Automaker posts earnings from operations far better than even the most optimistic outlooks, but buyouts and early retirements lead to net loss.

By Chris Isidore, CNNMoney.com senior writer
July 26 2006: 7:42 AM EDT


NEW YORK (CNNMoney.com) -- General Motors roared past even the most optimistic Wall Street forecasts Wednesday as it reported a large operating profit and made money from its core auto operations for the first time since 2004.

The nation's troubled No. 1 automaker reported a net loss of $3.2 billion, or $5.62 per share, due to charges it took to trim staff using buyouts and early retirement bonuses. But GM (Charts) also reported income excluding special items of $1.2 billion, or $2.03 a share, compared to the loss of $231 million, or 41 cents a share on that basis in the year-earlier period.


Analysts surveyed by earnings tracker First Call had forecast EPS of 55 cents a share on that basis. The most optimistic forecast was for EPS of $1.11.

Shares of the Dow component were up $1.34, or 4.4 percent, to $32 in pre-market trading on Inet, although that was off of earlier pre-market highs immediately after the report.

GM's global automotive operations earned $362 million on an adjusted basis, excluding special items, compared to a $899 million loss on that basis a year earlier.

Most of that improvement came in its core North American auto unit, which still posted a $85 million loss. But that was an improvement from the $1.1 billion loss there a year earlier.

Profit excluding items also improved in its two of its three other regions - Europe and Latin America/Africa/Middle East, while profit slipped only narrowly in Asia-Pacific.

"With the support of our employees, unions, dealers, suppliers and stockholders, we are moving rapidly and aggressively to address our challenges and restructure GM for future success," said a statement from GM Chairman and CEO Rick Wagoner. "It's rewarding to see our automotive business return to profitability on an operating basis and a clear sign that we're on the right track, but there is more work to be done."

Much of GM's earnings surprise came from strong revenue and sales, despite its declining market share in its core U.S. market.

Overall revenue was $54.4 billion, up 12.2 percent.

Revenue outside of its finance unit was up 11.7 percent from a year earlier to $44.9 billion. That compares to Wall Street forecasts of $42.9 billion. The gain came on a better mix of products sold, including strong sales for its new large SUV's compared to a year earlier.

Total vehicles sold fell 7 percent worldwide to 2.4 million vehicles, and 17 percent in the United States during the quarter.

The company had reported a profit in the first quarter when it restated some results due to accounting for changes in its health care expenses. But that profit came completely from its GMAC finance unit, with its auto operations continuing to lose money.