Wednesday, January 17, 2007

Strong Earnings Seen For GM

Market Scan R.M. Schneiderman, 01.16.07, 11:47 AM ET

Ailing auto giant General Motors should see solid earnings over the next two quarters, according to a Monday report by Goldman Sachs.
"GM's outlook and strategy update at the Detroit Auto Show on January 11 reinforced our expectation for positive earnings momentum in the fourth quarter of 2006 and the first quarter of 2007," said Robert Barry, an analyst for the research firm.

The reason: cost savings from job and benefit cuts as well as stronger-than-expected SUV pricing and sales. "Anecdotally, GM management seems to have more spring in its step - no doubt in anticipation of what is set to be its strongest lineup in years," said the analyst. He added that the company's planned fleet sale cuts should also weight positively on earnings.

Nonetheless, he cautioned that GM (nyse: GM - news - people ) still faces long-term problems and that foreign competition may continue to eat away at marketshare."We do not think GM's current product cadence strength and related benefits will drive a sustainable 'turnaround,'" said Barry. He has a "neutral" rating on the company.

GM is set to report earnings on Jan. 30

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