BUSINESS

GM Sales Fell 1.2 Percent Last Month After Offering Fewer Deals

06/01/2011 12:35 pm ET | Updated Aug 01, 2011

DETROIT (AP) — General Motors' U.S. sales fell 1.2 percent in May as it offered fewer deals to customers and it cut sales to rental car companies.

The largest U.S. car company says it sold 221,192 vehicles last month, led by smaller, more fuel-efficient models.

GM blamed the drop mainly on a decision to cut sales to rental car companies by 21 percent from a year earlier. Sales to individual buyers rose 9 percent despite a 10 percent drop in rebates and other incentives.

GM is the first major automaker to report sales on Wednesday. Analysts expect overall U.S. sales to fall 4 percent from last May due to fewer deals, a shortage of models because of the earthquake in Japan and uncertainty over high fuel prices. The sputtering economy also kept some buyers on the sidelines.

GM's sales were led by the new Chevrolet Cruze compact and the Chevrolet Equinox and GMC Terrain midsize crossover vehicles. Cruze sales were up 40 percent over the Chevrolet Cobalt, the lackluster model it replaced. Equinox sales were up 34 percent and Terrain sales rose 42 percent. Sales of GM's full-sized pickup trucks, however, were down about 13 percent.

Don Johnson, GM's vice president of sales, said consumers are continuing to take a wait-and-see attitude as prices continue to fluctuate around $4 per gallon.

Even so, he feels consumer confidence over the long term remains strong and sees pent-up demand among drivers who kept their vehicles longer than usual during the economic downturn.

"All things considered, we continue to believe the recovery remains on track," he said.

The economy may test that optimism. Recent reports have been discouraging, raising worries among economists about the strength of the recovery.

Private trade groups reported Wednesday that employers added fewer jobs than expected in May, while U.S. manufacturing activity expanded at its slowest pace in 20 months. The government also said construction spending remained weak in April.

Payroll processor ADP said Wednesday that private employers added just 38,000 jobs in May, down from 177,000 in April. It's the weakest result since September.

The Institute for Supply Management said Wednesday that U.S. manufacturing activity expanded in May at the slowest pace in 20 months, thanks in part to the sharp rise in energy prices. And the government reported that construction spending remained weak in April.

Normally, buyers can count on deals in the summer as automakers try to clear out old inventory and make way for new models in the fall. But this year, the deals will be hard to come by.

More buyers are seeking fuel-efficient cars with gas prices still high. But there aren't enough cars in the marketplace, since Japanese automakers had to cut production after the March 11 earthquake and domestic automakers can't produce cars any faster. Automakers are also raising prices to make up for the higher price of steel and other commodities. As a result, the deals are disappearing, and experts are advising people to delay their purchases if they can.

"If you don't have to buy, wait until fall. If lease a car, extend it," said Edmunds.com chief Jeremy Anwyl. "There will be deals this summer, but they will be fleeting because of imbalances in the market."

WATCH a segment on GM at the 2011 New York Auto Show.

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