Despite Weak August Sales, GM Sees Brighter Days Ahead

General Motors reported Wednesday that sales fell 25% in August as the nation's economic recovery appeared to stall and cautious consumers held back on buying cars. But despite the downturn, GM officials said they remain upbeat that the hard-hit auto industry will continue to improve in the months ahead.

For the month, GM said it sold 185,176 vehicles, compared to 246,479 a year ago, when most automakers were benefiting from the federal government's "cash for clunkers" program. Ahead of the release of last month's sales figures, analysts noted that comparisons to August 2009 would be skewed because of the boost in sales caused by the rebate program.

"Last year's 'cash for clunkers' program spiked industry sales higher in 2009, so results this August were, not surprisingly, a bit mixed," Don Johnson, GM's vice president of U.S. sales, said in a statement. "Importantly, three of our four divisions showed solid gains. This is further evidence that our performance is the result of balanced contributions across our brands."

Among its four core brands -- Chevrolet, GMC, Buick and Cadillac -- sales fell 10.6%. Year-to-date, GM said it has sold 1.465 million vehicles, up 5.4% from the first eight months of 2009.

GM reported sales at its Buick division rose 66% compared to a year ago, while those at Cadillac and GMC increased 83.1% and 12.3%, respectively. But Chevrolet, which benefited most from the "clunkers" program, saw sales fall 21.5%, to a total of 131,952 cars and trucks. Chevrolet is by far GM's largest division, selling 2.5 times more vehicles than the other GM brands combined.

Comparing results to July, GM reported sales fell 7.3%, marking the first time in 12 months that GM failed to post month-to-month sales gains.

Signs Point to Pent-Up Demand

Speaking on a conference call with analysts and the media, Johnson sounded an upbeat note about the fourth quarter, noting that the company still sees little risk of a double-dip recession.

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Low interest rates and strong corporate profits, Johnson said, are helping to offset a raft of discouraging economic news of late, including last week's downward revision of second-quarter gross domestic product growth to 1.6% from the previously reported 2.4%.

Within the auto industry, Johnson said several signs point to a continuing recovery. The average age of the U.S. vehicle fleet has increased, he said. "This tells us that there is pent-up demand building, which will eventually be relieved when the economy gets a much firmer footing."

Johnson said data showing Americans are saving more is another indication of better economic times ahead. "This higher savings rate implies that households are making progress in rebuilding their balance sheets," which could lead to increased auto sales in the months ahead.

Keeping an Eye on the Chevy Cruze

GM was the first automaker to report monthly U.S. sales figures Wednesday. Others, including Toyota Motor (TM) and Ford Motor (F), are expected to report August sales data later in the day.

On Tuesday, GM said it had begun ramping up production of the 2011 Chevrolet Cruze, (pictured, above) which will start rolling into showrooms this month. The new compact car, designed to compete with rival models such as the Toyota Corolla and Ford Focus, is estimated to get 36 mpg on the highway when equipped with a manual transmission, according to the Environmental Protection Agency.

Analysts will be watching to see how consumers respond to the Cruze, which replaces the dated Chevrolet Cobalt. GM needs to compete effectively in the compact car segment as buyers seek to downsize to more fuel-efficient vehicles.

GM's Johnson said Wednesday that its dealers have fewer than 8,000 Cobalts in stock nationwide.
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