Randy Arickx - IR Fritz Henderson - Vice Chair, CFO Sanjiv Khattri - EVP, CFO of GMAC Paul Ballew - Executive Director, -Global Markets Mark Newman – CFO Walter Borst - Treasurer

Scott Merlis - Thomas Weisel Partners John Murphy - Merrill Lynch Joseph Amaturo - Calyon Securities Rod Lache - Deutsche Bank Himanshu Patel – JP Morgan Jon Rogers - Citigroup Jonathan Steinmetz - Morgan Stanley Chris Ceraso - Credit Suisse Ronald Tadross - Banc of America Securities

Jim Mateja - Chicago Tribune Chris Isidore - CNN/Money Bill Vlasic - Detroit News Tom Krisher - Associated Press David Welch - Business Week

Welcome to the General Motors third quarter 2006 earnings conference call. (Operator Instructions) I would now like to turn the conference over to Mr. Randy Arickx, Executive Director of GM Investor Relations and Financial Communications. Please go ahead, sir.

Thanks, Jennifer, and good morning, everyone. Thanks for joining us as we review our preliminary third quarter results that we sent to you earlier this morning. I'd first like to direct your attention to the legal forward-looking statements and risk factors on the first page of the chart set. As always, the contents of our call will be governed by this language. I should also mention that to comply with the SEC's Regulation G, we have provided some supplemental charts at the end of the charts that we will be speaking to today in order to provide reconciling data between financial results as discussed today and the GAAP equivalent results that are in GM's financial statements. I would also like to highlight that GM is broadcasting this call live via the Internet, and that the financial press is participating as well. This morning Fritz Henderson, our Vice Chairman and CFO, will provide a review of our Q3 results. After the presentation portion of the call, about 30 minutes will be set aside for questions from security analysts, followed by 30 minutes of Q&A with the financial press. I would also like to mention that we have several other executives available to assist in answering your questions. With us today are Paul Schmidt, Corporate Controller; Mark Newman, CFO of GM North America; Sanjiv Khattri, Executive VP and CFO of GMAC; Walter Borst, Treasurer; and Paul Ballew, Executive Director of Global Market and Industry Analysis. Now I will turn the call over to Fritz Henderson.

