Randy Arickx - Executive Director IR Fritz Henderson - Vice Chairman, COO Ray Young - CFO

John Murphy - Merrill Lynch Rod Lache - Deutsche Bank Brian Johnson - Lehman Brothers Jonathan Steinmetz - Morgan Stanley Chris Ceraso - Credit Suisse Himanshu Patel - JPMorgan Itay Michaeli - Citi Brian Jacoby - Goldman Sachs Thomas Walsh - Detroit Free Press John Stoll - Dow Jones David Welch - BusinessWeek Jamie LaReau - Automotive News

Ladies and gentlemen, thank you for standing by. Welcome to the GM first quarter 2008 Earnings Call. (Operator Instructions) I would now like to turn the conference over to Randy Arickx, Executive Director Investor Relations and Financial Communications. Please go ahead sir.

Good morning and thank you for joining us as we review our 2008 first quarter results that we sent out earlier this morning. I’d first like to direct your attention to the legend regarding forward-looking statements and risk factors on the first page of the chart set. Like always the content of our call will be governed by this language. I should also mention that to comply with the SEC’s regulation G, we’ve provided some supplemental charts that provide reconciling data between managerial financial results as discussed today and the GAAP equivalent results that are in GM’s financial statement. 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, President and Chief Operating Officer will provide opening and closing comments and Ray Young, GMs Chief Financial Officer will cover our first quarter earnings review. After the presentation portion of the call, approximately 30 minutes will be set aside for questions from security analysts followed by approximately 30 minutes for questions from the financial press. I would also like to mention we have several other executives available today to assist in answering your questions. With us today are Walter Borst, Treasurer, Nick Cyprus, Corporate Controller and Chief Accounting Officer, David Meline, CFO of GM North America and Mike DiGiovanni, Executive Director Global Market and Industry Analysis. Now I’d like to turn the call over to Fritz Henderson.

Thanks Randy, good morning everyone. One page two we summarize briefly the operational highlights for the first quarter, touch on market performance, our global share 12.5%, down five tenth of a percent versus the first quarter really driven what was happening in North America. North America being our largest market and the US being the largest market in North America, when that market declines as it has it puts a pretty significant amount of pressure on our global market share. So, when you look at our market performance, we actually improved our penetration in a number of important segments in the US market. The US market example both was reduced and moved away from trucks. It had a pretty significant amount of pressure on both our North America market share and our global market share. We had record GM sales in three of the four regions driven largely by emerging market growth. Our revenue is at $42 billion about flat, what you saw was a $3.5 billion decline in North America, pretty much almost offset completely by the growth we saw in the other regions in terms of revenue. Automotive earnings before tax of an adjusted basis were improved. North America was unfavorably impacted by the American Axle strike, to a degree. But also lower volume even beyond that. But there were some favorable factors in North America, particular commodity hedging in foreign exchange. Our North America operation showed continued good cost performance of $0.5 billion year-over-year in structural costs related principally to manufacturing and people cost and material cost was lower, there was a small amount of material cost performance despite some pretty significant head winds in material area. We ended the first quarter with automotive liquidity at $23.9 billion and Ray will take you through that in more detail later in the presentation. Page three briefly summarizes the impact of the American Axle strike. Through the end of the first quarter it was approximately 100,000 units as we would have covered in our sales call. The majority of the impact is full sized pickups and full sized utilities. But also some impact in full-sized vans, mid-sized trucks and have significant use. In terms of the contribution margin impact of the loss in production, it’s about $800 million EDT impact in the first quarter from that. Today the strike has had a minimal impact however on our ability to meet customer demand. There has been some impact on fleet sales, particularly the vans. With actually, lost some sales, whether or not we could make those up is a different question over the course of a year but in terms retail performance it has had a minimal effect so far. We do show a little bit later what impact that has had in our dealer inventories. And finally, I guess we do continue to manage our production schedules across the plants to try to maintain production to the extent possible, particularly for passenger cars. We have a number of open locals, including one local strike. You know, but what we're trying to do is close all of our locals. We have a whole list of issues we need to address. We're trying to do it cooperatively in a spirit of openness with the UAW and frankly keep our business running to the maximum extent possible while American Axle and UAW have been targeting people hopefully bringing their negotiations to closure. With that, let me turn it back over to Ray, and I will be back with you later.

