High levels of vehicle inventory at General Motors Corp. will be beneficial during the fall selling season, a company executive says.

However, GM introduces a new national marketing program effective June 3-July 7 that builds on May incentives by increasing financing terms from 60 months to 72 months and upping cash spiffs from $3,000 to $4,000 for some models. Advertising supporting the new incentives hit June 5.

GM sales totaled 431,540 units in May, up 4.1% from the 399,171 cars and trucks delivered year-ago. But its inventory levels didn’t decline from April, finishing May at roughly 1.25 million units, or about 300,000 units higher than usual.

“We look at our inventory levels as manageable, (but) certainly at the higher end of our inventory band,” says Paul Ballew, GM general director-market and industry analysis.

“Our balance is very good; we’re about two-thirds truck. If we’re going to build inventory, that’s where we’d like to build inventory – given our strength,” he says. “We are going to have to, as are all other manufacturers, manage this (inventory) as we head into the third quarter.”

Assuming a 16 million-unit seasonally adjusted annual rate for July-September, which is roughly the year-to-date pace, GM’s inventory levels likely will finish the third quarter at approximately 1.25 million units – more than 370,000 units higher than year-ago.

Adding to the concern: GM’s market share is declining again (27.3% during January-May vs. 28.1% year-ago), and it is highly likely that the third-quarter SAAR will be significantly lower than year-ago’s 17.76 million-unit SAAR.

“The last few years going into the fourth quarter we’ve been pretty lean on inventory. So you’ve got to find the right balance,” Ballew notes, adding that GM’s retail share has been steady since the late 1990s. “In fact, last year when we got into September and October, we were very constrained on old-year model inventory.”

GM believes the traditional fall sales surge will be aided by the U.S. economic recovery, which will begin before the end of the year and accelerate in early 2004. The auto maker is forecasting 2.5% economic expansion during June-December, Ballew says.

President Bush’s $350 billion tax cut plan provides optimism, as well. It should boost gross domestic product by 0.5% and improve consumer spending, GM predicts. “I am optimistic (about the U.S. economy) relative to other developed markets,” says Ballew.

But government data released June 4 provides plenty of reasons to be pessimistic. Jobless claims rose in late May, according to the U.S. Dept. of Labor. And the Dept. of Commerce says factory order were down 2.9% in April.