Good morning. Before I get started, just three quick introductory comments. First, our results are fairly complicated, so what I'm going to try to do as I go through this presentation today is I'm going to hit some charts quite fast that are relatively straightforward, and I will slow down on some of the areas where I think we need to spend a bit more time. Second, I'd emphasize the results are preliminary. Because they are complicated, these are preliminary results. Third, we will have some time at the end for the normal question-and-answer period. So turn your attention to chart 2, third quarter highlights. It was a third quarter of record revenue for General Motors, $48.4 billion, which was a third quarter record; not an all-time record, but a third quarter record for us. Up about 3% from the same period last year, and that is on a comparable basis. Last year in the third quarter, we had already fully consolidated the operations, for example, of GM Daewoo. So this is an apples-to-apples comparison. GAAP earnings, $115 million loss, or $0.20, which compares to about $1.5 billion improvement versus the same period last year. Looking at adjusted earnings, to $0.93 a share, $529 million, represents $1.6 billion improvement versus the same period a year ago. North America drove the lion's share of the improvement, improved $1.3 billion versus the third quarter, largely driven by costs. I will spend some time on that later. Significant improvements continue in GME and LAAM. Continued growth in Asia Pacific, solid financial results, but down year-over-year. I will cover that later. Lower results at GMAC. We will spend some time on the GMAC this morning. Sanjiv will have a chance to take you through some of the results of GMAC. But on an adjusted basis, GMAC's results were unfavorable year-over-year. Then there were a number of tax items which I am going to stop fairly early on and try to explain in the presentation. We ended the quarter with cash at $20.4 billion, including readily available VEBA assets of $2.5 billion. Page 3 looks at the adjusted results for the third quarter. You can see the improvement by sector. North America improved $1.3 billion, still lost money at $367 million, so by no means a satisfactory result. But pretty much a continuation, and to some degree an acceleration, of the year-over-year improvement you have seen versus the first and the second quarter. Europe lost $16 million, quite close to breakeven, but we did lose a little bit of money in the quarter. $105 million improvement. LAAM, had $184 million of profit in LAAM in the third quarter, the best result we have seen in nine years for a quarter. So we are hitting on all the cylinders in Latin America, Africa, Middle East. You can see Asia-Pacific at $83 million, down $105 million. GMAC, down $308 million. And in Corporate/Other, which I want to talk to shortly, with an improvement of $458 million. If you look at production, we are down 104,000 units third quarter '06 versus third quarter '05, concentrated, by and large, in North America. Next page, Corporate/Other. Corporate/Other results were favorable year-over-year and driven primarily by two factors. First, reduced legacy costs. Legacy costs were reduced $120 million after-tax in the third quarter of '05 versus the third quarter '06. This is by and large the impact of the GM/UAW healthcare deal. And this relates to the portion of employees who are carried in the Corporate sector; so this is largely healthcare savings. Then there were numerous discrete tax items which total about $340 million after-tax. Those tax items that were included in adjusted profitability included a favorable settlement of various foreign tax matters, adjustments to certain tax reserves based upon re-evaluation of the tax risk; primarily in the U.S. and Australia. We did our tax return as filed adjustment in the third quarter, as we filed our return in July. These are items which come up in the normal course of business. Those are included in adjusted profitability, but we keep them in the Corporate sector so they don't get in the way of the year-over-year comparison in the Automotive operations. In addition to these, there was a favorable adjustment in the LAAM results. It relates to a tax recovery; that is approximately $30 million. Those are in the LAAM results, so I want to make sure I point that out. Very strong quarter for LAAM, but LAAM did have a tax benefit which also affected their profitability by about $30 million. Beyond those items that were included in adjusted profitability, there were two specific tax-related issues that related to AP that were called out as special items. $148 million after-tax, those two items, the main one of which is a deferred tax asset adjustment at GM Daewoo, actually. So a lot going on in taxes in the quarter. Want to make sure we are very transparent about it, not only in terms of quantifying it, but making sure you know where it is in the P&L. Page 5. Third quarter adjustments to income. These are the special items in detail. We have charts on Delphi and GMAC, so I'm not going to belabor these here. But you can see from adjusted net income of $529 million, we had $644 million of special items in the quarter, which took us to a $115 million loss. Delphi was $325 million after-tax, GMAC $373 million after-tax, which relates to largely an impairment loss. Restructurings and impairments within the Automotive business were $94 million, and then you see the tax-related items carried here, which I mentioned in the prior chart. We do look at our profitability from a management perspective, both on an adjusted and a GAAP net income basis. We exclude special items. From a management perspective, we think it is more useful in terms of looking at how we measure our operations, how we make comparisons across reporting periods, and we think it might be also useful for investors to measure and assess our performance. Page 6, the GMAC impairment loss on sales was a $373 million after-tax charge, which is largely comprised of GMAC goodwill impairment related to its Commercial Finance business. In the fourth quarter of last year, we partially impaired goodwill related to this business. But as a result of changes in business, changes in some direction and changes in management, we determined that we needed to review goodwill again in the third quarter. The GMAC results that Sanjiv will review with you include a $695 million impact from this impairment at the GMAC level. That is for 100% of the impairment. GM, in the second quarter, already impaired 51% of this remaining goodwill as part of the accrual for the original GM loss on sale of GMAC. You might recall the announcement of the sale of 51% required us to do this in the second quarter. So in effect, the impact of the GM level at $373 million, or the remaining 49% of the goodwill, by and large. We also have some true-up of the gain/loss on sale that's in the quarter. It is not a significant number, but we mentioned at the time in the second quarter that based upon changes largely in the capital gains portfolio at the insurance business, we would need to make minor adjustments through the year, and we have as well. But the primary impact at GMAC is the impairment of the remaining goodwill in the Commercial Finance business. Delphi, page 7. In the fourth quarter of last year, we estimated our contingent liability related to Delphi to range from $5.5 billion to $12 billion. There was no single point within the range that was deemed more probable than others, but the range was based upon, at the time, what we felt might be reasonably possible outcomes, although we did signal that we felt that the likely outcome was on the lower end of the range. A charge of $5.5 billion pretax was taken at the time. In the third quarter of this year, based upon the current status of discussions, we've taken an incremental charge of another $0.5 billion pretax, which would bring total charges to $6 billion. We have also revised the range of liability as to what is reasonably possible to between $6 billion at the low end and $7.5 billion at the top end, all pretax, based upon current negotiations in the range that GM now believes is reasonably possible. We do consider amounts nearer the low end of the range as more likely, but this negotiation is not done yet, which I'll come to in a moment. In addition to these charges, which are part of the transformation of Delphi, the final agreement may also include other initial and/or ongoing payments that GM might be required to make or might agree to make as part of a consensual solution. For example, in 2007, we might incur additional cuts that would be made to the workforce in order to affect a transformation at Delphi. Those amounts would not be expected to exceed approximately $400 million pretax. Any ongoing items that we might agree to as part of consensual agreement would be of a limited duration and would be estimated to average less than $100 million annually pretax. As part of the deal, we would also look to negotiate material cost reductions over time, which we would expect to exceed these levels by a significant degree. But I will end my discussion with Delphi to say that there is no assurance because the deal is not done yet. We are, I think, pleased with the progress that has been made to date, but there is still a fair amount that has to get done to get this matter behind us, both from a GM and a Delphi perspective. We have worked with our labor partners -- UAW, IUE. We have also worked with Delphi, the various different constituencies in the Delphi matter. It is a fairly complicated deal but it remains a high priority for us to resolve in the near term. Turning back to adjusted profitability, the next chart looks at North America. You can see revenue in North America up $212 million, or effectively flat. Given our volume reduction, though, I think it was a relatively encouraging sign. Pretax profitability improved $1.7 billion; net income improved $1.3 billion. Our net margin, while a loss at 1.5%, was a significant improvement from the prior year. The industry ran at 17.1 million units in the third quarter, down significantly from the third quarter of last year, but frankly overall a little lower level than we saw for the full year last year, but not a bad level of industry demand in the U.S. Our market share was down nine-tenths of a point relative to the third quarter of last year. I would note our market share performance in the third quarter for GM was our best this year in the U.S., and that underneath our total market share, if you pull out rental where we are down year-to-year in the third quarter, this was our best retail performance of the year. In fact, our retail market share, exclusive of daily rent, was flat year-to-year. So said another way, our nine-tenths of a point reduction year-to-year in market share was driven by reduced rental car sales. So it gives you some sense of what was underneath the sales number. Dealer inventory ended the period at 1 million units, up year-to-year. Our inventory at the end of last year was at a frankly unreasonably low level, given what happened with the sales activities. Looking prior to that, 1 million units was a quite comfortable overall level relative to where we would typically end the third quarter in any given year. Page 9 provides you the update on revenue per unit. I want to make a few comments on this on the next chart. In the third quarter, our revenue per unit, we show the GAAP revenue per unit in the box, in the lower part of the chart, also up. What is shown in the chart here are vehicle revenues per units, which is gross revenue less sales incentives. You saw a move year-over-year in the third quarter from $19,637 to $20,216. And importantly, relative to the second quarter of '06, where we were $19,852, we are up about $360 from the second quarter of 2006. Page 10 has our North America profitability, not only for the third quarter but also for the calendar year. Very quick walk of profitability with a few key line items. First, if you look at volume and mix, in the third quarter, it was $400 million negative. This was volume-related. Actually, mix was modestly favorable, but the reduction was driven by volume. Other contribution to margin was unfavorable by one-tenth of $1 billion. In the third quarter, we included the impact of our revised warranty program. In the third quarter we needed to book some costs associated with 2007 model year vehicles built prior to July 1 and sold prior to July 1. The impact of that was about $100 million. That was included in the third quarter's results. There are a lot of things going on underneath that number. But in the end, between volume and mix of $400 million and Other contribution margin of $100 million, we were down year-to-year. Relative to the comparison of revenue per vehicle mix, a couple of comments at this point. Our launch vehicles, which comprised about 30% of our volume, are performing well, and we are getting better realization and better profitability. But the remaining volume, we're being affected by a very competitive market environment. So while we are seeing significant improvements in revenue per unit, we are not necessarily seeing those drive in terms of improvements in contribution margin. A very similar story to what we saw in the second quarter. When you look at the calendar year to date, favorable volume and mix; that was by and large in the first quarter, where we enjoyed strong performance from the contribution margin perspective. Pension and healthcare in the third quarter was $1 billion favorable, $1.3 billion year-to-date. Capacity, attrition and other structural costs was eight-tenths of $1 billion favorable in the quarter; year-to-date, $1.6 billion. So those are the key drivers of our profitability in North America year-over-year, both for the quarter as well as calendar year to date. I want to come back a little bit and talk about material costs on page 11. I already talked to you about launch vehicles, but spend a bit more time, because this is important to understand. Our launch vehicles are receiving favorable pricing. The market reception to those product has been very good. We have had richer mix, but we also have richer costs as part of the more well-equipped vehicles. The other thing that is affecting our contribution margin this year are increased costs of raw materials, largely precious metals and nonferrous. You have seen significant moves in aluminum and copper, and you have seen a lot of moves in rhodium, palladium, and other precious models used in catalytic converters, which has been a drag on our profitability on all vehicles, including our launch vehicles. We have also had increased freight costs related to higher fuel prices for the year vis-a-vis where we were last year. The carryover vehicle faced those same contribution margin pressures, but also had a lot more pressure in the market in terms of the pricing. As we look going forward, I mentioned that 30% of our volume this year is expected to be in launch vehicles. Next year, as we ramp up our full-size pickups and our new crossover family, we expect launch vehicles to reach 40% of our volume in 2007 in North America. Page 12, structural cost reductions. This times it out by quarter; frankly, no new news here, since we are pretty much on track in terms of achieving our $9 billion running rate structural cost reduction by the end of year; $6 billion in 2006. Page 13, moving away from North America to Europe. Europe pretax profit, $40 million, after-tax profit $16 million; loss, both of them. Relative to revenue, in effect GM Europe broke even in the third quarter, a small loss. Significant improvement year-to-year. Overall, not an acceptable result but a significant improvement. So I think another milestone on the way to the turnaround at GM Europe. Production volume you can see was down. Market share was down slightly. Really, the European story is about cost reduction and improved quality of sales, which includes not only fleet versus retail but also product mix. Page 14, Latin America, Africa and the Middle East. You can see revenue up $645 million, pretax profit up $146 million, net income favorable $153 million, net margin of a little over 5%. The overall market environment in LAAM is strong, and our market share was up six-tenths of a point. So we enjoy strong market shares in many of the major LAAM markets. We're growing market share, the market is growing. LAAM can be a fairly volatile place, but when the businesses align properly, it can be very good business, and our position there allow us to take advantage of that. So good work there. Asia Pacific. Looking at Asia Pacific on page 15, revenue up $99 million. You might recall our revenue does not include China, as we carry those businesses on the equity method as 50-50 ventures. Revenue was relatively flat. We're down year-to-year, if I move to the net income number, by $105 million. The biggest single item was the exclusion this year of equity income at Suzuki relative to the third quarter last year, where we recognized our 20% interest in Suzuki earnings. The second significant driver of the reduced year-to-year performance were costs in Australia largely related to the startup of our new Commodore product line. The overall market environment, though, in Australia, remains a challenge for us and so when you look back at the third quarter in Asia Pacific, a solid level of profitability, but frankly, below our expectations. We know we need to get back on the right path in Asia Pacific going forward. Some data there in terms of what is going on in the markets. China selling rate, 7 million units, up significantly year-over-year. Our market share, down slightly year-to-year, but our overall market position in China is one we like. A challenging environment, but it is nice to see the significant continued growth in primary demand. Page 16, I will now turn it over Sanjiv.

