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GM Reports Preliminary Q1 Financial Results


WEBWIRE

* Reported Net Loss $323 Million, About $1 Billion Improvement From 2005
* Record Quarterly Revenue of $52.2 Billion
* $567 Million GMNA Improvement Despite $484 Million Health-Care Charge
* Automotive Liquidity Stronger at $21.6 Billion

DETROIT – General Motors Corp. (NYSE: GM) today reported significantly improved financial results for the first quarter of 2006, with operations from every automotive region in the world contributing to the turnaround efforts.

“The first quarter represented an important milestone in GM and GM North America’s turnaround,” said GM Chairman and Chief Executive Officer Rick Wagoner. “Not only did we see significant improvement in the financial results of all our automotive units, we also announced numerous additional actions to improve our North American competitiveness and liquidity. And, we made significant progress in implementing those and previously announced initiatives, such as the UAW health-care agreement and the North American capacity plan.

“We’re pleased to see the significant progress in our first-quarter results and in the implementation of all four elements of our North American turnaround plan,” Wagoner continued. “And we remain focused on accelerating our return to profitability and cash generation.”

GM reported a preliminary net loss of $323 million, or $0.57 per share, in the first quarter of 2006, including special items. This was more than accounted for by the inclusion of a $681 million after-tax charge, or $1.20 per share, related to the recently approved health-care settlement agreement for U.S. hourly retirees. These first-quarter results represent a significant improvement from the year-ago loss of $1.3 billion, or $2.22 per share. Reported revenue rose 14.1 percent to a record $52.2 billion in the first quarter of 2006.

Excluding special items but including the effect of the $681 million health-care charge ($1 billion pretax), GM reported a preliminary adjusted loss of $529 million, or $0.94 per share in the first quarter of 2006. In the year-ago quarter, GM reported an adjusted loss before special items of $988 million, or $1.75 per share.

The reported results for the first quarter of 2006 include special items totaling a favorable $206 million after tax, or $0.37 per diluted share. These results include a gain of $317 million, or $0.56 per share, from the sale of most of GM’s stake in Suzuki, partially offset by restructuring charges totaling $111 million, or $0.19 per share, at GM North America (GMNA), GM Europe (GME) and GM Latin America/Africa/Middle East (GMLAAM). Additional details on the special items are included in the “Highlights” section of this press release.

GM’s results for the first quarter of 2006 are preliminary and may be revised prior to the filing of GM’s first quarter report on Form 10-Q in early May, depending on factors such as the final determination of the accounting treatment for the retiree health-care settlement agreement.

Health Care Agreement to Reduce Liability by $15 billion

The unprecedented health-care settlement between GM and its largest labor union, the United Auto Workers, was approved by the U.S. District Court on March 31, 2006.

“The health-care agreement is expected to result in an immediate 25-percent reduction in GM’s hourly retiree health-care liability, or about $15 billion,” Wagoner said. “The court approval is an important milestone, enabling us to implement this on the schedule we had anticipated.”

As part of the agreement, GM will make contributions to a new independent Defined Contribution Voluntary Employees’ Beneficiary Association (DC VEBA) of $1 billion in each of 2006, 2007, and 2011. GM will also make supplemental contributions to the DC VEBA related to events like profit-sharing payments and increases in the value of GM stock.

Because the settlement received final court approval on March 31, the first $1 billion DC VEBA contribution is being recorded in the first quarter of 2006 even though the cost savings will not be realized until the second half of the year. Beginning July 1, the pretax savings associated with the health-care agreement will be approximately $750 million per quarter through 2011.

According to the accounting treatment that GM believes is appropriate under U.S. Generally Accepted Accounting Principles, the obligation to make the contributions would be recognized in each of the three periods in which they become due and payable. Other possible accounting treatments include recognizing the present value of all three payments as expense on March 31, 2006 , which would significantly increase the amount of the first-quarter charge and eliminate any future charges. GM is currently in discussions with the U.S. Securities and Exchange Commission to determine the final accounting treatment and expects the issue to be resolved before it files its Form 10-Q.

GM financial results described throughout the remainder of this release exclude special items unless otherwise noted (see “Highlights”).

GM Automotive Operations

GM’s automotive operations reported an adjusted loss of $721 million in 2006, including the health-care charge, halving the year-ago adjusted loss of $1.5 billion. All of the company’s automotive units reported progress in the quarter, with three out of the four units posting profitable results.

