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GM Losses Narrow in Q1

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Some optimistic news amidst months of disconcerting reports. Seems the GMT-900s are aiding GM's turnaround despite doubt expressed by the media. Significant improvement in the financial results of GM's automotive units and actions to improve efficiency are beginning to show signs of success:


Posted ImageGM Losses Narrow in Q1

GMAC and others help out North American losses.

General Motors Corp. reported a narrower first-quarter loss and beat analyst estimates with the help of profits from GMAC and its automotive units in Europe, Asia, and Latin America.

GM reported it lost $323 million, or 57 cents a share, compared to the loss of $1.25 billion, or $2.22 a share, a year earlier. It was the sixth consecutive quarterly loss. But GM would have posted a profit of 26 cents a share excluding costs for a healthcare fund, compared with the 44-cent loss analysts expected as GM's revenue rose 14 percent to a record $52.2 billion during the first quarter, according to the financial data released.

GM also cut its North American losses in half as the automaker was able to charge about $1000 more for new models such as the Chevrolet Tahoe sport-utility vehicle. "Cost-cutting efforts, healthcare concessions, and restructuring should help GM narrow N.A. losses in 2006 but they will remain substantial," noted Merrill Lynch analyst John Murphy in a note to investors.

"The first quarter represented an important milestone in GM and GM North America's turnaround," said GM Chairman and Chief Executive Officer Rick Wagoner. "Not only did we see significant improvement in the financial results of all our automotive units, we also announced numerous additional actions to improve our North American competitiveness and liquidity. And, we made significant progress in implementing those and previously announced initiatives, such as the UAW healthcare agreement and the North American capacity plan," Wagoner said in statement that accompanied the quarterly financial report.

Wagoner still has to avoid a strike at Delphi Corp., its bankrupt former unit and largest supplier, which could disrupt GM car and truck production. He also has to complete the sale of a majority stake in General Motors Acceptance Corp., which would raise $14 billion over three years and help pay for the restructuring. GM Chief Financial Officer Fritz Henderson said the company is confident it will complete both goals this year.

Meanwhile, several rating agencies have reduced GM's credit rating to junk last year and now rate the automaker at B, five levels below investment grade.

In March, GM offered buyouts of as much as $140,000 to a third of its U.S. factory employees and reached an agreement with Delphi on ways to persuade workers to retire.

Fritz Henderson, GM's chief financial officer, said it was still too early to say how many of the employees eligible for the buyout will actually take it. The buyout, however, was structured to make it as attractive as possible, he said.

Delphi wants to cut wages and benefits of union employees. The United Auto Workers has threatened to strike if Delphi is able to void their current contract, which could cripple GM's production.

GM said its net loss for North American auto operations narrowed to $987 million from $1.74 billion a year earlier. Most of the company's increase in worldwide auto production, to 2.4 million vehicles from 2.2 million, was in the region. Production increases boost revenue, recorded when automakers ship vehicles.

In Europe, GM said it earned $48 million, compared with a net loss a year earlier of $514 million. The automaker cited reduced costs, higher vehicle prices and record sales at its Saab unit. GM in 2004 said it would cut 12,000 jobs to end losses in that region.

Profit in the Asia-Pacific region rose more than fivefold, to $398 million. In GM's region including Latin America, Africa, and the Mideast, earnings fell to $29 million, from $31 million.

Link: http://www.thecarconnection.com/Auto_News/...175.A10315.html

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increased pricing on cars like the Tahoe is what good product is all about. Once you release the right car, and demand goes up, then you can reap the benefits of actually getting MSRP value for the car, rather than steeply discounted transaction prices. Of course, key to this is hitting the right note with product.

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Very good news to read about, I'm just hoping the gap becomes even more narrow in the coming quarters. It's up to the head guys at GM to surround themselves with a great board and motivation to continue with the increase in profits for each division. An important thing they need to do is make sure not to just focus on one division and not another, all of them need to continue to produce great products and not fall out of consumer demand. GM can definitley make a huge turnaround by the end of this year and I'm just waiting for it.

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The losses should narrow a bit more when the Aura, Outlook and the Vue Hybrid comes onto the market but I still think that the upsurge in gas prices will put a crimp on the GMT 900 SUV sales.

But, I believe that when the Silverado debuts GM will finally swing into profitablity but not by much because the passenger car side of the house is so weak that GM will not be able to get traction on the sliding market share.

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and this is good news. serious reduction of the burn rate. factor out the one time charges and there is an operating profit. compare this to fords bad news. wow. the other folks are right, a few more winners and sustained sales of the new releases and they'll be turning a billion soon. the only temptation to avoid will be the strong desire to get too large again (adding unnecessary fixed expenses). its always easier to get bloated than to trim down.

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