Thanks a lot, Fritz. Good morning, everybody. It was an interesting quarter for GMAC. If you look at the core operating fundamentals, we are tracking quite well. Some softness in U.S. housing, but a very complicated quarter, so let's go through it in detail. On an adjusted operating income basis, GMAC reported net income of $346 million for Q3 2006. That compares two $654 million last year, a downward variance of $308 million. As you also know, as Fritz mentioned, GMAC also impaired its remaining goodwill in Commercial Finance, which was $695 million after-tax. So the net reported GAAP income for GMAC was a loss of $349 million. As you also recall, in late last year, Q4, GM restated prior quarters, which were not restated by GMAC because they were not considered material. As a result of that, the numbers that GMAC reports are marginally different from GM, just by $1 million. I did want to make you aware of that. In looking at what happened to our earnings, I would suggest that we look at chart 16 and 17 side-by-side, and I will take you through what is happening in each of our major business units. If you look at Automotive Finance, we reported net income of $136 million, which is essentially flat year-over-year. If you go one layer down, as you know, we did a $1 billion debt tender offer in mid Q3. That cost us about $135 million upfront accounting costs. Now, that is a great long-term benefit, both economically and accounting are very significant when we booked that upfront loss. If you adjust for that loss, core operating results within Auto Finance were actually up $132 million. That is basically driven by volume. We really benefited significantly from the increased retail share that GM achieved due to the 72-hour sale in early July. GMAC got more than its fair share of that business. We continue to do well in wholesale and underlying performance in terms of cost is tracking well. We are starting to see some weakness in consumer credit, but our actual provisions are doing well. Because if you remember last year at this time, we had Katrina, and that took off a big, big chunk in terms of credit provisions. But after that, we are starting to see some weakness in credit, but nothing serious at this time. RedCap was down with a net income of $76 million, down $206 million year-over-year. A lot of things happening in RedCap. The number one story is margins. If you look at the competition in the market the overall U.S. housing market is down year-over-year, and that is creating a lot of margin pressure due to competition. In addition, you have a flat yield curve, and in some cases actually an inverted yield curve. And that is also compressing margins, both held for investment and held for sale portfolios. As a result of that, basically our overall RedCap numbers are down from a margin point of view by $119 million pretax. Secondly, we are starting to see some weakness in credit within RedCap, both in severity, because housing price appreciation has started to stall, and also in frequency, delinquencies are up a bit. We are watching it very diligently. Our provisions are up pretax $76 million year-over-year, so again, of some concern. I look at where we are. I feel comfortable with our consumer exposure there right now, but clearly something we need to be careful about. Thirdly, the decrease in rates in Q3 also negatively affected our whole MSR portfolio net of hedging, down about $92 million pretax. The sum impact was basically if you look at the ten-year swap rate, it actually went down 55 basis points from Q2. And last year at this same time, it actually went up. Volatility is down and prepayment is down up because of the lower rate, and that is affecting pressure. So a tough quarter for RedCap when I look at the operating fundamentals. Originations were actually up year-over-year and we expect to gain market share. I don't have the final market share numbers yet, but we expect to have a gain in market share in Q3 again for RedCap. Insurance had another record quarter. Earnings were up over $100 million year-over-year, driven by two issues. One is uptick in capital gains. Last year, we had an unusually low level of capital gains. But the primary driver driving insurance performance is in fact loan loss. Very good quarter in terms of hurricanes and bad weather and we continue to track very well when it comes to our loss ratio. If you look, our combination ratio actually went below 90%, which is frankly very, very strong. To sum it up, volume was essentially flat. We are seeing some competition in the personal lines business, and we are starting to see some negative effect of the extended warranty program by GM that was announced in this quarter. A lot going on in Other. Other was a loss of $57 million, a deterioration of over $200 million year-over-year. Two things happening. As you all know, earlier this year, we sold over 80% of our share of Commercial Mortgage, which is now known as Capmark. As a result of that, our earnings in Commercial Mortgage, or Capmark, are down $129 million because we now own slightly shy of 22% ownership in that business. Secondly, on Commercial Finance, we had a deterioration of $71 million, primarily driven by credit reserves of over $77 million. What's basically happening in Commercial Finance is, as you know, we had this portfolio and we have re-evaluated the portfolio and there were some changes in terms of our expectations with respect to future cash flow and the value of our collateral. Looking at our higher funding costs for that specific business and material costs, we felt we could not justify the carrying value of those assets and we had to take a write-down. Finally, the fourth big thing happened in our business was the write-off to goodwill. And basically there was a change in our business mix, change in management and change in future direction. We are rationalizing some of our lower-turning product lines, which have not generated adequate results. We are moderating some of our growth assumptions, I think we had much more aggressive growth assumptions than what we are able to achieve in what has become a very competitive market. Thirdly, we are continuously updating our volume objectives. I think all of the negative and credit issues over the last one year, we are taking a while to recover. So when we put all of that together, the GMAC audit committee determined that it was difficult to keep up the goodwill. So now we have zero goodwill in Commercial Finance and we've cleaned up that capital structure, changed the management, and I am cautiously optimistic that we will have better levels, especially as our cost of borrowings improves. Now changing gears to chart 18, a couple of quick comments on our global liquidity. GMAC continues to have access to very a large liquidity. The reported cash at the end of Q2 was over $14 billion. Consistent with the plan that I've shared with you and Fritz has shared with you, as our access to capital improves, our cost of borrowings improves and as we get closer to closing the sale, we will prudently reduce our high cash balances. We look at what our outlook is, what our needs are, based on that. So we are very comfortable with the $14 billion number. I already mentioned that this hugely successful buyback of zero coupon debt that we said earlier, late in Q3. Another milestone we also closed successfully, a $10 billion Citibank facility, and we actually drew the first $2 billion cash from it. So very pleased with how that transaction came out. We continue to make progress with respect to Auto loans. We did over $13 billion already this year and plan to do a couple more billion in 2006. So our overall funding position will be improved, but we are already starting to see a big uptick as a result of this transaction, so it's pretty exciting. In closing, page 19, a quick couple of comments on outlook. Our overall outlook for '06 is mixed. We should still have a very solid year, but good results. I think we are aware that there is some weakness in the market space, both in terms of margins and also credit, something we are watching. But both Auto Finance and Insurance should have very good years, so looking very good about '06, for the rest of '06. With respect to preparing for a stand-alone GMAC, Fritz will update you on how the sale is coming along. But operationally, we are making significant progress. We are finalizing our organizational goals. We will finalize our goals. RedCap converted to LLC yesterday, so that is another big milestone. We are making progress on our services agreement with GM. So it is kind of the best of both worlds, continuing to build on what is a great GM relationship and planning for the future as a stand-alone, diversified financial services company. The outlook is good. The outlook is maintaining and growing GM business, but also growing non-GM business. There's a huge non-GM new business, growing that market, building up market share in what are going to be challenging times. But I feel pretty good about our mortgage business. If I compare it to our peer group, we've got a great mix, we've got an amazing sub-prime franchise. Our prime franchise is competitive with anyone else in the industry and we also have a very good international business. So if I look at that mix, the next 12 to 18 months are going to be challenging, but I feel pretty good about the mix of businesses we have within RedCap. And then we continue to grow internationally. So net/net, the outlook remains very promising for GMAC. Why don't I stop here and hand it over to you, Fritz, to update us on the sale?

