Good news for GM? Chrysler's sales are awful, but not that awful

Before you go, we thought you'd like these...
Before you go close icon
Chrysler struggled mightily to sell cars in May, a month it spent entirely in bankruptcy. Even so, last month's sales beat expectations and that could be a very good sign for General Motors.

How so? Chrysler's sales slipped 47 percent in May from a year ago. That's a big drop, to be sure, but it's no worse than the punishing year-over-year declines it has seen in recent months as people deferred new car purchases in the face of rising unemployment and falling home values. (In April, Chrysler's sales fell 48 percent year-over-year, for example.) And it suggests being bankrupt didn't scare off buyers, as many feared it would.

General Motors' May sales fell 30 percent compared with a year earlier. That marks an improvement over last month, when sales fell 34 percent year-over-year.

To calm customers worried there won't be anyone left to fix their Chevys and Buicks, GM announced it plans to honor warranties and service agreements. Whether anyone believes that will go a long way in determining how well the company can recover. If Chrysler's apparent success in convincing car buyers to look past its bankruptcy is any indication, that might not prove as difficult as it once seemed.

In this era of green shoots, "less bad" is the new "good," and analysts expected Chrysler to say sales fell 51 percent last month, according to Bloomberg News. But unfortunately for GM, things might not be that simple.

A relatively strong month by Ford (F), the only U.S. carmaker neither on the brink nor over it in last month, may complicate the picture. Ford said May sales fell just 24 percent, much better than analysts expected. That suggests car buyers may still prefer to do business with a going concern, even if they aren't going out of their way to avoid bankrupt automakers.

Yet some auto industry observers say bankruptcy might even be a selling point for GM. After all, according to Edmunds.com, the provider of car information online, it worked that way for Chrysler.

Edmunds.com said yesterday it saw a 72 percent surge in the number of people who said they'd buy Chrysler vehicles last month. And the number of potential buyers considering GM models ticked up in recent weeks as well, even as the automaker's bankruptcy was getting harder and harder to deny.

"The bankruptcy filings of Chrysler and General Motors have attracted more shoppers to those brands than anyone might have guessed," David Tompkins, an Edmunds.com analyst, said in a statement. "Comforted by the government-backed warranty, shoppers are drawn by the thought of bargains."
Read Full Story
Credit Card Compare

Credit Card Compare

Whether you're looking for great travel rewards or low annual fees, find the card that's right for you.

Compare Now

From Our Partners