Okay, thanks Fritz. Good morning everyone. I want to walk through our first quarter financials with you, this morning. Chart four gives you first quarter financial highlights. Head headline GAAP net loss, both $3.3 billion [5--1:24]. I wanted to really highlight the adjusted automotive earnings before tax, just almost $400 million, $392 million, that’s up versus last year excluding Allison results. Again to emphasize our core automotive operations excluding the special items were possible in the first quarter, despite the significant head winds that we have seen in the US market. We will talk a little bit more about that in the North America discussion. Adjusted net loss of $350 million or $0.62 EPS, excluding the special items. GMAC, you probably maybe listened to yesterday's GMAC results call, a loss of about $300 million. That's GM's portion of GMAC. Adjusted OCF, negative $3.6 billion, impacted by the American Axle strike. We will walk through that with you. And then total gross automotive liquidity, $23.9 billion at the end of first quarter. Just also note we had about $7 billion of committed credit lines at the end of first quarter as well. So, we have had really available liquidity at the end of first quarter of over $30 billion. Turn to chart 5 please. Just looking at the regions. You can see North America slightly down versus last year. Look at the other three regions Europe, LAAM, AP, very strong quarters, all up versus last year. We will talk a little bit about those results later. Again, total EBT $392 million, up 161 versus last year. See GMAC's results there, again down versus last year. Again, this is GM's portion of GMAC. We will give some more highlights of that later. On taxes, just a note, negative $259 million in book tax expense. As you know we took valuation allowances in US, Canada, and Germany. So therefore we are not recording any book tax benefit associated with any losses there. So, therefore, the tax expense represents effectively book tax expense on tax paying entities around the world. We walk all the way down to negative $350 million for a total GM net income on adjusted basis, $0.62 EPS. Also note that worldwide production was down about 107,000 units, more or less explained by the impact of the Axle strike. Turn to chart 6, North America first quarter adjusted results. You can see earnings before tax negative $611 million, down 342 versus prior year. As Fritz mentioned, revenue down about $3.5 billion, production volume down 178,000. You can see the industry SAAR, clearly a tough first quarter for the industry in United States. Again, when we talk industry, we include total, that’s including trucks and buses. Something of note, dealer inventory finished up the quarter at 875,000 units and when we compare that versus prior quarter of last year, down 200,000 units and that’s a significant inventory takedown and really reflects our strategy of trying to actively manage our inventory down in a more challenging industry environment. Chart 7 just our vehicle revenue per unit for North America. You can see first quarter, our first quarter was up 21,575 versus 21,072. Just to note that there is a translation exchange rate impact of about $300 there related to a really stronger Canadian dollar. Chart number 8, now I will slow down a little bit here, just to do a walk from '07 to '08. You know, our '07 first quarter adjusted earning was $0.3 billion. In terms of volume, we are down 167,000 units in terms of wholesale for North America, impact $1.1 billion negative. You can see in the box various factors impacting the volume. Clearly a weaker US industry in the first quarter, worth about 0.4 billion. Dealer stock take down, relative to what we did in the first quarter of last year, if you recall last year first quarter, we actually increased dealer stocks in the United States and this first quarter we actually brought down dealer stocks. So therefore, the delta, the difference resulted in about $0.4 billion impact to our earnings. Our retail shares slightly down about 0.6 points worth about 0.2 and then we also had lower daily rental sales. So, that explains the volume about negative $1.1 billion. A mix of slightly favorable-unfavorable mix of negative 0.1. On price, $0.5 billion, that's primarily related to the fact that last year in the first quarter we were still more or less in launch mode with our new full-size pickup trucks. Therefore, very low levels of incentives. In the first quarter this year we're back to more normal levels of incentives and hence that has had an impact of $0.4 billion in the United States. In a Canada, a small impact there as well. On material costs: actually a fairly good performance in terms of material performance. On a gross basis $0.3 billion in terms of improvements quarter-over-quarter. We did have some additional material costs related to program majors. As you know, some of the new launch products such as CTS and Malibu have additional material content. But that translates also into higher transaction prices as we have seen in the marketplace. And so when you net those two together still a favorable material performance, quarter versus quarter. In terms of pension, OPEB manufacturing as Fritz indicated about a $0.5 billion worth of improved cost performance there. You know, this quarter versus last quarter. Last year's first quarter. And then finally in terms of hedging and exchange, we had about a $600 million of commodity hedging gains. This is really the mark to market on our commodity contracts. In addition, we had a favorable $200 million related to exchange. Just to note as Fritz indicated the impact of our loss units from American Axle approximately $0.8 billion. That's basically incorporated as part of the volume of mixed reduction that we see above in the chart. Just a little bit more on inventory. This is actually a quite important story from our perspective. As you know, we have been actively trying to aggressively manage our inventory, our stock situation down at the dealers in