Higher GM and Ford sales point to steady recovery

Ford vehicle sit in a sales lot in Scottsdale, Arizona, June 2, 2009.

Credit: Reuters/Joshua Lott

By Soyoung Kim

DETROIT (Reuters) - Top U.S. automakers General Motors Co GM.UL and Ford Motor Co (F.N) reported an increase of 5 percent in July sales from a year earlier, results they said pointed to a slow but steady turnaround for the battered sector in the third quarter.

The sales increase for Ford was lower than some of the more bullish analysts had forecast and the automaker's shares dropped as much as 2.9 percent.

July sales for Hyundai Motor Co (005380.KS) rose 19 percent while sales for its affiliate Kia were up almost 21 percent. Nissan Motor Co (7201.T) posted a sales rise of almost 15 percent.

Auto executives said the early sales numbers for July eased concern that the industry could be tipping back toward recession after weaker-than-expected June sales results.

"In June, you had the feeling that maybe the industry wasn't out of the woods, and there was a lot of talk of a double-dip. But June really seems to have been a blip," said Al Castignetti, head of Nissan brand sales in the U.S. market.

The stronger auto sales for July came as indicators for U.S. consumer spending and incomes for June were flat, data economists said pointed toward a still-anemic recovery.

GM said its results underscored the progress it has made as a smaller and more focused company in the year since its emergence from a U.S. government-funded bankruptcy.

GM's sales figures are expected to represent the last monthly sales update from the top-selling U.S. automaker before it files for a stock offering. The IPO is expected to reduce the U.S. government's GM ownership stake of 61 percent.

GM executives said the July sales results show its progress in managing inventories, reducing costly sales incentives and building momentum with a more balanced line-up and sales gains for both cars and trucks.

Sales of GM's four remaining brands -- Chevrolet, Cadillac, GMC and Buick -- were up almost 25 percent from a year earlier in July.

But including the brands GM dropped in its restructuring -- Pontiac, Saab, Saturn and Hummer -- retail sales in July were down 3.8 percent from a year earlier.

That key subset of sales excludes the 25 percent of GM sales that went to fleet operators like rental car companies, and it is watched as an indicator of an automaker's pricing power and popularity.

GM said it was keeping its forecast for full-year industrywide U.S. sales unchanged at 11.5 million to 12 million vehicles at the start of the second half.

"I think it doesn't show we'll have incredible strength but it shows the recovery is still on track," said GM's U.S. sales chief, Don Johnson.

FORD SHARES DIP AFTER RALLY

Ford's sales were boosted by a nearly 40 percent gain for F-Series pickup trucks -- the best-selling vehicle in its lineup -- and early sales of the Fiesta, its smallest car and newest entry.

The 5 percent July sales gain for Ford sales was for its Ford, Lincoln and Mercury brands and excluded sales for Volvo. Ford this week completed a deal to sell the Volvo brand to China's Geely.

Ford, which gained sales momentum by avoiding the U.S. government bailouts that GM and Chrysler took, has taken market share in its home market for 21 of the past 22 months.

Ford shares, which have gained more than 20 percent in the past month, were down 2 percent at $12.90 on the New York Stock Exchange in early afternoon, off an earlier low at $12.77.

Industrywide auto sales are expected to top the 1 million vehicle mark in July, a single-digit increase from both the previous month and the same month in 2009 when sales were lifted by the first week of the government's cash-for-clunkers sales incentives.

Analysts surveyed by Reuters expect industry-wide sales of 11.4 million vehicles on an annualized basis in July. That would be up from near 11.2 million a year earlier.

The high end of the range of forecasts put industry sales for July closer to 12 million vehicles, which would be the highest sales result since August 2009.

But the pace of the industry's recovery has been slow and uneven, with demand for big-ticket items such as cars remaining far below the pre-recession levels.

As recently as 2007, automakers sold more than 16 million vehicles in the U.S. market, which was overtaken by China as the world's largest in 2009.