Car Makers Report Surprising Sales Surge

Auto makers sold a surprising 2.8% more cars and trucks in the United States last month, largely by enticing customers with big cash rebates, according to figures released Friday.

Chrysler Corp. posted a head-turning 20% sales gain from February 1995 and broke a five-month trend of lower car sales from a year ago. General Motors Corp. also beat analysts’ estimates with a 5.3% sales increase.

With Ford Motor Co. still to report sales, the auto industry appears to have hit a seasonally adjusted sales pace of 15.3 million vehicles, well above the 14.6 million a year ago. But analysts cautioned that the industry’s performance does not signal a significant strengthening of the overall economy.

“This is pretty consistent with an expansion that is continuing to straggle forward,” said Paul Ballew, chief economist for J.D. Power & Associates. “We’ve seen a lot of volatility over the last few months.”

Without the industry’s generous incentives, including low financing rates encouraged by another cut in interest rates by the Federal Reserve Board, last month’s results would have been quite different, analysts said.

“If you don’t have some kind of deal going, you won’t get people in the door,” said Joseph Phillippi, a Lehman Bros. analyst. “No one wants to buy retail.”

Auto makers resorted to rebates to trim their large inventories. For example, Highland Park, Mich.-based Chrysler boosted incentives last month to between $800 and $3,000 on most cars.

It seems to have worked: After posting a 13% plunge in car sales in January, the auto maker’s car sales rose 7% in February to 79,300.

General Motors, based in Detroit, has been the most conservative among the big auto makers in dangling incentives before consumers. The company is trying, with some success, to buck the industry’s aggressive sales techniques by offering what it says are everyday low prices.

“It would appear their value pricing strategy is working,” Phillippi said.

GM’s truck sales rose 5.4% over a year ago to 163,500. The company’s car sales, led by brisk sales of the Chevrolet Lumina and Cavalier, increased 5.2%. GM is offering up to $500 cash back on Cavaliers.

The Japanese auto makers had mixed results, with Honda Motor Co. racking up a solid 20% gain in U.S. sales last month while Nissan Motor Co. posted an 8.3% increase.

But Toyota Motor Co.’s February sales slipped 0.8%, and Mazda Motor Co. reported a 20% drop.

Japanese auto makers are also playing the rebate game, Phillippi said. “The Japanese are throwing lots of incentive money at the market--they need to do that to remain competitive on price.”

Dearborn, Mich.-based Ford is expected to show a slight dip in sales when it reports its February sales Tuesday.