Global automotive sales rose 4.4 percent to 2.2 million units as strong sales in GM’s Asia Pacific and Latin American regions were partially offset by declines in the United States and Canada. Global market share was down slightly to 13.2 percent from 13.3 percent a year ago.

GM North America Shows Improvement

GM North America reported an adjusted loss of $946 million in the first quarter of 2006, including $484 million of the retiree health-care settlement charge. This compares to an adjusted loss of $1.5 billion a year ago. Higher production volumes, improved mix and better net pricing contributed $1.1 billion of improvement to GMNA operating earnings, offset in part by the health-care charge. Revenue per unit sold in GMNA was significantly higher in the quarter versus a year ago, mostly attributable to better pricing and richer mix. U.S. dealer inventories ended the quarter at 1,169,000 vehicles, down 74,000 units from the year-ago period, and well positioned for the spring selling season.

GM recently increased its structural cost reduction target in North America by more than $1 billion, to $7.5 billion on a running rate basis by the end of 2006, excluding the cost of the three $1 billion DC VEBA contributions in 2006, 2007 and 2011. Approximately $4 billion of this reduction will be cash savings. GM also continues to focus on achieving the previously reported $1 billion target of material cost savings in 2006, which is under pressure due to high raw material and commodity prices.

GM remains committed to revitalizing its product portfolio through an aggressive product spending program. In 2006, GM expects capital spending to total approximately $8.7 billion. This represents an increase of approximately $800 million over 2005 levels.

“We are very pleased with the market’s reaction to our launch products,” Wagoner said. “In the first three months of the year, our new products accounted for about 30 percent of our total sales – more than double where we were a couple of years ago. We’re especially encouraged by the early sales of the Chevrolet Tahoe, GMC Yukon, and Cadillac Escalade. And we’re pleased with the reaction last week to the new Saturn Sky and Aura at the New York Auto Show.”

GM is revitalizing its sales and marketing strategy by focusing on the strength of its products, emphasizing their great value and features in relation to the competition. GM is focused on improving the mix and quality of its share by reducing incentives and the volume of sales to daily rental car companies. While this may result in short-term declines in sales and market share, it also is expected to result in improved retail sales and financial performance over time.

“Despite even higher incentives by many of our competitors, we think our new product-focused marketing strategy is the right one, and early results are in line with our expectations,” Wagoner said.

GM Europe Posts Profitable Quarter

GM Europe reported adjusted earnings of $88 million in the first quarter of 2006, a significant improvement from the year-ago loss of $92 million, reflecting improved pricing, continued progress in reducing structural and material costs, better mix and lower warranty and policy costs. In addition, Saab showed significant financial improvement and sold more than 34,000 vehicles worldwide, an all-time first-quarter record.

“Our European turnaround plan moved into high gear in the first quarter,” Wagoner said. “Looking forward, we’ll continue to focus on that, as well as growing our multi-brand strategy in Europe and on important vehicle launches. The Cadillac BLS is arriving in dealerships now, followed by the Chevrolet Epica in June and the Opel Corsa and Chevrolet Captiva in the third quarter.”

GM Asia Pacific Reports Improved Results

GM Asia Pacific (GMAP) reported adjusted earnings of $81 million in the first quarter of 2006, up from $70 million a year ago, reflecting improved sales volumes in China and higher sales volumes from GM Daewoo.

“Asia Pacific continues to be a very positive story for GM,” Wagoner said. “GM vehicle sales in China were up 76 percent during the quarter, and our steady commitment to expanding our product line-up continues to pay dividends. Likewise, our investment in GM Daewoo continues to pay returns, with domestic sales and export shipments rising 60 percent in the first quarter.”

GM Latin America /Africa/ Middle East

GM Latin America/Africa/Middle East reported adjusted earnings of $56 million in the first quarter of 2006, up from $31 million in the same period last year. This reflects a significant improvement in Brazil.

“GM continues to set sales and market share records in the Latin America/Africa/Middle East region,” Wagoner said. “In the first quarter, LAAM achieved an all-time first quarter sales record of 230,100 units, up 26 percent from the year-ago period. Of the 11 major markets in the region, four set all-time quarterly GM sales records and another four set first-quarter sales records.”

GMAC

General Motors Acceptance Corporation (GMAC) earned $605 million in the first quarter of 2006, compared to $728 million in the year-ago period, reflecting improved earnings from financing operations and insurance, offset by lower mortgage earnings.

