Last month was the auto industry’s best May since 2007 with a 6.7 percent rise in new sales to 1.54 million, putting the industry’s seasonally adjusted annual rate over 16 million units. Surprisingly, despite 2.6 million recalls to start the year, General Motors (NYSE:GM) outperformed peers like Ford Motor Company (NYSE:F) with a 12.6 percent increase in monthly sales. Some analysts attributed the performance to pent up demand, and now foresee increased demand for the latter part of the year. However, should you be so bullish?
In the month of May, GM’s 12.6 percent increase in sales significantly outpaced Ford’s 3 percent growth. Prior to May, General Motors’ U.S. auto sales had actually fallen 2.3 percent versus an industry that saw a 1.5 percent increase. As most would expect, GM’s weakness in the first four months was seen as an effect of its ongoing recall drama. While Ford’s recall volume has been significant as well, it’s not near what we’ve seen with GM, and its sales have naturally been better.
With that said, after 2.6 million vehicles recalled in the U.S., and a strong May, investors thought that GM could finally move forward. However, June has been a busy month for General Motors, including six recalls totaling more than three million units worldwide. In total, GM has issued 44 recalls covering 20 million vehicles globally, with potentially more on the way.