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GM Posts Loss, Studies Sale

Updated from 9 a.m. EDT

General Motors (GM - Get Report) unleashed a torrent of news on Wall Street Monday, reporting a much wider-than-expected third-quarter loss and saying it will explore the sale of its financing unit.

GM, battling with bloated costs and innovative competitors, also trumpeted a deal with the United Auto Workers union that will cut its annual healthcare expense by $1 billion. That news sent the stock up $2.55, or 9.1%, to $30.53.

GM pegged the overall value of the tentative UAW pact, which calls for "reduced GM healthcare coverage on individual hourly retirees," at $15 billion, or 25% of its hourly healthcare liability.

For the third quarter, GM lost $1.6 billion, or $2.89 a share, compared with a profit of $315 million, or 56 cents a share, last year. Excluding an $805 million asset impairment charge and other items, GM earned $1.1 billion, or $1.92 a share, in the quarter. Revenue rose 5% from a year ago to $47.2 billion.

Analysts had been expecting a loss before charges of 81 cents a share in the latest quarter.

The company's biggest drag continues to be North American automotive, where high labor costs and a portfolio of gas-guzzling muscle cars and trucks are squeezing the company as energy prices surge. The unit lost $1.6 billion in the third quarter compared with a loss of $88 million a year ago, while market share slid to 25.6% from 28.5% a year ago.

"Results were adversely affected by lower production volumes, continued increases in health care costs, higher material costs, and a shift in vehicle mix away from full-sized sport utility vehicles," GM noted. It said dealer inventories fell 28% year-over-year to 818,000 units at quarter's end.

Globally, GM's automotive operations' loss widened eightfold to $1.6 billion in the quarter, as profitable results in GM's Asia-Pacific and Latin America/Africa/Mid-East regions were more than offset by losses in North America and Europe. Global market share was 14.6% in the quarter, down from 15.4%.

Despite tightening lending spreads, the company's GMAC financing arm continues to be its saving grace, earning $675 million in the quarter, up from $620 million a year ago. Strong results from mortgage lending more than offset lower financing and insurance profits. Hurricane Katrina cut the division's earnings by $161 million.
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