Thanks, Sanjiv. Page 20 gives you an update on where we are on the transaction closing. A number of key milestones that are required for closing have already been achieved. I am not going to delineate each one; they are located on the chart. The most notable thing that happened in the third quarter, actually just most recently, was the six-month moratorium declared by the FDIC on the final decision of the notices under the Change in Bank Control Act related to industrial loan companies, of which we have. GM, GMAC and the Consortium have been working with the FDIC to develop a means to enable the transaction to stay on target for closing in the fourth quarter of '06, and we are devoting 100% of our efforts to doing just that. Page 21, liquidity position. Our gross liquidity position at $20.4 billion remained reasonably strong. Beyond that we have $14.4 billion of VEBA assets available to fund healthcare costs. That $20.4 billion, while down relative to the end of the second quarter, was up $1.2 billion relative to where we were in the third quarter of last year. We are committed to preserving a strong liquidity position. This what we used to finance the turnaround. In the third quarter, we completed the amendment and restatement of our revolver, which provides us with a further $4.6 billion in available liquidity. We have actually drawn on that facility and paid it back. We needed some experience as to how it worked, and we got that experience in the third quarter. The GMAC transaction would be expected, when it closes, to provide upfront proceeds of about $10 billion, of which we would reinvest $1.4 billion of that in Preferred, in GMAC. We and Cerberus will be making a significant investment in preferred stock to strengthen GMAC's capital base. Our near-term financial obligations remain limited. We have $1.2 billion of our debt maturing through 2007. And as of the most recent remeasurements this year, our U.S. salaried and hourly pension plans were $14 billion over-funded, which includes the impact of the attrition plan. That is up from the $6 billion level over-funded at the end of last year. So that number can change, obviously, based upon investment returns, as well as discount rates as we move into the end of the year. But we feel quite good about the status of the situation within our pension fund. I will have a few more things to say about that later in the presentation. Page 22 just shows you gross liquidity. I'm not going to spend too much time there. It just shows you where we have come from and where we are. Page 23, I want to spend a little time on, which is Automotive cash flow, which was red in the quarter. Let me direct your attention to the adjusted operating cash flow. We have shown in this chart both the third quarter and the calendar year for both '06 and '05. In the third quarter of this year, we burned $3.8 billion of cash at the operating level. That is actually wider than where it was last year in the third quarter, which is $2.3 billion. If you look at the calendar year-to-date, for the first nine months of last year, our cash burn was $7.1 billion on an operating basis; that has narrowed to $4.2 billion, you can see largely driven by the results from the third quarter. So what happened in the third quarter? When you move down to look at year-over-year, a couple of things happened. First, you see a use of cash for pension and healthcare expense. What that means is we are basically paying more actual cash disbursements more than expense in the third quarter. The big favorable adjustment by the way year-to-date, these are GAAP numbers, and that reflects the large attrition program charge that we took, the pension curtailment charge we took in the second quarter. Accrued expenses and other were red $2.9 billion. We did have a lot of things going on in our business, one of which was we ran the 72-hour sale at the end of the second quarter, we accrued for that at the end of the second quarter, and we paid for that in the third quarter. So it was a source of cash in the second quarter, a use of cash in the third quarter. When you look at it year-over-year, the swing, you could see in the third quarter of last year we actually had favorable receivables, payables and inventory, and favorable pension and healthcare expense. Last year we were expensing more than we were paying in terms of healthcare. Frankly, given where we stood last year, we were reducing our levels of working capital in the third quarter. We wouldn't normally do that, but third quarter last year was a pretty tough period for us and our business was being ramped down. But we had high working capital going into the third quarter; we managed to lower that in the third quarter of last year. What you see in the third quarter this year is probably more indicative of what you might see in a normal third quarter with lower levels of production on an operating basis. Moving below operating cash flow, no asset sales in the third quarter. You can see cash restructuring costs paid in the third quarter for both GM and for our portion of the Delphi matter $1.3 billion. Total adjusted operating cash flow after special items $5.1 billion, and it was financed when you look at it by $2 billion in withdrawals from the VEBA in the third quarter, reimbursing ourselves for healthcare expenses that were paid. Dividends, changes in debt, so you can see those numbers aren't very large. We did receive $0.5 billion dividend from GMAC in the third quarter, which accumulates to $1.9 billion for the year. The rest of the items net out to close to zero, but when you look at how we finance, the operating cash outflow was financed by a VEBA withdrawal to reimbursing ourselves for healthcare payments and $0.5 billion dividend from GMAC. Our cash did decline in the third quarter by $2.5 billion, but again, we ended at $20.4 billion, up $1.2 billion from the prior year's 9/30 level. I want to spend a little time in the next two charts talking about FAS 158. FAS 158 was finalized and published in the third quarter. This does affect the way companies account for pension and healthcare liabilities. That was done in September. The statement requires an employer to include additional net assets and/or liabilities -- in our case liabilities -- on the balance sheet to reflect the funded status of pension and OPEB plans and in our case this will be effective as of the end of this year. So you will be seeing this in our final statement as we publish our results this year. In effect, what it means is any unrecognized prior service cost or credits or actual gains and losses currently reflected in the financial statement footnotes will now be recognized in shareholders' equity. The way I think of it is the liability net of whatever the asset position is, is going on in the balance sheet for both pension and healthcare. The heretofore amounts of deferred charges in our case would basically be taken directly to shareholders' equity. We expect that the additional liabilities for pensions and healthcare that will be included on our books at year end will cause our shareholders' equity to become negative. We disclosed this last year as a potential in our 10-K. We have quite transparent about the statement would do to our balance sheet. The actual impact will not really be known for certain until our year end plan valuations are done, but based upon what we know today and some assumptions we make today, we would expect that reduction in shareholders' equity to be between $18 billion and $25 billion, and that is on a tax affected or after-tax basis. Page 25, I would also say I'd mention that $18 billion to $25 billion is a tax-affected number. The adoption of FAS 158 would then drive an increase or provide additional deferred tax assets of, we think, approximately $4 billion to $5 billion and reductions of deferred tax liabilities of between $6 billion and $9 billion. So therefore that estimated impact to shareholders' equity is before assessing our ability to realize this deferred tax asset, which is something we will need to do in the ordinary course of business as we close our books. We need to do that in looking at not only this portion of deferred tax assets, but the remaining deferred tax assets, which are substantial, which are included in our books, as I said, in the ordinary course of business. The practical impact of adopting FAS 158 are, to some degree, limited. No impact on pension expense. The statement didn't change how you determine pension expense. No impact on cash flow, no impact on benefit plans. Doesn't result in event of default under any debt covenant that GM has and doesn't have any direct impact on our ability to pay dividends under Delaware law. Under Delaware law, dividends must be paid out of surplus, which is defined as fair market value of the Company's assets, reduced by the fair market value of the liabilities and capital measured by the par value of outstanding stock. The accounting change will impact our book value under U.S. GAAP, but not necessarily the fair market value of GM's assets and liabilities. This will, as you can see, have a very large impact on our statements, though, and we wanted to make sure we were as transparent as possible as to what we are looking at. Page 26, one of the things I said at the end of the second quarter was that we needed to complete our study of Renault-Nissan. That was completed in the third quarter. There was a very good, high-level team that was assembled, a professional team from both Renault-Nissan and GM. The teams were in agreement on synergies, which were substantial. We were in agreement, actually, on the numbers in seven of the eight areas. The estimates differed in purchasing. We understood why, but the consensus was that the synergies in this area, no matter what level you looked at it, accrued predominantly to the benefit of Renault-Nissan. It would have improved the competitive position of Nissan, and particularly here in North America. Part of the disagreement, I think, was that Renault-Nissan were unwilling to make any sort of compensating payment to GM as a result of these disproportionate skewed synergies. The framework, actually, would also have involved Renault-Nissan potentially acquiring a substantial block of GM common stock at market price. We expected that the structure would involve a form of exclusivity or permanency which was yet to be negotiated, but would provide some restrictions on GM's strategic options going forward. Neither in the case of the block nor in the case of the exclusivity was it contemplated there would be any premium paid for either of those two. So stepping back and looking at it, the GM Board reviewed this in detail and the vote was unanimous that the alliance as proposed was not in the best interest of GM shareholders. We did advise that we are open to exploring and implementing individual synergy projects that are mutually beneficial. But this closed the matter from the standpoint, at least, of the GM Board. So to summarize the results in the quarter, Automotive operations improved by over $1.5 billion on an adjusted basis. The tax items I mentioned that were in adjusted earnings were favorable; GMAC was unfavorable. If you just look at the Automotive business, it was $1.5 billion improvement year-over-year on the strength largely of cost reduction actions in GM North America and continued momentum in the other Automotive regions. We are on track to achieve our $9 billion structural cost targets on a run rate basis by the end of this year and we continue to work on our long-term goal of reducing our structural costs as a percentage of sales to 25% by the end of this decade. Our share performance in the third quarter was our best of this year. As we look forward, we must leverage the launch of our new full-size pickups and the crossover vehicles that we are bringing into the market. We are entering in the true sweet spot of our product portfolio as we go into the latter part of this year and particularly into next year. A key priority remains to finalize the negotiations with Delphi. I said the same thing as I finished the second quarter; I think I said the same thing as we finished the end of the first quarter. But we are committed as a company to being part of the solution on a consensual basis, and we will devote the time and, as you can see, we will devote resources necessary in order to get this accomplished. We do believe we continue to be on track to close the GMAC transaction in the fourth quarter. There are some issues, but we are committed to try to work through them. We ended the quarter with our Automotive liquidity in a relatively good position at $20.4 billion. But frankly, the level of cash burn in the third quarter was indicative of the fact that we are not generating the operating results we need to in our business. We know if you look at profitability in the quarter, it was in effect a breakeven quarter at the GAAP level, a small loss in even the adjusted level, while significant improvement year-to-year was by no means a satisfactory level of profitability. The level of cash burn in the business is not at all satisfactory. So it points to the amount of work we have in front of us to get the business really turned around, but an important step along the way. That is all I have. At this point, we're ready to take questions.

