GM reports profit excluding special items - Apr. 20, 2006

GM reports profit excluding special items - Apr. 20, 2006

So are things shaping up for GM?

The embattled automaker reported that it earned $152 million, or 26 cents a share, excluding all special items in the period, such as a $1 billion pre-tax charge related to an agreement to change health care coverage for hourly retirees and their families.

Still, the company reported an operating loss of $529 million, or 94 cents a share when it excluded most of the special items but included the health care charge. It was not immediately clear which numbers are accepted by analysts surveyed by earnings tracker First Call, who had a consensus forecast of a loss of 44 cents a share. The company lost $988 million, or $1.75 a share excluding special items in the year earlier period.

It sounds like it. They are getting their operations in order. They are trying to clean up the Delphi mess, and they are making some decent cars, if my recent Hertz experience is any indication. While things are improving in the US, the money is actually coming from the land of BMWs, Volkswagons, and Fiat, where the people aren't used to reliable cars.

But the company's European operations returned to profitability, and profits improved in its other two regions -- Asian-Pacific and Latin America, Africa and the Middle East.

Where they do especially well in the US is not in making cars, but in making loans.

The company's results were lifted by continued strong results at its finance unit, GMAC, even though profits there slipped to $605 million from $728 million a year earlier. GM recently announced plans to sell just more than half of that unit, though, in an attempt to help it eventually return to an investment-grade credit rating.

So it sounds like they are building a strong, diversified company where everything is starting to improve.

Don't believe it. They still have expensive retirees, a huge infrastructure, too many brands, and labor challenges.

The big problem for GM, though, will happen on 2008-07-09. That's when gas will hit $5 gallon for good. The cars GM has been most successful with?

The company said its revenue per vehicle sold in North America was significantly higher in the quarter than a year ago due to the introduction of new models of its large SUV's.

"We are very pleased with the market's reaction to our launch products," said Wagoner's statement. "In the first three months of the year, our new products accounted for about 30 percent of our total sales -- more than double where we were a couple of years ago. We're especially encouraged by the early sales of the Chevrolet Tahoe, GMC Yukon, and Cadillac Escalade."

Until GM can shrink it's product lines (do we really need Buick?) and develop a significant and profitable presence in the small- to mid- size car market, they will continue to be in trouble.

Today was a good day for the stock, but GM is in too tenous a position to be considered anything but a speculative buy. That's my stock tip for the day.