the United States. This chart kind of shows how the SAAR rates have declined from the first quarter of '06 to first quarter of '08. Basically, just shy of 17.5 million units of SAAR in the first quarter of '06 and first quarter of '08 we have SAAR of about 15.6, about 10% reduction in terms of SAAR's. And during the same period we brought down our dealer stocks by over 25% from almost 1.2 million units down to about 875,000 units, almost a 300,000 unit adjustment in our US dealer inventory. This again is consistent with our strategy to aggressively manage our inventories in line with demand, by doing that we feel that we can reduce our risks of incentives, higher incentives and also improve the residuals of our products here. So I think this is important a fact to note as we look at our first quarter results. Turning to chart number 10 just overview of other regions. Significant that we did generate in terms of adjusted automotive EBT over $1 billion in the other three regions outside North America. Clearly automotive revenues are up over 20%. You can see in the chart, almost 50% of global automotive revenue generate in the other three regions. Our shares outside of North America went up, improved. Revenues up in both Europe, LAAM, and Asia Pacific. I will go through those later. Chart number 11. We've talked a lot about emerging markets in the past. We thought we would just kind of share with you in terms of what's happening in the BRIC countries, Brazil, Russia, India, China, as well as the other emerging markets to total emerging markets. Tremendous growth we have seen in terms of industry in the first quarter. The challenges that we see in the US industry, we're not seeing them right now in a lot of these emerging markets. Our shares are actually fairly strong and GM actually has fairly strong market positions in many of these countries, such as Brazil and China. And we're actually growing in other emerging markets, such as Russia and India, as you see in terms of our first quarter market share growth. Most significantly our outlook from the '07 to ‘12 period remains very bullish in terms of how these industries are expected to grow. Tuning to chart number 12 on Europe. A couple of things to highlight. We do have good revenue growth there, $1.4 billion. Just want to note that a portion of that relates to translation due to the fact we had a strong Euro there. The other thing to note is when you look at our revenues and earnings before tax, Chevrolet sales in Europe are actually accounted for in the Asia Pacific region and that’s because GM Daewoo, GMADAT exports those vehicles and they basically book their revenue and the profitability in that region there. So just something to remind you of as we look at earnings before tax for the European operations. Just for a note in the first quarter of '08, Chevrolet Europe registrations deliveries of over a 100,000 units. Looking at total European again, production was slightly down. Industry up 1.8 million units, primarily driven by the strength in Central Eastern Europe and Russia. Germany, we seem to see some stabilization in the industry there, its slightly up versus last year's first quarter. Just note Russia. Russia had a very strong first quarter, both in terms of the industry, as well as GM market share, they gained 2.8 points. Industry was up 37%, but GM Russia sales were actually up an astounding 78%. Turn to chart number 13. LAAM, very strong results, over $0.5 billion worth of earnings before tax. In terms of the industry within LAAM, industry was up 12%. GM sales were actually up 20%. So, we outgrew the industry. And that's the reason why our share picked up 1.2 points. Brazil continues to boom, industry up 31%, GM sales up 36%. A gain in market share in Brazil, one of our key emerging market countries. Turning now to chart Number 14. With respect to Asia, Asia had a good quarter too. Earnings before tax improved versus last year. $94 million improvement versus last year. Improvements in margins. You see China, China the industry continues to grow. You saw a little bit of share decline year-over-year, but, last year in the first quarter we had an exceptional market share. 14% market share which again, when do you the year-over-year comparison, a tough comparison we also had some factors with respect to weather which impacted some of SGM's Wulings deliveries in the first quarter as well. Australia share is down, primarily due to mixed change in the Australian market. Just something to note we have been working with Australia, the Holden’s turn around. We actually saw some good financial performance out of our Holden’s operations in the first quarters. Some good solid profitability down there in Australia, so very pleased at the turn around is progressing in Australia. Chart Number 15, just GMAC, most of you folks heard their call yesterday, you can see that GMAC, automotive business slightly down. That's despite the fact that we had strong generation of origination wholesales, we had some valuation adjustments and some higher credit provisions there. Insurance slightly down. ResCap, improvement but they also had a gain of $480 million on retirement of face value ResCap debt there. As you know we're still working with the GMAC and Cyprus folks in order to try to address some of the challenges that ResCap has especially during the past quarter in its international operations. Chart number 16 it’s a chart from the GMAC deck yesterday, showing auto delinquency rates globally are trending down in the first quarter, that’s just due to tighter underwriting standards and more active collection initiatives initiated by the GMAC team. This should translate to improved loss trends in the future. Chart 17 just walking from adjusted net income down to GAAP net income. Some of the special items, the GMAC impairment I will talk a little bit about that next. Restructuring related, I mean these are really related to some of their restructuring efforts we have in North America and Europe that we have already