GM Sales Slow Slightly in March; Cruze Hitting on All Cylinders

The torrid sales pace General Motors set for itself at the start of the year slowed in March as the auto maker backed off its aggressive pricing strategy, but deliveries of its important new Chevrolet Cruze compact car appear to be hitting their stride.

GM sold 206,021 vehicles last month, up 5.8% from year-ago’s 188,034, according to Ward’s data. There were 27 selling days in the month, compared with 26 in like-2010.

The auto maker’s performance in March fell slightly from the 207,028 vehicles it delivered in February, although far exceeding January’s 178,897. But even January was a strong performance for typically the worst month of the year for new-vehicle sales.

Don Johnson, GM’s chief U.S. sales analyst, says the auto maker expected the ramp-down as it took a breather from its industry-leading incentives and rivals increased their discounting.

“Our strategy earlier this year was to come out of the gate strong,” Johnson tells journalists and Wall Street analysts on a conference call to discuss GM’s March results.

“We succeeded in what we set out to do,” he says. “We had a very strong January and February, as our incentive levels and our marketing efforts were higher than the rest of the industry. We knew (the) strong performance would create some payback in March.”

March retail sales, a more profitable channel for auto makers than fleet sales, grew 17%, GM says, but slipped 8% from February’s result. Johnson says GM still expects a gain in its retail share in March.

Johnson says GM’s incentives, as a percentage of the auto maker’s average transaction prices, fell below the industry average in March. For the quarter, GM’s incentives as a percentage of ATP dropped below cross-town rivals Ford and Chrysler but remained above the industry average.

More than 50% of Cruze sales coming from customers trading in non-GM vehicles.

“Pricing is a fluid environment,” Johnson says of GM’s marketing strategy going forward this year. “We’ll make sure we are competitive.”

A big piece of GM’s ability to stay competitive and keep fueling momentum to its financial turnaround from the 2009 bankruptcy lies with the new-for-’11 Chevy Cruze compact car.

GM delivered 18,018 Cruzes in March, or four times as many Cobalts sold in like-2010. That’s down about 500 units from GM’s big month in February, but some 3,000 units ahead of January and up 5,000 on December, when the three shifts of production at Lordstown, OH, hit intended output levels.

The Cruze’s March performance among GM’s passenger cars was second only to the Chevy Impala, which sold 18,063 units in the month, with 13,491 of those going to fleet customers. By comparison, fleet sales accounted for 2,477 of Cruze deliveries in March, or less than 10%.

A far better car than the model it replaces, GM reports the Cruze is selling on average for $4,000 more than the Cobalt, $2,000 more than the Honda Civic and $3,000 more than the Toyota Corolla.

The average Cruze sells for $19,000, and the lowest trim level accounts for just 20% of sales. More than 50% of Cruze sales come from a customer trading in a non-GM vehicle. “Very good (conquest) news for us,” Cruze Marketing Manager Mike Wideman tells Ward’s.

The car also continues to make headway for GM in its weaker U.S. markets, such as California. And about 20% of current orders from the West Coast are for the Eco variant, a top-of-the-range LTZ model achieving 42 mpg (5.6 L/100 km).

Wideman says new customers cite fuel economy, exterior styling, ride and handling and safety as key drivers behind jumping into the GM fold with Cruze.

Johnson also reports GM continues to iron out its distribution difficulties after choosing not to renew a contract with Allied Automotive Group.

Allied reportedly sought a price increase from GM and at one point held more than 1,700 of the auto maker’s vehicles, and GM has filed a lawsuit seeking their return.

“We’re in pretty good shape,” Johnsons says of the situation, which saw Jack Cooper Transport take over much of Allied’s work. “We seem to be over that largely right now. Dealers seem to be happy.”

GM closed the month with an inventory of 574,000 units, or 57,000 more than February and 149,000 ahead of March 2010.

Jonson says GM continues to monitor the situation in Japan, where the earthquake and tsunami have pinched parts supplies to auto maker assembly plants around the world. “We have good levels of inventories,” he says.

GM confirms its outlook for annual vehicle sales in the U.S. this year of between 13 million and 13.5 million units, including heavy-duty models.

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