“GMAC continued to post strong earnings despite lower credit ratings and higher borrowing costs,” Wagoner said. “The agreement that we announced earlier this month to sell a 51-percent controlling interest in GMAC to a consortium of investors led by Cerberus Capital Management is expected to close later this year. Once implemented, the new ownership structure should strengthen GMAC’s ability to support GM’s automotive operations, improve GMAC’s access to cost-effective funding and provide $14 billion in liquidity to GM over the next three years.”

GMAC had cash reserve balances at March 31, 2006 of approximately $22.1 billion, including $17.3 billion in cash and cash equivalents and $4.8 billion in marketable securities. This compares with cash balances of approximately $20 billion at Dec. 31, 2005.

GMAC’s financing operations reported earnings of $270 million in the first quarter of 2006, compared to $216 million a year ago. The increase is largely due to the effect of lower consumer credit provisions, primarily as a result of automotive whole loan activity and favorable international credit performance.

ResCap earnings were $197 million in the first quarter 2006, down from the $351 million earned in the year-ago period. While revenues were strong from higher asset levels, results were negatively affected by lower net margins resulting from both pricing pressures and higher funding costs. In addition, gains on sales of loans were down due to a significant gain in the year-ago quarter from the sale of a portfolio of distressed mortgage loans. Mortgage originations were $41.6 billion for the latest quarter, representing an increase from the $36.4 billion in the year-ago period.

GMAC completed the sale of approximately 78 percent of its equity in GMAC Commercial Mortgage on March 23, 2006, for approximately $1.5 billion in cash. At the closing, GMAC Commercial Mortgage, now named CapMark Financial Group Inc., also repaid to GMAC approximately $7.3 billion in intercompany loans, bringing the total cash proceeds from the transaction to $8.8 billion. GMAC e arnings related to Commercial Mortgage were $9 million, representing operating income of $50 million and a loss on sale of $41 million, after closing costs.

GMAC’s insurance operations generated net income of $129 million in the first quarter of 2006, up from $94 million in the same period a year ago primarily reflecting the impact of strong underwriting results. In addition, first quarter results also benefited from the strategic acquisition of MEEMIC Insurance Co., a personal lines business that offers automobile and homeowners insurance in the Midwest.

Cash and Liquidity

Cash, marketable securities, and readily-available assets of the Voluntary Employees’ Beneficiary Association (VEBA) trust totaled $21.6 billion at March 31, 2006, up from $20.4 billion on Dec. 31, 2005 and $19.8 billion on March 31, 2005. GM withdrew approximately $2 billion from the VEBA trust in the first quarter of 2006, including $1 billion from the short-term VEBA.

Liquidity remains a key focus of the corporation. GM sold most of its 20-percent stake in Suzuki during the first quarter, generating approximately $2 billion in cash. Also, GM recently announced the sale of its stake in Isuzu which generated approximately $300 million in proceeds in the second quarter of 2006. In February, GM reduced its common stock dividend by 50 percent, which is expected to save approximately $565 million annually. Finally, the planned sale of 51-percent of GMAC is expected to provide GM with up-front cash proceeds of about $10 billion and significant ongoing cash flow from retained assets and GMAC distributions over time.

Outlook

GM has made significant progress to turn around its North American operations, including the UAW retiree health-care agreement, the manufacturing capacity actions, the changes to GM’s U.S. salaried retiree health-care benefits and salaried pension plan benefits and the hourly accelerated attrition program.

“While we are encouraged by the speed and scale of the changes we’re implementing, there is clearly more work to be done,” Wagoner 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.”

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Forward-Looking Statements
In this press release and in related comments by General Motors’ and General Motors Acceptance Corporation’s management, the use of the words “expect,” “anticipate,” “estimate,” “forecast,” “initiative,” “objective,” “plan,” “goal,” “project,” “outlook,” “priorities,” “target,” “intend,” “evaluate,” “pursue,” “seek,” “may,” “would,” “could,” “should,” “believe,” “potential,” “continue,” “designed,” “impact,” or the negative of any of those words or similar expressions is intended to identify forward-looking statements. Other than statements of historical fact, all statements in this press release and in related comments, including without limitation, statements about future events and financial performance, are forward-looking statements that involve certain risks and uncertainties. While these statements represent our current judgment on possible future events, and we believe that when we made these judgments they were reasonable, these statements are not guarantees of any events or financial results, and GM’s actual results may differ materially due to numerous important factors that may be revised or supplemented in subsequent reports on SEC Forms 10-Q and 8-K.

