March 27 (Bloomberg) -- General Motors Corp. said better- than-expected sales of new models such as the redesigned Chevrolet Tahoe are stabilizing its share of the U.S. retail market as it seeks to reduce incentives and low-profit sales to rental agencies.

The strategy, which includes cutting deliveries to rental- car companies by 100,000 in 2006, will result in monthly sales declines in the first half of the year, GM North American sales chief Mark LaNeve said today. The automaker, which plans to increase sales to retail customers, lost $10.6 billion last year as its share of the U.S. market fell to an 80-year low.

``There's a strong sense of urgency to have better results in 2006 and improve on those in 2007,'' LaNeve said on a conference call. GM, the world's largest automaker, cut prices on most of its models this year as it reduces incentives.

``The new models are doing pretty well,'' said Pete Hastings, a Morgan Keegan & Co. analyst in Memphis, Tennessee. ``We applaud GM for reducing its dependence on unhealthy fleet sales and aggressive promotions. The withdrawal pain should be worth it in the long run.''

GM expects overall March sales to fall because of the reduced rental-car deliveries, GM sales analyst Paul Ballew said on the call. He also said transaction prices should rise as much as 4 percent in the month.

Sales of new models in the first two months of the year rose 23 percent as sales of existing models fell 6.8 percent, GM said. The company has realigned its marketing so that workers focus on individual brands, such as Pontiac or Chevrolet, instead of regions.

Yearly Sales

GM may still ``have a shot'' at ending 2006 with a sales increase similar to the 1.5 percent rise it has achieved so far this year, LaNeve said in an interview.

``Over the full course of the year, we're looking to improve our business,'' LaNeve said. ``While we do that, our sales to the daily rent companies is going to come down so we have to make that up on the retail side and that's what we intend to do.''

The 2007 Chevrolet Tahoe is selling this month at an annual rate of about 120,000 vehicles, up from a pace of fewer than 100,000 in February, according to a presentation by LaNeve. The average Tahoe sport-utility vehicle sold for about $41,360 in February, compared with $33,394 for the 2006 model a year ago, GM said.

2006

The automaker's U.S. sales through February rose 1.5 percent as its market share fell. Six of GM's eight brands reported sales increases. Sales for the Tahoe, one of several redesigned SUVs GM is bringing to market this year, have increased 50 percent in 2006 after declining 18 percent in 2005.

GM's 8.375 percent note maturing in 2033 rose about .75 cent on the dollar to 74.75 cents to yield 11.36 percent as of 3:01 p.m. New York time, according to Trace, the bond-price reporting service of the NASD.

Shares of GM rose 28 cents, or 1.2 percent, to $22.93 at 4:16 p.m. in New York Stock Exchange composite trading. They have advanced 18 percent this year after declining 52 percent in 2005.

GM's average incentive offered to buyers declined to $2,540 a vehicle in February, 10 percent lower than in January and 26 percent lower than in February 2005, Woodcliff, New Jersey-based Autodata said.

The average sale price of a new GM vehicle was $28,188 from March 1 through March 19, 5 percent higher than in March 2005, according to Power Information Network, a unit of J.D. Power & Associates.

Toyota

GM's U.S. sales fell 4.3 percent in 2005 while its market share declined 1.3 percentage points to 26.2 percent. The U.S. market share for Toyota Motor Corp., the world's second-largest automaker, rose to 13.3 percent from 12.2 percent.

Wagoner is trying to cut annual costs by $7 billion this year by closing plants and eliminating 30,000 union jobs by 2008. GM last week offered buyouts as high as $140,000 or other incentives for eligible workers to retire.

GM also is preparing to fire hundreds of salaried workers tomorrow and next month, according to people at GM familiar with those plans.

GM faces another challenge in labor negotiations between Delphi Corp., its more parts unit, and its unions. Delphi Chief Executive Officer Steve Miller says if the unions don't agree to wage cuts by March 30, he'll ask a bankruptcy judge to throw out existing contracts. Delphi workers have said they would strike if that happens and analysts say a prolonged walk out could push GM closer to bankruptcy.

In Detroit, a federal judge is scheduled to rule this week on GM's plan to save $1 billion a year by reducing retiree health benefits.

On March 16, GM missed a deadline for filing its annual report with the U.S. Securities and Exchange Commission because it discovered errors at a mortgage unit. GM said it expected to refile by the end of the month.

To contact the reporter on this story: Barbara Powell in Southfield, Michigan, at Bpowell4@bloomberg.net; Jeff Green in Southfield, Michigan, at jgreen16@bloomberg.net

Last Updated: March 27, 2006 18:02 EST