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GM: Will Big Sales Mean Big Profits?

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In a month where many big-name automakers posted just so-so sales results, General Motors (NYSE: GM  ) did quite well for itself: GM's U.S. sales were up 7% in February, a good gain over a rough year-ago showing.

That compares well with the overall market's likely increase, which analysts expect to come in at just under 4% once all the numbers are tallied. And it's solidly ahead of the roughly 5% gain analysts expected for GM on the month.

So what went well for the General? Quite a few things, it turns out -- though there were a couple of red flags as well.

Will big truck sales lead to big profits?
For GM shareholders, the most striking number has to be the increase in the General's full-sized pickup sales. GM's pickup sales were up 28% over year-ago totals, well ahead of the 15% gain posted by rival Ford (NYSE: F  ) , as an uptick in new-home construction drove increased demand.

That's significant. Pickups are among GM's most profitable products, a key driver of profits in GM's all-important North American region. That's why investors have been watching GM's truck inventories carefully in recent months. The company's inventories swelled to worrisome levels late last year, as GM moved to stockpile pickups ahead of a planned refitting of its truck factories -- leading to concerns that deep discounts would be required to clear out excess trucks.

GM has tried to assuage those concerns, pointing out (reasonably) that its truck factories will be offline for several weeks while they are fitted with new tooling to produce GM's redesigned next-generation pickups, due at dealers in late spring. But its inventories continued to swell -- to 117 selling days' worth as of the end of January.

Things are finally looking up on that front: GM reported on Friday that its pickup inventories had fallen to 97 days' worth as of the end of February. That's comfortably closer to the 90 days' worth considered optimal by most industry-watchers, and it comes thanks to those strong February sales.

But those sales may have come at a cost. While Ford's spending on incentives was likely down in February, according to estimates from analyst Jesse Toprak at, GM's may have been up a bit over year-ago levels. That could have been a driver of pickup sales – but it could also end up cutting into GM's first-quarter profits.

A strong showing as Cadillac gathers steam
Looking beyond pickups, GM had a good month on several other fronts. Cadillac sales were up 20% in February, powered in part by the growing success of its hot ATS sedan. February was the best month yet for the ATS, as it continues to gain traction amid glowing reviews. The compact luxury sedan, a strong entry aimed directly at the class-standard BMW 3-Series, has quickly risen to become the second-best-selling Cadillac after the popular SRX crossover SUV.

While SRX sales were down, most of GM's other crossovers posted solid gains, just as you'd expect in a snowy February. Sales of the Chevy Equinox were up 15.7%, and the GMC Terrain posted a 21.2% gain. And interest in the Chevy Volt continued to build, as sales of the innovative hybrid were up nearly 59% in February.

But the story elsewhere was mixed, as Chevy's bread-and-butter Malibu, Cruze, and Sonic all posted sales declines -- though the weather in many parts of the country (unseasonably warm a year ago, snowy last month) may have affected year-over-year comparisons. Still, it's clear that GM needs more new products.

Fortunately, more new products are coming soon.

Next up: New sedans for Cadillac and Buick
GM's ongoing new-product offensive will continue at the New York Auto Show later in March, where GM has said it will show three new premium sedans: the Buick LaCrosse and Regal, and the important all-new Cadillac CTS.

The Cadillac in particular will be worth watching closely. Rebuilding the Cadillac brand is key to GM's global ambitions, and the CTS -- which will compete directly with the BMW 5-Series and Lexus ES sedans -- needs to be a "no excuses" top-notch competitor when it makes its debut. Will it be? Watch this space.

It's true that decades of mismanagement of General Motors led to a painful bankruptcy in 2009, but it emerged a leaner, stronger company. GM's turnaround, however, is still a work in progress. Investors around the world are wondering whether GM has what it takes to reclaim its former glory. To help you sort fact from fiction, I've put together a brand-new premium research report telling you what you really need to know about GM and its turnaround. If you own or are thinking about owning GM, then you don't want to miss this report. Click here now to get started.

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