Such factors include, among others, the following: the ability of GM to realize production efficiencies, to achieve reductions in costs as a result of the turnaround restructuring, health care cost reductions and an accelerated attrition program and to implement capital expenditures at levels and times planned by management; the pace of product introductions; market acceptance of the Corporation’s new products; significant changes in the competitive environment and the effect of competition in the Corporation’s markets, including on GM’s pricing policies; our ability to maintain adequate liquidity and financing sources and an appropriate level of debt; restrictions on GMAC’s and ResCap’s ability to pay dividends and prepay subordinated debt obligations to us; changes in the existing, or the adoption of new, laws, regulations, policies or other activities of governments, agencies and similar organizations where such actions may affect the production, licensing, distribution or sale of our products, the cost thereof or applicable tax rates; costs and risks associated with litigation; the final results of investigations and inquiries by the SEC; changes in our accounting principles, or their application or interpretation, and our ability to make estimates and the assumptions underlying the estimates, including the range of estimates for the Delphi pension benefit guarantees, which could result in an impact on earnings; changes in relations with unions and employees/retirees and the legal interpretations of the agreements with those unions with regard to employees/retirees; negotiations and bankruptcy court actions with respect to Delphi’s obligations to GM, negotiations with respect to GM’s obligations under the pension benefit guarantees to Delphi employees, and GM’s ability to recover any indemnity claims against Delphi; labor strikes or work stoppages at GM or its key suppliers such as Delphi or financial difficulties at GM’s key suppliers such as Delphi; additional credit rating downgrades and the effects thereof; our ability to complete the sale of a 51-percent controlling interest in GMAC and the effect of that sale on the results of GM’s and GMAC’s operations and liquidity; other factors affecting financing and insurance operating segments’results of operations and financial condition such as credit ratings, adequate access to the market, changes in the residual value of off-lease vehicles, changes in U.S. government-sponsored mortgage programs or disruptions in the markets in which its mortgage subsidiaries operate, and changes in its contractual servicing rights; shortages of and price increases for fuel; and changes in economic conditions, commodity prices, currency exchange rates or political stability in the markets in which we operate.

In addition, GMAC’s actual results may differ materially due to numerous important factors that are described in GMAC’s most recent report on SEC Form 10-K, which may be revised or supplemented in subsequent reports on SEC Forms 10-Q and 8-K. Such factors include, among others, the following: the ability of GM to complete the sale of a 51-percent controlling interest in GMAC; significant changes in the competitive environment and the effect of competition in GMAC’s and GM’s markets, including on GMAC’s and GM’s pricing policies; GMAC’s ability to maintain adequate financing sources and an appropriate level of debt; the profitability and financial condition of GM, including changes in production or sales of GM vehicles, risks based on GM’s contingent benefit guarantees and the possibility of labor strikes or work stoppages at GM or at key suppliers such as Delphi; funding obligations under GM and its subsidiaries’ qualified U.S. defined benefits pension plans; restrictions on ResCap’s ability to pay dividends and prepay subordinated debt obligations to GMAC; changes in the residual value of off-lease vehicles; changes in U.S. government-sponsored mortgage programs or disruptions in the markets in which GMAC’s mortgage subsidiaries operate; changes in GMAC’s contractual servicing rights; costs and risks associated with litigation; changes in GMAC’s accounting assumptions that may require or that result from changes in the accounting rules or their application, which could result in an impact on earnings; changes in the credit ratings of GMAC or GM; the threat of natural calamities; changes in economic conditions, currency exchange rates or political stability in the markets in which we operate; and changes in the existing, or the adoption of new, laws, regulations, policies or other activities of governments, agencies and similar organizations.

Investors are cautioned not to place undue reliance on forward-looking statements. GM undertakes no obligation to update publicly or otherwise revise any forward-looking statements, whether as a result of new information, future events or other such factors that affect the subject of these statements, except where expressly required by law.

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* Attachment(S):

- General Motors 2006 Highlights - Q1 Financial Results: http://media.gm.com/servlet/GatewayServlet?target=http://image.emerald.gm.com/
newspublisher/support_file/04-20-2006/38/NR1q06220060420073711.rtf

- General Motors 2006 Consolidated Statements of Income - Q1: http://media.gm.com/servlet/GatewayServlet?target=http://image.emerald.gm.com/
newspublisher/support_file/04-20-2006/38/NR1q06320060420073711.rtf



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