(Operator Instructions) Your first question comes from Scott Merlis - Thomas Weisel Partners. Scott Merlis - Thomas Weisel Partners: Good morning, everybody. Just if we go back to the cash flow statement on page 23, the $2.9 billion for accrued expenses in other, is there any more granularity you can give us? For example, this 72-month sale and I assume the outlook for that type of number in the fourth quarter would be a little bit lower, but still meaningfully negative?

A couple of things, Scott. We are not inclined to provide any more details beyond what we see here. What we tried to do is show both the quarter as well as the calendar year result, so you get a sense of what is happening across the calendar year as opposed to, let's say, June 30 to what is happening end of July. These numbers can bounce around. We would typically expect to see the third quarter being our toughest quarter from a cash perspective, and that is what happened. In terms of the projections going into the fourth quarter and the calendar year, at this point, I'm not in a position to really talk about it. Scott Merlis - Thomas Weisel Partners: Out of the $2.9 billion, any more granularity? The 72-hour sale, was it a large part of it or just immaterial?

A lot goes on in this category -- a lot. But if you look at it, as we looked at what was happening, particularly in the third quarter, at the end of the second quarter, this number move more favorably than we would have thought. Frankly, it was largely the 72-hour sale, which we paid for in the month of July. So therefore, you end up having a reduction in the accrued expenses in other as a use of cash. Scott Merlis - Thomas Weisel Partners: Right. My last question would be an update on the truck changeover and the SUV changeover. How is it going and where are the costs and cash flow effects? More in the fourth quarter or third quarter?

I would say the impact in the third quarter is minimal, Scott. So in terms of the financial impact, none. I will let Paul talk about the startup.

The acceleration is going well, Scott. We are on plan, maybe slightly better than plan in the full-size pickup. And on the SUV startup we are on track. Scott Merlis - Thomas Weisel Partners: So all on track then, all on plan?

Yes. We are feeling very good about the acceleration of our launch vehicles. The impact of those products won't be felt until the first and second quarter of next year in earnest, and we will start seeing some of the 900s in November and December. Scott Merlis - Thomas Weisel Partners: Thank you very much for the update.

Your next question comes from John Murphy - Merrill Lynch. John Murphy - Merrill Lynch: Good morning. Just wondering if you can give us an update on where you are with the buyouts, and very specifically, how many workers have actually exited the plants to date?

At this point, we have a group of people, I don't have the exact number actually in front of me, that need to go out in the first quarter of next year. We are pretty much exactly where we were at the end of the second quarter in terms of our game plan. Mark, do you have the number that is going to go out in the first quarter of next year?

Just in January, I think the amount is probably 3,000 or 4,000.

So we expected the lion's share of the people to go out this year and they are. The remainder we will pick up surely next year. John Murphy - Merrill Lynch: So you are saying in the third and fourth quarter, you will have already achieved the savings from those buyouts?

Yes. I would be hesitant to say the third quarter because you have people leaving throughout the third quarter, which would favorably affect the fourth quarter. The full complement of people going out the door would be done, by and large, by the end of the first quarter of next year. But we are already achieving savings from attrition plan. We saw it in our third quarter numbers to a degree. John Murphy - Merrill Lynch: On Delphi, you keep talking about the liability you are going to assume and the costs that you might have going forward. But you haven't addressed the potential claim back on the reorganized Delphi. Is there any clarity on that, or does that exist in your current negotiations?

Not going to get into the negotiations here. We did need to update what we expect our net cost was going to be of this matter, which we have done. To try to then break it apart, though, into it all of its various constituent parts would be to spend a fair amount of time talking about where we stand in the negotiations, which I am really not at liberty to do today. John Murphy - Merrill Lynch: Outside the box question here: the $14 billion over-funded in the pension plan, is there any way to leverage that at all in the Company? Or is that really just sort of siloed in the pension plans?

In general, pension assets are quite strictly governed under ERISA and quite strictly controlled. They've been managed, we think, well by the Company and under the supervision of the Board. I would suggest that this is good, we want to finish the year, see where we stand and we will probably come back and talk about that a bit more next year. But at this point, I would say the simple, short answer to your question is, no. We want to make sure that we maintain a very well funded pension plan because we want as much as possible to take this risk out of our balance sheet. John Murphy - Merrill Lynch: Thank you.

Your next question comes from Joseph Amaturo - Calyon Securities. Joseph Amaturo - Calyon Securities: Good morning. I was just wondering if you could give us what the actual pension returns are year-to-date as of 9/30?

Actually, I don't really want to do that because every time I look up, every week it is changing, as you might expect. We will provide you a much more full update of that as we do our calendar year. We close the year, we show the level of overall pension fund, what the actual return is, talk about assumptions for next year. I think the better time to talk about that is after we close the calendar year. Joseph Amaturo - Calyon Securities: And then the $14 billion over-funded references a remeasurement date. Could you just tell us what that date was?

It depends on hourly and salaried. The hourly date was April 30. Mark, the salaried date I think was shortly before that, because we changed our salaried pension plan. March 31 was the salaried plan.

Right. Joseph Amaturo - Calyon Securities: Lastly, the estimated range relating to the adjustments to equity for FAS 158 of $18 billion to $25 billion, does that include the projected liability assumption for the Delphi situation?

No. Joseph Amaturo - Calyon Securities: So that range would expand, I am assuming?

We have a liability that we established for Delphi. We will have this liability go on. You are not going to have double the liability. But what we have identified here is the range that we would capture based upon GM's data as we know it today. We have accrued for a liability at Delphi. At some point, once the deal is done, we'll probably explode that accrual into its various constituent parts and we will have to deal with it. But right now, that $18 billion to $25 billion doesn't include any liabilities associated with Delphi per se. That is comprehended in the $6 billion to $7.5 billion. Joseph Amaturo - Calyon Securities: What portion of the $6 billion to $7.5 billion is OPEB related?

