GM, Ford report sales gains as economy perks up

Christine Tierney / The Detroit News

General Motors Co. reported its first monthly sales increase in nearly two years on Tuesday and Ford Motor Co. also racked up gains in October, providing further evidence that the U.S. economy appears to be on the mend.

Overall vehicle sales were level with last October's totals, ending a streak of year-over-year declines as the market continued its slow climb out of the steep downturn that began in 2008.

On an annual basis, last month's selling rate was 10.5 million cars and light trucks, compared with 10.82 million a year ago and 9.22 million in September, according to Autodata Corp.

October sales provided a good measure of consumer demand because sales weren't distorted by incentives or depleted inventories, as in the previous two months.

Among Detroit's automakers, GM and Ford posted modest gains of 4.7 percent and 3.3 percent, respectively, in October, but Chrysler Group LLC continued its free fall.

Recovery plan out today

Its sales fell 30.4 percent last month, adding to the pressure on Chief Executive Sergio Marchionne to lay out a convincing recovery plan.

Marchionne, also CEO of Fiat SpA, will make his presentation at Chrysler's headquarters today. The smallest of Detroit's automakers, Chrysler was hit the hardest during the recession because of the preponderance of large vehicles in its lineup.

The latest economic data, showing gains in financial markets and slowing declines in U.S. home prices, are consistent with a transition from recession to recovery, Ford's senior economist Emily Kolinski Morris said. In the third quarter, the economy officially emerged from recession, expanding at a 3.5 percent rate.

But the high rate of unemployment is weighing on consumer sentiment. "As a result, we haven't seen the same consistent upward trend in consumer confidence that we've seen in other indicators," Kolinski Morris said.

Despite the dampening effect of a high jobless rate, executives at most of the major automakers reported increases in demand.

The most spectacular sales increase was reported by South Korea's Hyundai Motor Co. Its U.S. sales surged 48.9 percent in October from depressed year-earlier levels, reflecting strong demand for its small Elantra and Accent cars and its premium Genesis.

GM's monthly sales increase was the first year-over-year rise in 21 months for the automaker that emerged from bankruptcy in July. It reflected rising demand for its new cars such as the Chevrolet Camaro and its trucks.

"We're showing signs of momentum clearly," said Mike DiGiovanni, director of global market analysis at GM.

In another encouraging sign, he said 95 percent of GM's October sales came from the four core brands that it is retaining in the United States -- Cadillac, Buick, GMC and Chevrolet.

But DiGiovanni said the high jobless rate and tight credit were still weighing on the market. "We're not out of the woods yet on credit," he said. "Unemployment continues to be a concern. It's really the problem we've got to worry most about for consumer confidence."

DiGiovanni said he expected the sales pace would be maintained through the rest of the year.

Bob Carter, general manager of Toyota Motor Corp.'s Toyota brand division in the United States, told reporters he expected total U.S. sales to reach 10.3 million to 10.4 million cars and light trucks this year, rising to between 11.5 million and 11.7 million in 2010.

Toyota's U.S. sales were essentially unchanged from last year at 152,165 vehicles, accounting for 18.2 percent of the market.

Ford said demand for its new Taurus, Fusion and other cars and crossovers helped boost its sales. Compared with last October, the Dearborn automaker said it spent 30 percent less on incentives.

"As you probably noticed, it's helping the bottom line," Ford's market analyst George Pipas said, referring to Ford's strong third-quarter earnings.

Ford reported $1 billion in net income for the July-September quarter, providing another sign that the industry is pulling out of a long slump. Honda Motor Co. last week sharply increased its annual earnings forecast.

Incentives are cut back

According to Edmunds.com, an online auto research firm, automakers trimmed incentives to $2,468 per vehicle, on average, in October. That is down 12 percent from September levels, and 8 percent down from October 2008.

Edmunds analyst Jessica Caldwell said automakers were able to hold down discounts because "cash-for-clunkers" had helped clear out 2009 vehicles.

"Incentives declined simply because fewer old model year vehicles were sold in October, and the newer vehicles are not discounted nearly as heavily," Caldwell said. "Over 55 percent of vehicles sold in October were 2010 model year, compared with about 36 percent in September."

Honda Motor Co.'s U.S. sales dipped 0.4 percent in October, while Nissan Motor Co.'s increased by 5.6 percent.

Overall, European brands were down 3.5 percent, with Mercedes-Benz, Volkswagen, Volvo, Jaguar and Land Rover reporting higher sales, while BMW was down.

Even though Chrysler's year-over-year results were among the weakest, it said last month was better than September, when the industry felt the after-effects of the "cash-for-clunkers" incentives.

"The industry showed signs of improvement this month with increasing sales, which is a trend we expect to continue for the remainder of the year," Fred Diaz, president of the Ram brand and lead sales executive for Chrysler, said in a statement.

Staff Writers Bryce G. Hoffman and Robert Snell contributed.