Tags: US | Auto | Sales

GM, Ford Report Double-Digit Sales Jumps in May

Wednesday, 02 Jun 2010 01:56 PM

Drivers snapped up new models and rental-car and government fleets ordered more vehicles in May, boosting U.S. auto sales for yet another month.

It was a sign that automakers are benefiting from a fragile but improving economy. Consumers even shrugged off an 8 percent decline in the stock market in May.

Both Ford Motor Co. and General Motors Co. saw double-digit sales increases over the same month last year, when GM was headed into bankruptcy protection and Chrysler Group was already there. If the trend holds for other automakers, May would be the seventh straight month of year-over-year sales increases for the industry.

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.

Ford's sales rose 22 percent, boosted by strong demand for the F-Series pickup and new Ford Mustang. Sales to rental, government and commercial fleets rose 32 percent.

But sales fell at Ford's Lincoln, Volvo and Mercury brands, with Mercury down 11 percent. The company is expected to announce later Wednesday that it's phasing out the mid-range brand. It has scheduled an afternoon conference call with Mercury dealers.

Ford brand sales climbed 28 percent.

GM's sales rose 17 percent, led by a 32 percent jump in sales of its four remaining brands — Chevrolet, Buick, GMC and Cadillac. Those brands got a lift from strong new products, such as the Chevrolet Equinox midsize crossover, Chevrolet Camaro muscle car, and Buick LaCrosse sedan.

Fleet sales spiked to 38 percent of GM's sales. Those sales can hurt resale values and brand image, but the company said it expects to end the year with 25 percent of its sales to fleets.

Consumers found that deals were slightly worse than in April. The average industry incentive was $2,603 per vehicle last month, down from $2,631 in April and $2,943 in May of last year.

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

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.

"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.

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