Despite Loss, has GM Turned the Corner?

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Troubled auto giant General Motors lost $3.2 billion in the second quarter. But there are indications that the company's restructuring plan is starting to pay off. Don Gonyea talks to Paul Eisenstein, editorial director of The Car Connection, about GM's prospects.


The business news starts with big losses, but still good news for GM.

The world's largest automaker, General Motors, lost more than $3 billion in the second quarter, due to the cost of worker buyouts that are part of the company's restructuring plan. But without those one-time charges related to buyouts, GM actually posted a bigger than expected operational profit of $1.2 billion, and its sales went up as well: 12 percent.

And that's what Wall Street is looking at.

Paul Eisenstein, publisher of the Internet magazine, The Car, joins us now. Good morning Paul.

Mr. PAUL EISENSTEIN (Publisher, The Car Hey, good to be with you, Don.

GONYEA: So Paul, GM loses money - lots of it - but this is still seen as a good day for the company.

Mr. EISENSTEIN: Its funny how that works, isn't it, where Wall Street applauds people for losing a lot of money? In this case, however, it's because GM is finally doing what a lot of critics - particularly their largest investor, Kirk Kerkorian - has been saying they needed to do: they've been cutting back on their workforce.

So, if their projections are right, they may now be on a par with some of their lean and mean competitors.

GONYEA: So what is the latest on this massive restructuring plan? How do you know, really, if it's on the right track?

Mr. EISENSTEIN: Well, these numbers seem to suggest that it was. It's been a tough quarter for the industry, Detroit in particular. The gasoline price hike has been devastating for Detroit.

Across town, Ford Motor Company is having to restructure its restructuring. DaimlerChrysler, for those of us who drive around Detroit, has massive parking lots all over the city filled with unsold light trucks.

The fact that GM was able to show any increase in sales suggests that maybe, hey, they are on track to achieve what they were talking about - which, if I remember correctly, was cutting their fixed costs by something like $7 billion this year.

GONYEA: Clearly, GM is taking on this task of restructuring the corporation. But is part of the challenge for the company also that, still, so many of the conversations about GM deal not with product but with cost cutting?

Mr. EISENSTEIN: It is viewed by most Americans as being damaged. What it needs to do is start putting out the right sort of products.

GM is beginning to have some good things happen with products like the Pontiac Solstice, that little sports car, but they still have a lot of old product that people don't believe in. They still have an awful lot of Americans who won't even consider them, won't even put them on the shopping list.

GONYEA: Paul Eisenstein is publisher of the Internet magazine The Car Thanks Paul.

Mr. EISENSTEIN: Don, good to be with you.

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