While General Motors Corp.’s sharp cutback in daily rental fleet sales came as no surprise, its decline in overall January deliveries was steeper than expected, a result its top market analyst blames on the auto maker’s historically low incentives.

GM U.S. light-vehicle sales fell 19.8%, with cars plunging 25.5% and trucks taking a 15.2% hit, Ward’s data shows.

The auto maker is lowering sales to fleets in an effort to boost residual prices, which historically lag behind those of its Japanese competitors.

“This is going to be a delicate balance between executing our plan and being competitive in the marketplace,” Paul Ballew, GM executive director-global market and industry analysis, says.

Both GM and Ford Motor Co. warned reporters their January numbers would take hits as a result of reductions in fleet sales, especially to daily rental firms. GM sold 56,000 fewer rental units in January vs. year ago – accounting for about two-thirds of its monthly sales decline.

Total car fleet sales were down 33%, while truck fleets dropped 36% in the month.

The push against fleets also will impact production schedules. GM revised its first-quarter North American output slate to 1.080 million vehicles (417,000 cars and 663,000 trucks), down 40,000 units, or 3.6 %, from last month’s plan.

While fleet drops were no surprise, the retail sales fall was more than Ballew had projected. Retail car sales declined about 14%, while retail trucks slipped 10%.

Most of that falloff is a result of lower, less-competitive incentives, Ballew says.

According to Edmunds.com, GM spent $3,853 per vehicle on incentives in January, down almost $350 from year ago and its lowest since April 2002. Meanwhile, Ford increased incentive spending nearly $700 vs. year ago to $3,502. The industry averaged $2,276, Edmunds reports.

“Incentive effectiveness wasn’t as good, because we had some competitors who did some things we didn’t match,” Ballew says. “In hindsight, maybe we should have (matched) – but it’s (only) January.”

GM’s truck rivalry is heating up and incentives could play a role. Ballew says Toyota Motor Corp. is spending $3,500 in incentives for its new fullsize Tundra pickup, which is base-priced higher than GM’s new trucks. That’s about $1,500 more than GM is spending on incentives for its fullsize pickups.

“I would say all three (Toyota, Chrysler Group and Ford) are throwing all kinds of hand grenades into the marketplace,” says Ballew, who doesn’t expect GM to respond in kind.

Ballew says 33% of all GM light-duty pickups sold in January are from the new GMT900 platform.

Still, the auto maker says it will have a tougher first half than second half of the year. GM doesn’t expect to have completely stocked dealerships with its new trucks until the end of March, and it won’t have its new GMC Acadia and Saturn Outlook cross/utility vehicles in most showrooms until May.

Saturn sold 4,106 Aura sedans, a volume that disappointed some analysts. Ballew says it will take time for buyers to warm up to the all-new vehicle, and advertising for the new model has not begun in earnest.

Public reaction to the Aura so far seems about the same as when Cadillac launched its successful CTS a few years ago, Ballew says.

GM still is expecting total U.S. industry sales to reach 17 million units in 2007. If the market is weaker than expected, Ballew says GM still has many “levers” it can pull, such as cutting prices or introducing other non-cash incentives.

“I’d be more concerned about this if it was March or June or August,” he says.

scanderson@wardsauto.com