U.S. auto sales fell by about 30 percent in May from a year earlier, but aggressive discounts helped steady results for the battered industry, according to monthly results released on Tuesday.

Industry-wide auto sales for the month were on track to top 10 million units on the annualized basis tracked by analysts -- a better result than most economists had expected.

That would represent the highest sales rate for 2009, and industry executives seized on that development as early evidence that the U.S. auto market could be pulling out of its steepest slump since the early 1970s.

One month does not a recession end, but it was definitely a step in the right direction, said Al Castignetti, general manager of Nissan in the United States.

Analysts had been expecting sales close to 9.4 million units for May, compared with the 14.3 million unit rate for the industry a year earlier.

Ford Motor Co, the only American automaker to have avoided bankruptcy, had the strongest month among major automakers with a sales decline of 24 percent.

Sales for General Motors Corp, which filed for bankruptcy this week, were off 30 percent. Chrysler, operating in bankruptcy since the end of April, saw its sales drop 47 percent.

Cleary we're starting to see both globally and in the United States, we think, the industry starting to make a turn for the better, GM sales analyst Mike DiGiovanni told analysts and reporters on a conference call.

Sales for Japan's Toyota Motor Corp and Honda Motor Co were off 41 and 42 percent, respectively.

Rival Nissan Motor Co, which spent more heavily on discounts, saw sales drop by only a third.

Nissan said it had seen more car shoppers in its showrooms than during any month since August of last year after running a heavily promoted sale in May that offered discounts and low-cost leases on vehicles like the Maxima.


Ford executives said the company's performance in May had raised the automaker's confidence in a second-half recovery in the U.S. market as the economy begins to gain strength.

That rebound is crucial for Ford as it attempts to steer clear of the reliance on U.S. government funding that is now reshaping GM and Chrysler in bankruptcy.

For consumers and the industry, the next 90 days will be volatile and especially challenging. Frankly, we expect to see a lot of fire sales in the market, said Ford vice president of sales Ken Czubay. We are already anticipating wild swings in production from some of our competitors.

GM filed for bankruptcy on Monday, beginning what the Obama administration hopes will be a fast-track restructuring. The slimmed-down company that will emerge will be 60 percent owned by the U.S. government.

The sale of most of Chrysler's assets to Italian automaker Fiat will take effect on Friday, clearing the way for the automaker to emerge from bankruptcy after about a month.

Chrysler remained the most aggressive of the major automakers in discounting, but incentives were up across the board, analysts said.

Industry-tracking service Edmunds.com estimated that major automakers had spent about $2.6 billion on discounts in May, up 5 percent from a month earlier. Incentive spending by the major Japanese automakers was at a record level, it said.

In addition to incentive programs underwritten by the major automakers, a number of the 789 Chrysler dealers who are set to lose their franchises this month resorted to fire sale discounts to clear out remaining inventory.

Ford said it had reduced incentive spending in May and officials believe market share for its Ford, Lincoln and Mercury brands grew to its highest level since 2006.

The seasonally adjusted annual rate of auto sales is a key measure used by economists to gauge the health of the U.S. economy.

At the height of the recent credit-fueled boom, U.S. auto sales reached 17 million units in 2005.

GM said this week that its restructuring in bankruptcy would allow it to break even at an industry-wide sales rate of 10 million vehicles.