A big piece of it would be. Joseph Amaturo - Calyon Securities: Okay, thank you.

Your next question comes from Rod Lache - Deutsche Bank. Rod Lache - Deutsche Bank: Good morning, Fritz. First of all, a point of clarification. Did you say that the Delphi accrual is a gross number or is it net of some assumption you have made for recovery on the bankruptcy claim?

I said it is a net number. Rod Lache - Deutsche Bank: It is a net number. Net of some proceeds that you have made an assumption of for the sale?

Again, I'd love to actually go through all the constituent parts, but I'm really not at liberty to do that today, because it is frankly a matter that has got to get dealt with at the negotiating table. But we have made our best estimates as to what our net costs would be, and that is what is included in this range. Rod Lache - Deutsche Bank: Okay. There is a big improvement in revenue per unit, not a lot on the contribution margin. Is that concerning to you at this point, given how high a percentage of your portfolio is actually new product at this point? Would you expect that to improve as the new pickup launches?

We go from 30% launch vehicles to 40% launch vehicles next year. We have seen improvement in our contribution margin on our launch vehicles; that is good. We have to have it. What has really pulled it down this year and we have the normal competitive environment, which has been quite intense, but the impact of both precious metals as well as nonferrous has been pretty significant, and I think this impact has not only been with us but across the industry. So has affected both launch and non-launch vehicles. As to where those are going, I really don't know because it is tough to really predict it. I would say we have been relatively pleased with the improvement in revenue per vehicle and the mix of vehicles on launch vehicles. It has been heartening, but frankly, we're not all satisfied with where we stand on contribution margin. We need to not only improve our profitability in launch vehicles, but we've got to do a better job on carryover vehicles as well. Rod Lache - Deutsche Bank: Lastly, clearly the earnings are improved, but as you pointed out, the operating cash flow is weak, even before the restructuring spending. Can you just clarify from this point going forward how much incremental cash cost savings do you expect? Because as you pointed out, there are some incremental people that are going to be coming out. How big of a cash impact would you expect from the run rate that you are at in these numbers?

Good question. This year, of the $6 billion of cost savings that we would see this year, about $2.5 billion and I think I said this number in the second quarter; it is still the same, is cash related. As you move into next year, $9 billion run rate savings, about $5 billion of which is cash. So you will see an improvement in cash savings as you go into next year as well. Rod Lache - Deutsche Bank: An incremental $2.5 billion next year?

Yes. Rod Lache - Deutsche Bank: Thank you.

Your next question comes from Himanshu Patel – JP Morgan. Himanshu Patel - JP Morgan: Good morning, Fritz. If you go to slide 23 on the cash flow, I'm just looking at your year-to-date changes in working capital for receivables and payables. It looks like for the first three quarters of this year and last year, it was roughly an even amount, $1 billion drain. But if you look at your North American production, obviously the comparison for the first three quarters of '06 to '05 production wasn't down that much in aggregate. It was down 300,000 or 400,000 units from '04 to '05. So I was just trying to understand. Your production hasn't moved all that much, but your working capital is still a drain this year. Are your payment terms changing with your suppliers? Is that what is really driving this? Or is there some stuff outside of North America to explain it?

I think I'm going to let Walter address that question.

The short answer is that payment terms aren't changing. Those have been consistent. It's also a function of where the production is within the quarter. Last year there was a fair amount of production towards the end of the quarter. This year, that wasn't the case, so we are having additional working capital drains. Himanshu Patel - JP Morgan: Okay. Then for Asia Pac, could you disclose what the equity earnings contribution was in the year-ago third quarter from Suzuki?

It was about $40 million. Himanshu Patel - JP Morgan: All right, thank you.

Your next question comes from Jon Rogers - Citigroup. Jon Rogers - Citigroup: Most of mine have been answered, but maybe one for Sanjiv. As I look at the share from retail sales for GMAC, we're at about 58% this quarter versus in the 40s last year at this time. Is that mostly a function of the nature of the 72-hour sale incentives versus employee discount? What do you think is a good number for that share going forward?

Good morning, Jon. I think you are exactly right. Last year, if you remember, employee prices was mostly cash. 72-hour sale was 0% APR for five year and six year. Our steady rate is probably around 14%. I think we will do well if we can keep 14%, because GM obviously needs to have the flexibility of what type of incentives to put out there. So 14% is a good steady rate. But Q3 was unusually helped by the 72-hour sale, which obviously we are happy to do again. Jon Rogers - Citigroup: Just a point of clarification. On slide S1, there is a $105 million benefit for special attrition. Can you tell us with that is?

By the way, that amount is netted of out of the impairment. When you look at restructuring/impairment, you had red 94 on page 5; that is net of this benefit. This benefit really is in the third quarter we made some adjustments for not only healthcare, but also disability for the people who actually went on the attrition plan. We had accruals, I mentioned at the end of the second quarter that the re-measurement date for healthcare was actually a different date, so we were going to have to pick a healthcare adjustment in the third quarter for healthcare, but we also needed to do the same for disability. As a result of the number of people that took buyouts, we actually had a favorable adjustment in our disability accrual. Jon Rogers - Citigroup: Okay, thank you.

Your next question comes from Jonathan Steinmetz - Morgan Stanley. Jonathan Steinmetz - Morgan Stanley: Good morning, everyone. Fritz, just on slide 10, the other contribution margin, negative $100 million. You talked about the warranty program, so it is flat if I ex that out. But you have qualitatively referenced new product, old product and raw material. Are you able to provide any quantification or order of magnitude at least on this? Was this $500 million favorable offset by $500 million unfavorable, or $1.5 billion offset by that type of level? Anything just to help on the walk there?

There is a lot of moving parts to this number, which I don't really want to go into, because there are a bunch of them. But you have them all. You have got favorable moves on launch vehicles, unfavorable moves, raw materials. Mix is actually on the line item above it, modestly favorable. We ended up being net zero, other than the warranty effects. Jonathan Steinmetz - Morgan Stanley: Okay. And if I flip to slide 12, it looks like third quarter and fourth quarter, if I compare that versus the last deck you did on the second quarter earnings, which was slide 13 there, it seems like some of that maybe got pushed into third quarter and out of fourth quarter. Is that accurate, (a)? And (b) if it is, what caused that?

Well, it actually got pulled forward into the third quarter. It was a small amount, and frankly, the costs are coming out of the system a little faster than we expected. We are confident in terms of raising our $6 billion target for the year. We saw a little bit better performance than we had actually expected in the third quarter in structural costs and we reflected it in the bar chart. Jonathan Steinmetz - Morgan Stanley: Lastly, you talked about having the technical ability to pay the dividend, given everything coming back on the balance sheet. But can you talk with such a big cash burn and a large OPEB liability, what is the justification for continuing to pay a dividend here?

I'm not going to speak for our Board; that is a matter for the Board of Directors to discuss. They look at it on a quarterly basis, regularly. We have had a policy, we did reduce our dividend this year by 50% earlier in year. That was considered prudent at the time, and that has been maintained since then. I'm just really in no position to speak for the Board in this matter. What we tried to do here is simply at least lay out what the factors for how we treat the balance sheet. Then the Board's going to have to make this decision and judgment each quarter. Jonathan Steinmetz - Morgan Stanley: Okay. Thank you.

The analyst portion of the question-and-answer session will conclude shortly. Following the question-and-answer session for the analysts, we will proceed with the media portion of the question-and-answer session. (Operator Instructions). Your next question comes from Chris Ceraso - Credit Suisse. Chris Ceraso - Credit Suisse: Good morning. I have a few things. First, I apologize if I missed it, but why are these preliminary numbers, Fritz?

