Ford, Toyota soar as incentives fuel 24% industry gain

General Motors Co. posted a 21 percent increase in March U.S. sales while Toyota Motor Corp. and Ford Motor Co. rose more than 40 percent as higher incentives industrywide helped lure buyers to showrooms.

Ford, which advanced for the sixth straight month, was outsold by Toyota and GM in March after leading the industry in February. Toyota's 41 percent gain was aided by richer incentives aimed at luring buyers after its recall crisis.

"Retail sales were really artificially inflated by huge incentives going on in the marketplace and did not reflect true demand,” said Jessica Caldwell, director of industry analysis at Edmunds.com. “April will be a good indicator of real consumer demand."

Overall U.S. sales rose 24 percent from the depressed levels of March 2009, when automakers were battling the weakest demand in almost three decades. The seasonally adjusted annual sales rate of 11.7 million was the year's highest and the second strongest since August, when the U.S. cash-for-clunkers campaign lifted demand

Chrysler Group fell 8 percent after posting its first monthly gain in more than two years in February. Chrysler, No. 5 in U.S. sales through February, was outsold for the second time this year by Nissan North America, which soared 43 percent.

The Hyundai brand's 15 percent increase was below analysts' forecasts of a gain of more than 30 percent.

American Honda was up 22 percent, in line with predictions. Subaru, the only automaker to post U.S. sales gains in each of the past two years, rose 46 percent.

Last month's SAAR was below the 12 million average forecast of eight analysts compiled by Bloomberg. Still, it was the fifth straight gain from a year earlier. The March 2009 pace was 9.3 million, according to Automotive News data.

Incentive discrepancy

For the first time on record, GM's per-unit incentives were below the industry average, said Susan Docherty, vice president of U.S. marketing. GM spiffs totaled $2,800 per vehicle, down nearly $2,000 from March 2009, she said. The industry averaged $2,910.

GM incentives ranked fourth highest, behind Ford Motor, Chrysler and “an import competitor,” she said.

GM, Ford and other automakers use J.D. Power and Associates data to measure incentives, Docherty said.

But Edmunds.com's incentive measure puts GM first among all automakers with $3,519 spent per vehicle last month. That compares with an industry average of $2,742, the consumer auto site says.

Both Edmunds.com and J.D. Power measure customer cash, interest and lease incentives, along with cash to dealers for specific vehicles. But J.D. Power also includes cash that automakers give dealers for meeting sales volume objectives.

Still, that shouldn't make J.D. Power's per-vehicle numbers lower for GM, said Edmunds.com's Caldwell.

“We've been doing the same thing for years, and it's weird that we're coming to a point where all of the sudden we're showing a huge discrepancy,” she said.

GM retained Chevrolet, Cadillac, Buick and GMC brands as part of its government-backed restructuring, and is selling or closing Saab, Hummer, Saturn and Pontiac, whose sales plummeted 88 percent in March. GM released results for the four remaining lines, which each posted gains of more than 40 percent, almost an hour before the complete tally.

“They haven't increased consideration for the remaining brands,” said Jim Hall, principal of the consulting firm 2953 Analytics Inc. in suburban Detroit. “Killing brands does not increase the consideration for the brands you're continuing. Obviously, they have to do that.”

Industry sales that failed to match analysts' estimates underscored the market's contraction in the recession. Annual U.S. deliveries averaged 16.8 million last decade through 2007. The 2008 total was 13.2 million, and 2009's tally of 10.4 million was the lowest in 27 years.

Automakers were buoyed in March by rising consumer confidence and spring weather after February blizzards in the Northeast. The Conference Board's confidence index rose to 52.5 from 46.4 a month earlier as gloom over job prospects began to lift.

On March 2, Toyota began offering incentives such as subsidized leases after the automaker recalled more than 8 million vehicles globally to fix defects linked to unintended acceleration and to adjust brakes.

Competitors responded with their own discounts while avoiding the spending levels the industry rang up in March 2009 as GM and Chrysler added incentives ahead of their bankruptcy filings. Incentives are down 14 percent from a year earlier, according to Edmunds.com.