Despite Recalls, General Motors Company's Sales Are Rising
General Motors said on Tuesday that its U.S. sales were up 13% in May, as a strong holiday weekend helped the General to its best monthly sales total since August of 2008.
GM's increase soundly beat analyst estimates, as the company continued to defy expectations that an ongoing recall scandal would impact sales of its latest products.
Strong retail sales suggest that the recall isn't hurting
GM's long-delayed recall of vehicles with defective ignition switches has led to a huge public outcry, a raft of lawsuits, a record fine -- and major changes within General Motors, as CEO Mary Barra has moved aggressively to fix long-standing problems within the company.
So far in 2014, GM has recalled over 15.8 million vehicles in North America, a huge number. Many analysts, including your humble Fool, have been concerned that the recalls and attendant publicity would have a negative impact on GM's ongoing sales.
But as was true a month ago, if the recalls are impacting GM's sales, the impact is hard to see. GM's retail sales rose 10% last month, outpacing rival Ford's 6% retail gain, as GM's new pickups and other recent models posted strong gains.
Another good month for GM's latest models, including the pickups
Sales of GM's new-for-2014 pickups, the Chevrolet Silverado and GMC Sierra, were up a combined 9.5% in May as GM continued to tweak its incentive offerings on the new trucks -- and as GM's dealers received larger supplies of new heavy-duty pickups, which went into production earlier this year.
Several of GM's most recent models posted strong results. Sales of the well-regarded new Chevy Impala sedan continued to rise, up 23% -- and Corvette sales more than tripled. The new Cadillac CTS sedan rose 39%, and the Cadillac Escalade, also all-new, gained 30%. At Buick, sales of the small Encore SUV more than doubled, while the Regal sedan gained almost 50%.
Some older GM models also posted strong results: The compact Chevy Cruze was up 41%, the Traverse crossover gained 23.5%, and Camaro sales rose 30%.
That last one might seem like a surprise. Chevy's Camaro is an older model, widely expected to be replaced next year. But its key competitors, Ford's Mustang and Fiat Chrysler's Dodge Challenger, are even older. An all-new Mustang and updated Challenger are both due later this year, and Ford and Dodge dealers are selling down the last of the old models right now.
Last year's Cadillac darlings struggled again in May
GM also saw a significant gain in fleet sales in May, up 21%. But the company cautioned that the gain was something of a fluke: GM said that the big gain was due to the timing of some deliveries, May was likely to stand as its highest-volume month for fleet sales in 2014, and GM's fleet sales are likely to fall sharply in June.
GM still has some weak points to contend with. Sales of the midsize Chevy Malibu have been sluggish even after a significant refresh last fall, and the Cadillac ATS and XTS sedans seem to have lost much of the momentum we saw last year. For the year to date, Cadillac sales are actually down slightly -- an abrupt change after an exceptionally strong 2013 gain.
Recalls will weigh on earnings, but good sales should help
GM's leadership, and its shareholders, still have good reasons to be pleased. The recall scandal continues to grind on, with more revelations expected in the coming days as GM is set to release the long-awaited report on its internal investigation.
The costs of this quarter's recalls are already expected to take a $400 million bite out of GM's second-quarter earnings, on top of the $1.3 billion hit that GM took for recall-related costs in the first quarter. And more recalls could still be on the way.
But GM's U.S. sales are holding up, as is its pricing -- GM says that for the year to date, its average transaction prices are up about $2,700.
So far, at least, the company and its new CEO are weathering the recall storm.
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The article Despite Recalls, General Motors Company's Sales Are Rising originally appeared on Fool.com.John Rosevear owns shares of Ford and General Motors. The Motley Fool recommends Ford and General Motors. The Motley Fool owns shares of Ford. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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