We haven't filed our Q yet. I always consider earnings preliminary until I file my Q. Chris Ceraso - Credit Suisse: Okay, fair enough. As far as the corporate/other, I appreciate the breakdown there. Part of it, the legacy costs going away, what should this be on a go-forward basis? Does it kind of go to zero because it was running at 150 negative and now you have carved out 120 of legacy, or do we have to factor in these ongoing Delphi costs? What should we use there?

What we tried to do is single out the tax items which distorted the number in the third quarter. The $120 million favorable effect from legacy is on an ongoing basis what you would see in the corporate sector. And then my advice is just kind of take a look at what we have historically been and make your own adjustments from there. Chris Ceraso - Credit Suisse: Okay. Sanjiv, it sounds like there is a bunch of maybe brewing credit concerns in the Auto, the Home and the Commercial sectors, if I understood you correctly. Can you maybe quantify what the magnitude of the potential risk is here and talk about any mitigating actions that you may be taking to keep that under control?

First of all, I want to be careful that I don't want to alarm you. There is across the board some weakness in housing credit. I can't put a number around it, but I think we are very prudent in terms of how we develop our audit committees and very transparent with them in terms of how we look at frequency, how we look at severity, how we look at some of the early indicators. And at this time, I feel pretty comfortable with where we are. We will obviously look at it diligently. I can't give you a number. And on the Auto side, actual provisions, if you compare them to three or four years ago, credit performance continues to be very good. I did want to let you know, though, that versus the stellar performance over the last 12 months, there is some weakness now. Some of that weakness is in severity and some of the weakness is in frequency. Again, I can't put a number on it. As you know, we have just created successfully not only a whole loan market for Auto assets, but we also created a whole loan market and a full securitization market for sub prime assets. And we continue to do tradeoffs, and we continue to manage the size of our balance sheet. I expect our managed asset size to actually go down over time as we continue to beneficially exploit the liquidity in the market and shed some risk in an efficient manner. That is how we proactively manage it. I also feel very good about the quality of our servicing, and I think we have as good a chance as anyone else in terms of managing this properly. Chris Ceraso - Credit Suisse: Then I have just a quick one for Paul, if I could, or maybe two. I noticed that the production on the full-size SUVs was up maybe 40% year-to-year in Q3, but you are sitting on something in the neighborhood of 120 days of inventory. Was there a reason for that sort of overbuild in Q3? Does it relate to the build out of the pickups, or should we expect to see that start to come out in Q4 and then in the first half of next year?

We made some adjustments, as we talked about last month on the sales call, on the full-size SUVs. But in fairness, your comment is right. We are going to balance between large pickups and large SUVs as we go through the acceleration of pickups in '07, and get those inventories back down and in alignment on the large utilities. That will happen, Chris. We're a little long on large U’s right now. We have been pleased that our selling rate and our mix has held up as well as it has, given the fact that the industry faced the headwind it did in the second and the first part of the third quarter. But we need to focus on taking those inventories down just a little bit going into '07 and then through the back end of '07. Chris Ceraso - Credit Suisse: Okay. Any color on October sales?

Pretty similar to September, probably a little softer. We've seen some competitors back down in their incentive spending in October versus September. We look a lot like last month. We're seeing a pretty strong truck mix; we are having a good month on full-size pickups as we are going through the sell-downs. So pretty similar to what we saw last month, although we will be down again in rental sales. The industry will probably come in just a little bit weaker than what we saw last month. But again, not unexpected, given the transition to '07. We've seen some of our competitors really reduce their incentive spending, at least temporarily. Chris Ceraso - Credit Suisse: Okay, thank you very much.

Your next question comes from Ronald Tadross - Banc of America Securities. Ronald Tadross - Banc of America Securities: Good morning, everyone. Just on the accrued liability on the accrued line on the cash flow. I understand that part of this is from catch-up from 2Q. But I guess I am wondering are there any cash costs that you incurred in 3Q that you will actually have to accrue for on the P&L in 4Q in that $2.9 billion related to like incentives or whatever?

No. Ronald Tadross - Banc of America Securities: No?

No. So you are saying we accrued --. Ronald Tadross - Banc of America Securities: Did you pay for any incentives this month?

No, no. We don't prepay incentives. Ronald Tadross - Banc of America Securities: That is good to know. Fritz, just philosophically, you said 70% of your portfolio is not new and that is where you are seeing the challenge and not happy about the contribution margin. I guess I am wondering two things. First, do you feel like you are reinvesting enough of the pricing on the new products? You're obviously picking up some pricing on the new products. I'm wondering if you feel like you are reinvesting enough of that in your older products. That seems to be industry practice. And then the other thing is how else do you improve your contribution margin? We are almost at peak run rate on cost reductions here. What could you do next?

I'm going to let Paul answer the first part of your question. The second part of your question in terms of what can you do next; you can continue to drive material cost savings. It has been a tougher period for that in today's world given what has happened with precious metals and nonferrous. It has been really tough and, frankly, freight has been really tough as well. One of the things we would look for as we move into next year, for example, with freight is with some moderation of fuel prices we should start to see some rescission in the freight jumps we've had this year, which would help us. Nonferrous, we've already seen some easing on some of those commodity prices, largely driven by robust economic growth. With a little bit of slowing of economic growth, these things could be pretty volatile. We can get back to the normal day-to-day work of lowering our material costs and over time I mentioned as part of the overall Delphi deal that we would look to, assuming we reach consensual agreement, move our prices we pay on Delphi parts to something more competitive over time. So those are some of the things that we can do. Let me ask Paul to answer the first part of your question.

Your question along with a couple of other questions this morning, I think one thing that is important is for all of us to place Q2 and Q3 in context. The industry really has gone through a period where it got impacted by some headwinds, which has affected mix and affected what we've seen in terms of revenue performance because of the run-up in gas prices and interest rates. Retail demand has been negatively impacted, and that's shown up both in terms of volume as well as prices in the marketplace as a whole. So there is some temporary impact for the industry underperforming. Having said that, the long-term strategy on contribution margin on the growth side of it is twofold. Number one, you want to execute best-in-class products, and then secondly, you want to shorten your lifecycle and get onto a cadence that provide you a consistent freshening of the portfolio and that is the cadence we are on right now and the cadence that we are executing to over the next few years. If you do that, that will help certainly. Our execution levels have been very good, which we are seeing on our launch vehicles, and that helps over the life of the vehicle as well in terms of what we see in pricing and the decay as the product gets a bit older. So that's really at the heart of what we are focused on. And again, if you take into context what's happened in the industry in the last two quarters, I think you are seeing us execute to that plan to improve the contribution margin going forward. Ronald Tadross - Banc of America Securities: So basically, you guys want to work this more on the cost side than the price side. You don't want to take all this price you are getting on the newer product and put it into the older stuff.

I mean, you have to do both and you have to keep your products fresh, and we will make enhancements and upgrades of existing products in the portfolio. But having said that, cost is one element in this as well, and it has been an abnormal nine months when you really think about what has happened to material prices, what has happened in terms of overall demand in the U.S. because of the run-up in gas prices and interest rate. As some of those pressures lessen and we continue to execute a plan to reduce costs, that will help. And then if we are executing the product successfully in the marketplace, that is how the strategy comes together. Ronald Tadross - Banc of America Securities: Just one clarification, your 40% for next year of new product, does that include the SUVs you launched this year, the Tahoe?

Ronald Tadross - Banc of America Securities: Okay, thank you.

Our first media question comes from the line of Jim Mateja - Chicago Tribune. Jim Mateja - Chicago Tribune: I was wondering, has General Motors had any contact with Mr. Kerkorian, either verbal or written, since the board voted against the alliance?

We regularly talk to our shareholders, including Mr. Kerkorian. Wouldn't be really appropriate to relate the nature of those discussions, but I would say as a general matter we regularly talk to our employees. We have done so both before and after the announcement. Jim Mateja - Chicago Tribune: Also one last one, with the new full-size trucks coming and the crossovers, is it the anticipation that the profits from the trucks and the crossovers combined would then equal what the profits of the trucks alone had been?

