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Old 10-25-2006, 11:03 AM   #1
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Default GM posts narrower net loss after cost cuts

GM posts narrower net loss after cost cuts


DETROIT (Reuters) - General Motors Corp. (NYSE:GM - news) on Wednesday posted a quarterly operating profit that more than doubled Wall Street estimates, citing progress in its turnaround effort including cost cuts for labor and health care.

GM, which is slashing more than 34,000 jobs and closing 12 plants, said it is on track to cut $9 billion in operating costs this year.

"They are still in a little bit of a honeymoon as far as cost cutting goes and they are getting really the undiluted benefits of the cost cutting," Argus Research analyst Kevin Tynan said.

The world's largest automaker, which lost $10.6 billion in 2005, posted a narrower net loss of $115 million, or 20 cents per share, compared with a loss of $1.7 billion, or $2.94 per share a year earlier.

Excluding $644 million in charges for writedown of the value of the GMAC financial arm, the reorganization of the Delphi auto parts maker and other items, GM posted an operating profit of 93 cents per share.

Analysts, on average, had expected an adjusted profit of 45 cents per share, according to Reuters Estimates.

Total revenue rose 3.6 percent to $48.8 billion from $47.1 billion a year earlier.

The improved results come at a time when GM executives are bracing for a possible proxy fight with billionaire investor Kirk Kerkorian, the automaker's largest individual shareholder.

GM shares, which have risen more than 80 percent this year, rose 1.2 percent to $36.65, in Wednesday's early electronic trade.

Kerkorian's financial adviser Jerry York quit the automaker's board earlier this month, after GM nixed the possibility of a three-way alliance with Nissan Motor Co. Ltd. (7201.T) and Renault SA (RENA.PA).

York has flagged GM's negative cash flow as an area of concern. GM said cash totaled $20.4 billion at September 30, 2006, down from $22.9 billion at June 30, 2006. That figure includes the liquid assets of a trust fund for employee health care.

The automaker recognizes that reversing its cash burn is an "important priority," Chief Financial Officer Fritz Henderson said on Wednesday.

"We need to get that turned around," Henderson said, speaking to reporters after the release of its third-quarter results.

GM narrowed the range of its estimated exposure for benefit guarantees to bankrupt Delphi Corp. (Other OTCPHIQ - news) to between $6 billion to $7.5 billion on a pre-tax basis, from a previous estimate of $5.5 billion to $12 billion.

GM, which spun off Delphi in 1999, has been in talks with the parts maker and its unions over a cost-saving labor deal that would allow Delphi to emerge from bankruptcy.

In a statement, GM Chief Executive Rick Wagoner called the resolution of a Delphi deal and the closing of the sale of its controlling stake in General Motors Acceptance Corp. "near-term priorities."

GM agreed to sell 51 percent of GMAC unit to a consortium led by Cerberus Capital Management for $14 billion. Wagoner expects the deal to close in the fourth quarter.
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