GM Fans Breathe Relief

GM's troubles in 2005 led to widespread speculation about the prospect of bankruptcy for the company. Its largest auto parts supplier and former subsidiary, Delphi filed for bankruptcy, and the companies are locked in tough negotiations with the United Auto Workers union, which represents most of their workers. GM has said it will be liable for anywhere from $5.5 billion to $12 billion in costs related to Delphi's bankruptcy.

Meanwhile, Delphi recently filed motions in court to void its labor agreements, prompting a showdown with the union that could result in a strike. Not only could a strike decimate GM's cash position, but it also could have major ramifications for the automaker in its own negotiations with the UAW to lower its burgeoning labor costs.

GM indicated Thursday that liquidity is "a key focus of the corporation," and its CEO Rick Wagoner told CNBC that talk of bankruptcy for GM is misguided.

"The sooner people stop talking about bankruptcy, the better for us," Wagoner said in the interview.

In addition to the GMAC sale, GM earlier this year cut its annual dividend payments in half to build up its cash position. It also sold most of its 20% stake in Suzuki during the first quarter, generating about $2 billion in cash. GM also recently announced the sale of its stake in Isuzu, which generated about $300 million in proceeds for the second quarter.

GM said it ended the first quarter with $21.6 billion of cash, marketable securities and other short-term assets, up from $20.4 billion at Dec. 31.

Last month, GM reached a deal with the UAW to finance early-retirement packages and buyouts offered to as many as 131,000 workers at GM and Delphi. It expects the plan to pave the way for the company to reach its goal of goal of cutting 30,000 hourly jobs by 2008. Last year, it negotiated a deal to cut health care benefits for hourly retirees, and it also has cut benefits for white-collar workers and ended its salaried pension plan.

"While we are encouraged by the speed and scale of the changes we're implementing, there is clearly more work to be done," GM said. "Our next key priority is to reach a consensual agreement with Delphi and its unions that makes sense for all of the parties. The agreement we recently reached with the UAW on the attrition program is a significant step in achieving this objective, but there is more important work to do."

The No. 2 U.S. automaker, Ford (F Quote), is set to report earnings before Friday's opening bell. On average, analysts are projecting earnings of 25 cents a share, down from last year's 39 cents a share. Late Wednesday, Ford said it plans to take a $2.4 billion pretax charge this year as part of its restructuring plan. Previously, it said it had expected a charge of $1 billion.

"It's possible that as much as GM was surprisingly positive for the first quarter, Ford will be a negative," says Tynan. "They're dependence on SUVs and incentives really sets them up for a disappointing quarter."

Ford shares recently were up 31 cents, or 4%, Thursday to $7.91.