previously announced. Delphi $731 million, that is a reduction in terms of our estimated recoveries, which we will cover that a little later. And then the valuation allowance on deferred tax assets that’s related to really a couple of operations that were in Europe whereby we took some valuation allowances in the first quarter. So, that $2.9 billion with adjustments will walk us down to about $3.3 billion reported GAAP net loss position. Chart Number 18 in terms of GMAC impairment, we regularly test the fair value of GMAC, compared to our carrying value. In the first quarter, when we took a look at our various lines of business of GMAC, and particularly the residential mortgage business, ResCap, as you know mortgage valuations have really come down in the market place, the market multiples. And so when we actually estimate the value of ResCap using market multiples in the first quarter, summed up the rest of the lines of business of GMAC and compared it to our carrying value of GMAC we determined that we had to take a non cash partial impairment on GMAC, worth about $1.3 billion on the common. And we took about 0.1 on the preferred. So in sum that represented about $1.45 billion on non-cash charge in the first quarter. Chart Number 19, liquidity position, as Fritz mentioned we finished at $23.9 billion at the end of March. That includes about $700 million of readily-available VEBA assets. That is down $3.4 from the year end 2007. And that's primarily driven by a lot of the American Axle situation, which I will talk about a little bit further. Just again I want to reiterate we do have $7 billion of undrawn committed US credit facilities at the end of the quarter. So our position at the end of the first quarter in terms of available liquidity was over $30 billion. Chart 20 just kind of shows the trend rates in terms of our cash, and our net liquidity position. You could see it again down versus the fourth quarter of this year, of prior year. 21, just talk about operating cash flow. Adjusted operating cash flow. First quarter 2008, we had adjusted operating cash flow of negative $3.6 billion. Again, we estimate that the impact of the American Axle strike about negative $2.1 billion for the quarter. 1.3 of which was related to management of working capital and accrued expenses. Chart 22, just a detail walk in terms of operating cash flow. You take a look at the first line, earnings before tax debts on a GAAP basis, negative $1 billion. That includes the special charges related to Delphi and deferred tax assets. And that depreciation capital spending, you see capital spending is up first quarter '08 versus first quarter '07, just a couple of comments. As we noted at the beginning of the year our capital spending in '08 will be higher than our capital spending levels in '07. This is a consciousness effort in order to make sure we fortify our product portfolio. When we took over the barons in terms of the first quarter, this is really a timing issue. The $700 million higher quarter-over-quarter we don't expect this trend to continue over the rest of the year. But, I just want to emphasize that we will be spending more capital this year in General Motors compared to last year. Change in receivables, payables, and inventories, I will walk through that in more detail in the next chart. Add back pension, healthcare expenses, deduct that. That is how you arrive at negative $3.6 billion in terms of adjusted OCF. Some cash restructuring charges, we walk you down through adjusted OCF after special items, negative 3.9. Then we go to non-operating related items including the dividends, change in debt and some borrowings overseas, the asset carve out cash flows from GMAC, and hold-on operating of 0.5 billion resulting in change in cash and cash related of negative 3.4. Chart number 23, in terms of working capital and accrued expenses. As you know, traditionally in the first quarter of every year we build up receivables, we build up payables as we ramp up production from year end to year end plant close. You can see this year our ramp up has not been that dramatic due to the American Axle strike. So, our total working capital this year, in the first quarter was actually negative $2 billion. Again, the American Axle impact was approximately negative $1.3 billion in terms of both combined working capital and accrued expenses. Net sales allowances, you can see that it is actually in use this year and that's again due to the fact that production was down in the month of March and so therefore our sales allowance reserves are coming down in North America. Non-cash charges, that's just reversal of the Delphi and the deferred tax asset valuation allowance expense items in the prior chart, both non-cash in nature. Chart number 24, just industry outlook. No doubt the US economy is facing strong headwinds. You know, we are pleased that the Fed has taken an aggressive stance in terms of reducing interest rates. It has a side effect of weakening dollar and resulting higher oil prices. You know short term industry conditions remain very challenging. You know, second quarter is likely going to be a tough quarter for the entire US industry. We are revising our outlook for the calendar year with respect to our total industry. Again, I want to emphasize total, including trucks and buses. We are revising it down from our initial guidance at the beginning of the year of the low $16 million units to currently mid-to-high 15 million unit range. We will continue to monitor closely on how the industry trends evolve, noting that there are some positive signs out there. You know, outside of housing sector, the automotive sector and the finance sector, employment investment levels appear to be holding up. And there seems to be some signs that housing activities are starting to stabilize in certain parts of the country, albeit at a lower level. With that, I am going to stop and turn it over to Fritz just to allow him to give you some perspectives for what to expect for the rest of the year. Fritz.