It's a puzzling question. I'm sitting here thinking to myself. We're not going to get into product line profitability and forecasting, but we do look for our new crossover family to be additive to our portfolio. We like the product. We think it fills a niche that we don't fill today. We think it has an interesting utility for the benefit of the consumer. We think it is quite apart and different from our body and frame traditional full-size U’s which continue to sell well. So, no, we would like to sell our new pickup at a very healthy level of volume. We would like to sell our 900 SUVs at a very healthy level of volume. We would like to see these new crossovers, frankly, get us into a segment that we are not in today. Jim Mateja - Chicago Tribune: Thank you.

Your next question comes from Chris Isidore - CNN/Money. Chris Isidore - CNN/Money: When do you think we will see a target from you about a return to profitability in North American Auto operations? It seems like it is just beyond the reach for over a year now. Do you think you'll be able to give some kind of guidance on that by the end of this year?

I'm not going to answer the question because that's something we need to debate. At this point, it wouldn't be very useful to talk about '06. As we look at our '07 forecast, we will undoubtedly have that debate internally. Many, many companies actually have gotten away from the practice of providing guidance, actually, and we got away from it in '05 for unfortunate reasons. But I would say if the next logical time we would look at this would be end of this year, early next year, but I can't promise anything because, frankly, we need to go through that debate ourselves. Chris Isidore - CNN/Money: All right, thanks.

Your next question comes from Bill Vlasic - Detroit News. Bill Vlasic - Detroit News: Good morning, Fritz. A couple of Delphi questions, if you will. Can you give us the factors that you await in reducing the upper limits of your possible liabilities at Delphi?

Yes, without going into the exact factors which would then take us into the negotiation, the responsibility we have is to look at what is the range of outcomes that is reasonably possible based upon all the facts and circumstances that are known at the time you actually close your books? We have been in continuous negotiations with all of the parties pretty much through this year, including the third quarter where there have been a series of quite intensive meetings. We have been quite transparent in terms of our desire to find a consensual solution to this. Delphi is trying to do the same thing. Frankly, when we got done closing the books at the end of the third quarter, we felt we needed to look at this range of what is reasonably possible again on a net basis, net cost basis; what is the net cost to GM? We felt that, one, our lower level of range at 5.5 was no longer appropriate. We raised it by $0.5 billion. We took charges for that. But the second thing we needed to do is make an assessment at the top end of the range. And quite frankly, based upon all of the things we knew at the time, we felt that it would be most appropriate and prudent for us to narrow that range. Bill Vlasic - Detroit News: Without saying what the factors are, generically was it healthcare, pensions? What accounts for that large of a reduction, what you think it is reasonably possible?

Actually, I can't even go through it generically because if you think about it, you have healthcare, you have pensions, you have potential recoveries, you have cost of workforce transformation. There are many moving parts to the negotiation, which we need to step back and take a look at in total when we come up to this judgment. I don't really want to point to one thing here in terms of this is the one thing which caused us to reduce it. There were a series of items which suggest that we should reduce that top end of the range. Bill Vlasic - Detroit News: Okay. In your press release today, you said the final agreement with Delphi may result in GM agreeing to reimburse Delphi for certain labor expenses. There has been some suggestion that GM may subsidize some of Delphi's hourly labor costs. Is that on the table; is that something that is a possibility going forward?

Well, it is actually on the table. As we said in the Delphi chart, actually, if I go back to chart 7 we talked about further charges. We said in '07, we could see additional workforce payments not expected to exceed approximately $400 million in that year. On an ongoing basis, there might be ongoing subsidies provided to either Delphi which could relate to the workforce, but may not be exclusively related to the work force. We would expect those ongoing subsidies to be of limited duration and estimated to average less than $100 million annually pretax. All of this is our best estimate. The deal is not done yet, though. So once we get it done, we would have to come back and talk about what are the exact terms of the deal. Bill Vlasic - Detroit News: Do you expect the deal to be completed in the fourth quarter?

I've been working on this all year, as has the team, as have Delphi. Frankly, we have an interest in bringing this to a consensual solution, but trying to forecast it given all of the different constituencies is tough to do. Bill Vlasic - Detroit News: Great, thanks very much.

I'm cautiously optimistic, is the way I would put it. Bill Vlasic - Detroit News: Thank you.

Your next question comes from Tom Krisher - Associated Press. Tom Krisher - Associated Press: Hi, Fritz. You said that inventory was about one million, about the same as prior years. But given your lower volume, does that not mean that you have more days supply of vehicles and that might not be a drag on fourth-quarter earnings?

I've got some data. If you look at it versus last year, it was actually up from 818,000 units. Last year's number was very low. I mean this was the level that we would not typically see because of the timing of the incentive programs from last year. If you look at the third quarter of '04, it was 1.137 million. If you look at the third quarter of '03, it was 1.087 million. A million units, we feel their overall level of inventory was reasonable. We already talked a little bit about the fact that our overall level of full-size U inventory at the end of the quarter was a little higher than we would like. We are taking steps to bring that back into line. But I would say at 1 million units, we feel pretty confident about our level of inventory. Tom Krisher - Associated Press: Okay. Then given your cash burn, do you see any acceleration of cuts or any changes that you might have to make in your restructuring plan for the fourth quarter and beyond, or are you happy with the pace that things are going?

The pace that we have been at in terms of the restructuring plan has been very fast. We've tried to be very aggressive with our actions. We tried to front-end load them. We worked very hard with the UAW, with the other unions, to try to address problems, get on top of them and get them behind us. I think what we tried to show in terms of what we have done in our cost reduction target, for example, is we have systematically upped them as we've taken additional action. But we will stay aggressive on cost. In the end, our results are not satisfactory yet. So we are going to stay aggressive on the cost side, but at the same time, we need to execute in the market to really drive the turnaround as well. Tom Krisher - Associated Press: Okay. Then just for clarification, was that Paul speaking to the question about inventory?

Yes.

Yes, it was. Tom Krisher - Associated Press: Thank you.

Your final question comes from David Welch - Business Week. David Welch - Business Week: Good morning, guys. Question may be more for Paul. Market share was the best it has been all year in the third quarter. But if you go month-by-month over it, even going back to May, when you compare your market share range to your incentive spending range, it looks like your natural share rate might be 22 to 23. And if you're willing to spend closer and closer to $4,000 you can get a lot more. Is that a fair way to look at it, that you are kind of in the 22 to 23 range unless you want to spend a lot more and buy it back?

I don't know that is fair, David. I would say we had to respond to what competitive activity was occurring in second and third quarter, and we had to respond to the very substantial shock that the industry incurred from the run-up in gas prices. We like to talk about Katrina and Rita as being the real impact from the hurricane, but really the impact this spring was more severe, because it persisted for a longer period of time. It went up $0.75 a gallon at the pump. So we had to offset those effects. Fortunately, those effects have gone away, at least to some degree; they have lessened is probably the right way to say it. We have seen our share on a more consistent basis in the 24% to 24.5% range, including the fact that we are taking down our daily rental numbers. So 22%, 23% is at the low end. Certainly in the first quarter, given what was occurring with competitors and so on and what we were doing in terms of our plan and go to market, we were below that level. But if you look at the year as a whole, we have been pretty consistent around 24% to 24.5%, right in that range. David Welch - Business Week: Fritz, the Delphi charges of $100 million that you may end up paying going forward, would you guys, I assume, negotiate some kind of endpoint on that, that you're not just going to pay it forever?

That's why we talked about limited duration, which would still need to be negotiated. David Welch - Business Week: All right. Thanks, guys.

Mr. Arickx, there are no further questions at this time. I will turn the conference back to you. Please continue with your presentation or closing remarks.

Thanks, Jennifer, and thank everyone for your time today. We will talk to you in January.

Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.