Image: General Motors Reports Annual Profit
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New General Motors Cadillacs are displayed at a General Motors dealership in Dearborn, Michigan. GM today reported that U.S. sales jumped 49 percent last month.
updated 3/1/2011 4:28:04 PM ET 2011-03-01T21:28:04

The U.S. auto sales recovery picked up steam last month with all major car companies reporting double-digit gains.

General Motors Co. led the way with a whopping 49 percent U.S. sales jump compared with February of last year, followed closely by Toyota Motor Corp. with a 42 percent gain.

Nissan Motor Co. and Honda Motor Co. had gains of 32 percent and 22 percent, while Hyundai Motor Co. sales went up 28 percent.

Chrysler Group LLC and Ford Motor Co. showed much smaller increases, but Chrysler sales were still strong with a 13 percent increase and Ford came in at 10 percent.

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The companies said Tuesday that consumers snapped up both cars and trucks, buoyed by a gradually improving economy, and the U.S. automakers pointed to strong sales of new models. But the sales gains, especially for GM, were juiced by sweeter financing and lease deals. While analysts weren't ready to declare a price war — and GM denied starting one — they noted an increase in the deals customers were offered.

The auto industry website estimated that automakers raised incentives 5 percent from January to February to an average of $2,708 per vehicle. Chrysler, Ford, Nissan and Toyota all sweetened deals by more than 6 percent for the month, the site said.

And the industry's enthusiasm for a fast start to 2011 is tempered somewhat by a rapid increase in gas prices, due to both increased demand and a jump in oil prices amid unrest in the Middle East.

Also Toyota's gain, while impressive, was compared with a bad month last year when a string of embarrassing safety recalls had reached its peak.

Still, the gains for February were so strong that Ford's top sales analyst told reporters the sales rate, when adjusted for seasonal differences and projected out for a full year, may be the highest since the government's Cash for Clunkers rebates juiced sales in the summer of 2009.

At GM, Don Johnson, GM's vice president of U.S. sales, said GM boosted incentives early in the year to get off to a fast start and catch competitors off guard.

The automaker started the increases in January by raising incentives $400 per vehicle from December, mainly with low-interest financing and lease deals in Northeastern states. It stuck with the deals in February, leading to sales of more than 207,000 cars and trucks.

But Johnson predicted GM would back off on incentives later in the year.

Automakers have attempted to wean themselves of incentives, trying to sell cars and trucks based on how much they improved quality, not how much they shaved off the sticker price. Incentives on average had been falling since the industry ran into financial trouble in 2009.

Johnson said GM did targeted incentives, mainly in the Northeast, during January and February. It offered to buy drivers out of leases and to give cash to loyal GM customers for trade-ins.

Yet Johnson vowed that GM would not return to its old ways of offering huge incentives just to move cars and trucks to keep factories running. As recently as March of 2009, GM's average incentive spending was $4,750 per vehicle, the highest level in a decade, the website said.

Johnson said GM won't stick to large incentives because it no longer has to unload a big inventory due to over-production in its factories like it did before entering bankruptcy protection in 2009.

The company has 60-day supply of vehicles, which is considered optimal for an automaker.

"We are managing our inventory very well. So we're not out there to drive sales to match production," he said.

He said GM's sales increase was driven by its products, not by a $400 increase in incentives.

"A $400 increase doesn't drive these kinds of share gains and sales gains," he said.

Johnson said GM has noticed customers looking at small cars more often since gas prices have gone up, but he said consumers have not yet changed their buying habits.

Ford, however, said some customers were shifting to smaller cars as gas rose well above $3 per gallon nationwide because of turmoil in the Middle East.

"With oil nearing $100 per barrel and gasoline prices continuing to rise, consumers' consideration for fuel economy once again is taking top billing," Ken Czubay, Ford vice president, U.S. sales, said in a statement.

GM CEO Dan Akerson at the Geneva Auto Show cautioned against optimism for the industry because of the rising oil prices.

"I don't think the industry learned a lot of lessons from 2008. They will this time around," he said of the 2008 spike in U.S. gas prices to above $4 per gallon.

Ford sales were led by the redesigned Explorer sport utility vehicle, a car-based vehicle that gets better gas mileage than its truck-based predecessor. Explorer sales more than doubled in February.

Chrysler said its sales were led by the Ram truck brand, which was up 81 percent, and the entire Jeep lineup, which saw a 23 percent increase.

GM said sales of its full-size pickup trucks, the Chevrolet Silverado and Avalanche and the GMC Sierra, rose 65 percent compared with February of last year, another sign that businesses are starting to make purchases again.

Crossover vehicles, which are like sport utilities but more efficient because they're based on car frames, also saw big increases, led by the five-passenger Chevrolet Equinox, which was up 98 percent.

Toyota said sales of the Camry, the top-selling car in the U.S., rose 64 percent for the month, while the RAV4 crossover vehicle was up 85 percent.

GM also said its passenger car sales rose 40 percent in February, led by the new Chevrolet Cruze small car that was introduced late last year.

The Associated Press contributed to this report.

Video: GM's Sales Show Gains


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