In a surprise to analysts and itself, General Motors (NYSE:GM) reported an increase in U.S. sales for February. Despite high gas prices, Americans still craved their pickups and SUVs. For the month, this segment generated a 7.4% increase to counter the 3.3% drop in car sales. That brought the overall gain to 3.7%, instead of the 6.8% drop many were expecting.
Most of the credit for the surprise increase was given to the company's redesigned models. Its nearly all-new Saturn lineup led the way with a 60% gain for the month. And GM's redesigned Silverado pickup achieved something not done in 20 months: It knocked Ford's (NYSE:F) F-Series out of the top spot among pickups.
Not to take away from the automaker's success, but GM still has some bad habits it needs to break. Despite promises to get away from luring buyers with hefty incentives, the company increased incentive spending to $2,693 per vehicle. That's not quite as bad as Ford or DaimlerChrysler's (NYSE:DCX) Chrysler unit, which spent $3,084 and $3,526 per vehicle, respectively. However, it's more than double the $1,041 per vehicle spent by Toyota (NYSE:TM). If GM hopes to improve profits, it will have to find a way to reduce these costs.
But back to some good news. The sales increase is even more impressive when you factor in the fact that GM reduced fleet sales by 18% on the month. It's a good sign that management is willing to risk sales results in an effort to improve margins. Reducing low-margin sales to car-rental companies is a bold move for the company. The fact that it was able to couple the reduction with increased sales is a big win.
Despite the good month for GM, its main competition was hardly sitting idly by. I would be remiss if I didn't point out the fact that Toyota continued its charge, increasing sales by 12.2% for the month. It was strong across the board as truck and car sales both posted gains.
The top automaker -- based on cars sold in the U.S. -- is not going down without a fight. Unfortunately, it has a long, difficult battle ahead, and this represents just one good month after a plethora of bad ones. It will take several more positive months and probably a few more successful redesigns to keep GM on top. In the meantime, it should enjoy its victory and continue to improve one month at a time.
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Fool contributor Mike Cianciolo welcomes feedback and doesn't own any of the companies in this article. The Fool has a disclosure policy.
