GM narrows loss by 75% in quarter

April 21, 2006|By RICK POPELY | RICK POPELY,CHICAGO TRIBUNE

General Motors Corp., which posted a narrower first-quarter loss yesterday on higher revenue, said it expects further improvement this year from previously announced cost-cutting moves.

The troubled automaker lost $323 million, or 57 cents a share, compared with $1.3 billion, or $2.22 per share, in the corresponding quarter last year. Revenue grew 14 percent, to a record $52.2 billion.

Results were better than some analysts had expected and encouraged investors, who bid up GM's shares 10 percent, or $2.07, to $22.64, in New York Stock Exchange trading.

"Their new products are doing well, and the company is on the right track to cut costs. They're making progress," said Linda Bannister, a research analyst with Edward Jones.

While Bannister believes the world's largest automaker could be profitable in 2007 if its large trucks continue to sell, Edward Jones maintained its "sell" rating on GM stock.

"The question is how sustainable this is. Where will they be in '07 and '08, when these products start to show some age?" Bannister said. "It remains to be seen if they can produce other products people want to buy without incentives."

Chief Financial Officer Fritz Henderson confirmed that strong sales of GM's new full-size sport utility vehicles, among its most profitable models, helped lift revenue. The 2007 Chevrolet Tahoe, GMC Yukon and Cadillac Escalade boosted sales of GM's large SUVs by 8 percent, while other automakers reported double-digit declines. The run-up in gasoline prices could be a factor.

"Are we concerned? Yes," Henderson said. "But the people who want full-size sport-utes want them for a particular reason," such as towing, he said, adding that GM's new SUVs have better fuel economy than rival models.

Burnham Securities analyst David Healy said he was surprised by GM's performance, especially in light of the automaker's $10.6 billion loss for 2005. He said he thinks GM could show an operating profit in 2006, though special charges will likely result in a net loss.

If not for a $1 billion charge to cover health care expenses, GM would have shown a profit in the first quarter.

Henderson maintained the company's blackout on earnings guidance that started a year ago, but said the automaker expects to lower its structural costs by $4 billion by year-end through previously announced cuts. Those moves include closing 12 North American plants and trimming 30,000 union jobs by 2008.

Rick Popely writes for the Chicago Tribune.

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