Strong new products and government fleet contract push up GM sales 17 percent in May

GM says its new car and truck sales rose 17 pct

DETROIT — Strong demand for new models and higher fleet sales lifted General Motors Co.’s sales 17 percent in May.

The improvement, over a dismal May of last year as GM was headed into bankruptcy protection, was a sign that automakers are benefiting from a weak but improving economy. Consumers even shrugged off an 8 percent decline in the stock market to buy more cars and trucks.

GM was the first automaker to report U.S. sales Wednesday, and the whole industry is expected to show a double-digit increase over last May, when Chrysler was in bankruptcy protection and GM was nearing it.

One key factor for automakers in May was the long Memorial Day weekend — a key selling period that can account for half of all sales for the month.

Paul Taylor, chief economist with the National Automobile Dealers Association, said good weather and a weak Memorial Day last year — which came just a day before GM filed for bankruptcy protection — helped make sales comparatively stronger during last weekend’s holiday.

GM sales from its four remaining brands — Chevrolet, Buick, GMC and Cadillac — rose 32 percent for the month on strong new products and a big government fleet contract. GM’s overall sales include brands it is phasing out or selling, such as Saab, Saturn, Pontiac and Hummer.

GM sold 97,000 more cars and trucks in the first five months of this year compared with the same period of 2009, even though it had eight brands at the time.

GM’s combined sales of its most recently released products rose 323 percent. Those brands are the Chevrolet Equinox midsize crossover, Chevrolet Camaro muscle car, Buick LaCrosse and Regal sedans, GMC Terrain and Cadillac SRX crossovers and the CTS Wagon.

Sales to rental, commercial and government fleets spiked to 38 percent of GM’s sales. Fleet sales can hurt resale values and brand image, but the company said it is carefully managing its fleet and expects fleet sales to drop the rest of the year. GM expects to end the year with 25 percent of its sales to fleets.

Incentive deals were slightly worse than those offered in April and down $340 per vehicle from May of last year, according to Edmunds. The average industry incentive was $2,603 last month compared with $2,631 in April and $2,943 in May of last year.

Jesse Toprak, vice president of industry trends and analysis at TrueCar.com, said incentives are lower than in previous years because deep production cuts have left dealers with lean lots, making them less eager to cut prices.

The outlook for auto sales through the summer appears rosy — provided the economy cooperates. The financial markets need to stabilize and employers need to start hiring at a faster clip for sales to continue climbing, said Paul Ballew, a former chief economist at GM who is now chief economist at insurance firm Nationwide.

“We have a very choppy recovery, and big-ticket items get impacted by a choppy recovery,” he said.

But several trends bode well for new car sales. Prices for used cars have been rising, which means consumers on the fence between a used and new car are more likely to buy new, Taylor said.

In addition, gas prices remain steady, home prices have started to stabilize and consumers are becoming more eager to replace their aging vehicles .

“That free fall of home equity that consumers were looking at has stopped in most markets across the country, and that’s important,” he said.