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GM's July US sales rise about 8%

General Motors Co on Tuesday posted a 7.6% sales gain in July on stronger demand for compact vehicles including the Chevrolet Cruze car and Equinox crossover.

world Updated: Aug 02, 2011 22:10 IST

General Motors Co on Tuesday posted a 7.6% sales gain in July on stronger demand for compact vehicles including the Chevrolet Cruze car and Equinox crossover.

The increase pointed to a slight rebound in July sales from the disappointing results of the previous two months. Still, it raised questions about the strength of the recovery and the mood of American consumers, reeling from high unemployment and the uncertainty swirling around the US debt talks in Washington.

"We're seeing that the consumer confidence is pretty fragile right now because of everything that's happened in the past few months," GM US sales chief Don Johnson said on a conference call.

Monthly car sales figures are among the first snapshots of consumer demand each month.

Consumer spending habits are of particular interest after last week's tepid increase in US second-quarter output and sharp downward revision for the first quarter.

The auto industry also is coming off May and June sales that fell short of economists' predictions, raising concerns about the recovery. Analysts said higher pricing by many automakers backfired at a time of penny-pinching by consumers.

GM said US sales rose to 214,915 new cars and light trucks, within the range of analysts' expectations and up from 199,692 vehicles last year.

The rest of the automakers are scheduled to release their US sales results for July later on Tuesday.

Thirty-nine economists polled by Reuters were expecting an annual sales rate in July of 11.8 million vehicles.

That pace would still trail the 13 million-plus rate from earlier this year, but many industry executives said it would mark the beginning of a recovery from a bottom in June, when the rate was 11.45 million.

Whatever the number, it is a far cry from the almost 17 million averaged from 2000 to 2007, before the deepest US economic downturn since the Great Depression and the bankruptcies of GM and Chrysler in 2009.

At the start of the year, analysts had forecast a bounce back in 2011 sales to between 13 million and 15 million vehicles, but the March earthquake in Japan that led to production cuts and the weak economy changed that picture.

On Tuesday, GM reiterated its outlook for the low end of the 13 million to 13.5 million range, including about 300,000 in medium and heavy truck sales, but GM's Johnson said "a real cloudy economic outlook" had hurt consumer sentiment.

"We believe that it will continue to recover although more gradually than we had anticipated in the second half," he said.
Consumer nervousness was reflected in the Commerce Department's announcement on Tuesday that US consumer spending unexpectedly fell in June to post the first decline in two years.

Industry research firm said to appeal to those consumers, automakers may boost incentive spending.

Japanese brands already increased incentive spending about 25% to $1,990 per vehicle from June to July, compared with a 4.5% rise to $2,919 per vehicle by the US automakers, according to Edmunds.

While the US level is 47% higher than the Japanese rate, the difference is far below a year ago when it was a 69% gap, suggesting Johnson and his US peers may resort to priming the incentive pump, Edmunds said.

"With production working its way back to normal, the Japanese are making a strong play for their lost market share and American automakers may need to kick in more incentives as they fight for more consumers," Edmunds senior analyst Jessica Caldwell said.

Overall, automakers' incentives averaged $2,371 per vehicle in July, up 7.6% over June, but they were down 14% from last year, Edmunds said.

Johnson said the No. 1 US automaker will stay competitive if rivals boost incentive deals for shoppers, suggesting deals could become more generous in the coming months.

GM said July sales of cars and crossovers rose 8% and 20%, respectively, showing a continuing tilt toward vehicles with smaller profit margins than full-size pickup trucks, which fell 3%.

GM shares were down 1.9% at $27.55 at midday on Tuesday.

First Published: Aug 02, 2011 22:02 IST