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Overhaul helps drive GM's recent profits

By ASSOCIATED PRESS
Published March 15, 2007

DETROIT - General Motors Corp. accomplished something in the fourth quarter of 2006 that domestic automakers have been unable to do for some time: It reported a profit.

Now comes the hard part: repeating that success. The company's chief financial officer, Fritz Henderson, stopped short of promising it this year, but he pledged continued improvement over last year's numbers.

For the quarter, the world's biggest automaker reported net income of $950-million because of the benefits of cost cuts, higher automotive revenues and a gain on the sale of its finance division. It was a turnaround from a $6.6-billion loss in the same period a year ago.

GM, which is undergoing a massive overhaul that includes shedding thousands of jobs and closing plants to become more competitive with such Asian automakers as Toyota Motor Corp., wound up with a loss of $2-billion for all of 2006 compared with a restated loss of $10.4-billion in 2005.

Henderson said despite the fourth-quarter profit, no one at GM is declaring victory over the company's financial woes.

He would say only that he expects GM's year-over-year performance to improve in 2007, and he would not predict whether the company would continue to be profitable through the year.

Worldwide, the company said it made $228-million selling cars and trucks for the quarter and $422-million for the calendar year. Its North American automotive operations lost $14-million for the quarter and $779-million for the year, but the annual figures were $5-billion better than the previous year, Henderson said.

The company also cut structural costs by $6.8-billion last year, mainly through buyouts and retirement offers accepted by more than 34,000 hourly workers. It expects to reap the results of $9-billion in cuts this year.

But GM still is losing money in North America and has $47.4-billion in employee health care and other long-term liabilities, as well as other challenges that will have to be addressed in contract talks this year, Henderson said.

"We still expect to have negative cash flow in 2007," Henderson said.

GM shares fell 26 cents to close at $30.25 on the New York Stock Exchange. They have traded in a 52-week range of $19 to $37.24.

[Last modified March 15, 2007, 02:34:28]