After robust start to year, GM sales cool on lower incentives

DETROIT - General Motors' sales cooled in March after a torrid start to the year, reflecting a pullback in some enticing incentive programs.

GM sold 206,621 light vehicles last month, up 10 percent from March 2010. But sales slipped slightly from February, a traditionally slow month, when GM sold 207,028 units.

GM's tepid month allowed Ford to vault past its cross-town rival for only the second month since 1998. Ford's 212,295 sales marked a 16 percent gain from March 2010. But GM's retail sales exceeded Ford's.

"We knew this strong January and February would create some payback in March, and it did," GM's U.S. sales chief, Don Johnson, said during a conference call today with analyst and reporters.


In March, GM ended a popular $1,000 loyalty cash program and lease pull-ahead deals. Some dealers have said the withdrawal of those programs slowed showroom traffic.

For the first quarter, GM's total sales rose 25 percent, to 592,546, according to the Automotive News Data Center.

Retail, small cars lead

Johnson said GM is encouraged by the underlying strength of its retail sales, which grew 17 percent in March. Sales to fleet customers, such as car-rental companies and commercial businesses, dipped 1 percent. Fleet accounted for 27 percent of GM's overall sales. At Ford, fleets accounted for 35 percent of sales last month.

"Consumers are telling us that they're not delaying purchases," Johnson said.

Johnson said he doesn't foresee a drop in retail demand despite the backdrop of rising gas prices, unrest in the Mideast and uncertainty over the supply of parts from Japan.

He said GM has seen little impact on production from the March 11 earthquake and tsunami that has closed most assembly plants in Japan and disrupted a few in North America. Many analysts foresee production problems at U.S. plants in coming months.

"I don't see a big change in consumer demand unless something really dramatic comes out of Japan that we aren't seeing right now," Johnson said.

The big highlight for GM last month was car sales, led by the Chevrolet Cruze. GM sold 18,018 Cruzes in March, the most since the compact's September launch.

GM said retail car sales rose 34 percent in March from a year earlier, while retail truck sales grew only 12 percent. Executives cited the popularity of the Cruze and higher gas prices for the shift.

Chevy sales chief Alan Batey said about half of Cruze buyers came from non-GM brands. Batey said the car is drawing new customers to GM's mainstay brand, especially in California and other markets in which Chevy historically has lagged.

"This vehicle is really helping us in states where we've had a weakness," Batey said.

Incentives plunge

GM's incentive spending in March fell 16 percent from February, to an average of $3,109 per vehicle, according to TrueCar.com. Ford's average rebate increased 8 percent to $2,740 - the largest boost among the seven largest automakers.

Johnson reiterated that GM plans to keep its incentive spending at or below the industry average, measured as a percentage of average transaction prices. He said GM's March spending was below the industry average of about 10 percent.

TrueCar said GM's incentive spending averaged 9 percent of its average transaction price, although it pegs the industry average at 8 percent. GM's average transaction price of $34,052 was the industry's highest.

Todd Snell, dealer principal of Snell Motors in Mankato, Minn., which sells Buick, GMC and Cadillac, said the pullback on incentives didn't dampen sales. His March sales improved from February, although he did see a shift toward smaller cars and away from more-profitable trucks because of rising gas prices.

He said he hopes GM won't throttle back too far on discounts for trucks and SUVs, which could come under more pressure if gas prices climb higher.

Snell said: "I think they'll have to be careful about pulling incentives off of the trucks, when sales already are under pressure a bit from higher gas prices."