Auto sales up, but still show weakness

NEW YORK (CNNMoney.com) -- U.S. auto sales rebounded 24% in March with virtually every automaker posting double-digit gains in sales. But the industry is not in as strong shape as those surges in sales would suggest.

The comparison is to one of the worst months for auto sales in history, when the threat of bankruptcy and possible closure hung over both General Motors and Chrysler Group and huge job losses and tight credit hurt the sales of almost every automaker.

Jesse Toprak, vice president of industry trends for TrueCar, said the March sales were a step in the right direction for the industry, but only a baby step.

Japanese automaker Toyota Motor (TM), which has been battered much of the year by recall problems, posted a 41% jump in sales, topping forecasts of a 37% gain from tracker Edmunds.com.

But Toyota paid for that increase with an aggressive set of incentives such as zero percent financing and subsidized leases designed to win back consumers who had been scared away by the drumbeat of bad news reports.

Sales at American automakers GM and Ford Motor (F, Fortune 500) both fell short of Edmunds' estimates. Overall sales at Ford (F, Fortune 500) rose 40%, while Edmunds had originally forecast that it would post a 55% increase. GM sales reported a 21% rise in sales, less than Edmunds' forecast of a 27% improvement.

Don Esmond, a senior vice president at Toyota, said the company was gratified by the bounceback in sales. He said the gain was due to customers retaining confidence in Toyota despite all the negative news reports, rather than just the financing deals it offered in the month.

"There was more at play in March than just our marketing program," he said. "It doesn't matter how good the deal is, I don't believe anyone would buy a new car or truck from a manufacturer they didn't trust."

Toyota's financing offers are set to expire Monday. Esmond wouldn't give details about what offers will come next but it is evident the company will stay aggressive.

"We will continue to take the necessary steps to keep our dealers competitive in the market place as we get back to business," he said.

The only major automaker to report a drop in sales was Chrysler Group, where sales were down 8% from a year ago, a bit worse than Edmunds' forecast. Last March, Chrysler made a last-ditch push to sell cars at whatever price they could to raise cash in an effort to stave off bankruptcy.

It wasn't until the end of that month that President Obama announced the federal government would provide the bailout GM and Chrysler would need to stay in business.

GM and Ford all said they were pleased by the results. Ford's market share continued to increase, although it lost the title it held briefly in February as the No. 1 automaker in terms of U.S. sales.

GM recaptured the U.S. sales lead. The company reported better results for the four brands that it still has in its U.S. lineup -- Chevrolet, Buick, Cadillac and GMC. Those brands together posted a 43% rise in sales. But sales of the four brands GM is dropping -- Pontiac, Saturn, Hummer and Saab -- tumbled 88%.

Similarly, Ford sales rose 43% when limited to the Ford, Lincoln and Mercury brands it still owns. Ford agreed to the sale of its Volvo brand to Chinese automaker Geely on Sunday. Volvo sales fell 18% in March.

Elsewhere, Japanese automaker Honda Motor (HMC) posted a 22% gain in sales, roughly in line with Edmunds' forecast, while sales at Nissan soared 43%, which was still a bit short of forecasts. Korean automaker Hyundai Motor Co., which includes both the Hyundai and Kia brands, reported combined sales up 18%, well below Edmunds' forecast of a 40% gain.