General Motors Corp. said Monday it earned $445 million in the first quarter, instead of the $323 million loss it initially reported last month, mainly because of accounting changes related to a plan to cut health-care benefits for union retirees.

The accounting revision, made in consultation with the Securities and Exchange Commission, allows GM to spread the costs of the health-care agreement over several years. The change erased a big first-quarter charge and flipped the company into profitability, giving GM its first quarterly profit since 2004.

GM shares up more than 5 percent after analyst upgrade
Tuesday May 9, 11:44 am ET
By Jui Chakravorty


DETROIT (Reuters) - Shares of General Motors Corp. (NYSE:GM - News) rose more than 5 percent on Tuesday after an analyst raised his rating on the stock, following revised first-quarter results that pushed the world's largest automaker to a profit.

Deutsche Bank analyst Rod Lache raised his rating on the stock to "hold" from "sell," saying the automaker has generated "substantial" liquidity from asset sales and is likely to moderate its cash burn in 2007 and 2008.

Lache also said the risk of a strike at GM's main parts supplier and former subsidiary, bankrupt Delphi Corp. (Other OTCPHIQ.PK - News), has diminished.

"We believe there's a reasonably good chance that an agreement on Delphi can be reached within the next 60 days, which should be a positive for the stock," he wrote in a research note.

GM shares were up $1.05, or 4.46 percent, at $24.60 on the New York Stock Exchange, after rising more than 5 percent earlier Tuesday.

Delphi has asked the court to void its labor contracts and analysts have said a strike at the supplier could shut down GM plants and force it to spend billions of dollars a week.

Separately, GM late Monday revised first-quarter results, snapping a losing streak of five consecutive quarters. GM said it made the change after discussions with securities regulators over how to treat an initially reported charge of $681 million, or $1.20 a share, related to a health-care settlement with blue-collar retirees.

After excluding that charge, GM said it had earned $445 million, or 78 cents per share, in the first quarter, compared with an initially reported loss for the period of $323 million, or 57 cents per share.

GM reported a net loss of $1.3 billion, or $2.22 per share in the first quarter of 2005.

Analysts remained cautious after the revised results.

"... It does not alter the economic reality -- which is that the deal is a significant long-term benefit, but a cash flow wash for the first three years," Sanford Bernstein analyst Brian Johnson wrote in a research note.

Johnson also said his "market-perform" rating on the stock reflects a 30-percent chance of bankruptcy at GM.

The automaker, which lost $10.6 billion in 2005, is slashing 30,000 jobs and closing 12 plants as part of a broader restructuring effort.

Despite his rating upgrade, Deutsche Bank's Lache said GM will have to increase revenue for its restructuring plan to work.