher than analysts had projected for the automaker and cemented a market share gain for GM in the first two months of the year.

 

In a measure of the popularity of its incentive programs in February, GM said retail sales, which exclude bulk purchases by rental agencies and other fleet operators, were up 70% from a year earlier, a record increase.

 

Analysts and GM's rivals have questioned whether the automaker was at risk of returning to the reliance on heavy discounting to drive sales at the expense of profits which had marked its slide into bankruptcy in the last decade.

 

But GM sales chief Don Johnson said that the company would begin to ease off incentives this month after stepping up its spending in the traditionally slower winter months.

 

"Our goal is very clearly to continue to have a very disciplined approach," Johnson told reporters. "Our incentive costs will start to moderate in March."

 

Post continues after video:

 

Industrywide U.S. auto sales are expected to show a gain of about 20% from the still-depressed levels of a year earlier in February.

 

Analysts and industry executives have cautioned that the recent rise in oil prices could slow or even derail the industry's recovery now in its second year.

 

U.S. gasoline prices rose to $3.38 a gallon in the past week, the biggest jump since 2005 when Hurricane Katrina disrupted petroleum supplies, the U.S. Energy Department said.

Pump prices averaged $2.79 for all of 2010, when U.S. vehicle sales began to recover, according to industry data.

 

"Customers in the U.S. are the most sensitive to oil prices. When they go up, hybrids fly out of showrooms and SUVs and pickup truck sales fall," Toyota Executive Vice President Takeshi Uchiyamada told reporters on the sidelines of the Geneva auto show.

 

The effects could spill over to Europe too, Ford Motor (F) Chief Financial Officer Lewis Booth warned. If prices remained high for long enough "they may affect the economic recovery of Europe," he said on Monday.

 

The sales results represent one of the first snapshots of U.S. consumer demand, and the February data is expected to show steady demand without evidence of the kind of accelerating turnaround that some analysts had forecast.

 

For the fifth consecutive month, the annualized sales rate is expected to hold above 12 million vehicles in February.

 

The average forecast of 41 economists surveyed by Reuters was 12.6 million vehicles on that basis for February, about flat from the sales rate in December and January.

 

Ford's sales analyst, George Pipas, said the consistent pace of sales was encouraging even though there was a risk that the recovery might not find a higher gear as quickly as expected.

 

"I think this could be seen as the base for an increase in sales in spring and summer, potentially," Pipas told reporters in a briefing Monday. "Maybe there are things like oil that could jeopardize that."

Tags: gm
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