Profit outlook lifts GM stock

[Flybrian]

BY MICHAEL ELLIS FREE PRESS BUSINESS WRITER

General Motors Corp. shares closed above $30 for the first time in more than nine months on Tuesday amid growing expectations that the troubled automaker could post an operating profit today.

The higher stock price put billionaire investor Kirk Kerkorian back in the black on his nearly $1.7-billion investment in GM stock.

If GM beats earnings forecasts, analysts say CEO Rick Wagoner could tout the figures as proof that his turnaround plan is succeeding and the automaker doesn't need to join an alliance with Nissan Motor Co. and Renault SA.

"I believe that it will demonstrate beyond any possible doubt that Mr. Wagoner is turning around GM without any outside help," said David Healy of Burnham Securities, who is the most bullish analyst on GM. "If I'm right, they're going to put North America into the black this year."

An operating profit in the second quarter, following the net profit in the first quarter, could strengthen Wagoner's hand when Kerkorian is pushing for the alliance with Renault and Nissan.

After a July 14 meeting between Wagoner and Carlos Ghosn, the chief executive of Renault and Nissan, GM said management would spend three months studying the proposed partnership.

Although Wagoner said he would keep an open mind about a deal, supporters of GM say the alliance makes little sense for the automaker and they view it as a threat to Wagoner's job. People close to Kerkorian said he is unhappy with the pace of change at GM after last year's $10.6 billion in losses, the worst results since the early 1990s.

GM's better second-quarter results, coupled with the stronger stock price, might help secure Wagoner's position.

GM shares ended Tuesday at $30.66, up 99 cents, or nearly 3.3%, for the day. They last closed above $30 on Oct. 17 when GM announced it had reached an agreement with the UAW on concessions for retiree health care costs.

Kerkorian, who owns nearly 56 million shares, or 9.9% of GM, paid an average of $30.24 on his investment, according to a Free Press analysis.

GM is expected to report a multibillion-dollar loss for the three-month period ended June 30 due to a one-time charge of about $3.8 billion for the costs of enticing about 35,000 U.S. hourly to retire early or quit.

But Wall Street analysts focus on operating results, which exclude the charge and are expected to show a profit.

GM's potential new partner Nissan reported a 4% rise in its first-quarter net income on Tuesday to $944 million.

The results may appear strong compared to GM forecasts. GM last reported a $1-billion quarterly profit in the second quarter of 2004.

Ghosn said that Nissan faces only short-term challenges, due to a dearth of new car and truck introductions, which has caused vehicle sales to fall.

Nissan has promised stronger results later this year.

Meanwhile, GM's success at cutting annual costs by $8 billion could result in profit-sharing checks for U.S. autoworkers for the first time since 2004, Healy said.

Excluding the charge, Healy forecasts a second-quarter profit of $1.17 per share, or about $660 million, for GM, far above the average forecast of 53 cents per share, or about $300 million.

In the second quarter last year, GM lost $987 million, or $1.75 per share.

GM may see substantial improvement in North America, where it could cut losses by $1 billion to around $400 million, according to BNP Paribas analyst Bradley Rubin. GM's recent changes to its white-collar health care benefits will save $700 million alone, Rubin said.

GM is also seeing positive signs in its U.S. sales. Its new full-size SUVs are selling well and sales incentives are down about 25% from last year.

Consumers are also paying about $1,200, or nearly 5%, more on average for GM vehicles.

The better results at GM are in contrast to Ford Motor Co., which last week reported a $123-million loss in the second quarter and warned it would have to take more restructuring actions.

[Chicagoland]

What's "Buickman" think? And "The Truth about cars"? To them GM is supposed to be bankrupt by now, right?

[ZL-1]

What's "Buickman" think? And "The Truth about cars"? To them GM is supposed to be bankrupt by now, right?

172343[/snapback]

Quoting a future GM deathwatch (nr. 2 billion or so): "GM turned a profit, It's time for the CEO to leave"

[nyscene911]

Just to elaborate a little bit on this.

One week ago, Stockscouter ranked GM stock as a 5(pace same as market, normal-risk). Now they've raised it to a 6--outperform the market, low risk.

Toyota, otoh, was an 8 last week, but has now been downgraded to a four.

Good times for GM, it appears.

Edit: here's links

http://moneycentral.msn.com/investor/srs/s...n.asp?Symbol=GM

http://moneycentral.msn.com/investor/srs/s...n.asp?Symbol=tm

Edited July 28, 2006 by nyscene911

[Ghost Dog]

Sell Kirk sell !!

[GMman]

This is really good news. I bet Rick is breathing a sigh of relief.....with more fantastic new models being released in the near future, surely things will stay on this path.....

Can somebody answer me this.....I know they always close plants to cut costs, but do they ever cut middle and upper level management....the pencil pushing guys that don't really have a job description and make a bunch of $$$ and wouldn't be missed if they got canned? Surely they can save a bundle that way..?