Thanks Ray. Page 25 takes you through where we stand in North America in terms of aligning our production schedules against demand. A couple of comments I would make, first, you know, historically in between 12/31 and 3/31 we would build inventory within the dealer body. If you look back over any period of time we would build anywhere between 100,000 to 200,000 units of inventory from 12/31 to March 31st. Coming into this year we did not expect to do that, given you know, number 1, that we had made some progress reducing our year-end inventories, number 2, we certainly had a more sanguine outlook with respect to the US market coming into the year, certainly relative to '07 or '06. So, you know sitting here today, we are absolutely committed to aligning our capacity with demand. We did not plan on an American Axle strike, it happened. And it happened in an area that as I said in my comments it actually minimally affected our retail delivery. What it did is affected pretty significantly dealer stocks. And particularly on full-size pickups it was a fairly meaningful reduction in full size pickup dealer inventory. But even beyond that we announced earlier this week, a further reduction in our capacity in full-size pickups and full-size utilities. We took four shifts out, three out of full-size pickup plants, one out of full size utility in order for us to make sure that we keep our inventory in line with the market demand as we get through 2008. We also continue to work aggressively in North America to successfully implement first of all our attrition program and then second take advantage of the opportunities that are availed to us in the '07 contract. When we look at inventories, we talked about end of March, of about 875. Clearly, the strike has continued through April. Our estimate, and this is just a guesstimate today as we probably end right around 840,000 units at the end of April which would be our lowest level of dealer inventory since 1983. Obviously, you have got sales call coming up here shortly, but, as we look at it, you know we certainly still have some issues we will need to wrestle with, full-size utility inventory. For example, is still higher than we will like but I think it is part of the reason we took the action we did in terms of the aligning shifts. We are looking at opportunities to build production and to grow production in some of the cars that are the hottest whether it is Malibu, G6, actually. We've launched later on this year the Chevrolet Traverse, we have very high expectations for that product. So it is about making sure we don't only align aggregate demand with capacity and inventories but also try to make sure we manage the mix of that to where the customer is going. And as we launch products do it successfully. Outside of North America, and we look at emerging markets the strategy is to take our foot and firmly affixed it on the accelerator and jam it to the floor. We're growing quickly. We're growing profitably in the fastest growing emerging markets. We're trying to expand our capacity in a cost effective manner. With new assembly plants being built in Russia, India and Mexico that will be coming on line in reverse order to that, Mexico, India and Russia, certainly over the next 12 months to 18 months actually. Actually, it is within the next 12 months. We're working with partners to increase capacity and we're evaluating longer-term capacity increases in the place like Brazil, however, what we're really doing is expanding our powertrain capacity and we're continuing to squeeze production volumes out of our existing plants in Mercusol. So, what we're trying to do is make sure we can run faster than the growth that we're seeing in these emerging markets. We need to expand our lower cost product portfolio. We have historically used an emerging market flow to blend new architectures as well as lower costs or legacy architectures products that we continue to update and make current, make modern, and make improvements to those products. But at the same time they have interesting cost points that allow us to sell in the segments where there is a real volume in growth. Then finally, maintaining a strong focus on brand building and distribution channels. It is equally important in the emerging market to do that whether you're an established place like we are in Brazil or you're establishing yourself as we are in Russia. Page 27, there is an example of what we're doing, for example, in Latin America, Africa and Middle East. When I went there in 1997, we were building a new plant in Rosario. We inaugurated in Rosario in '97. We were building a new plant in Gravati. We inaugurated that plant in 2000. Just in time for those markets to collapse. And so, what we're trying to do, in a place like Mercusol is to make sure now the market has come back and actually met or exceeded our projections that we're looking at back then let's make sure we fully utilize our capacity and do it in a smart way. So we're adding assembly capacity in the Mercusol through shifts, through line rate increases. We are adding capacity in the Indian markets line rate increase in Columbia, contract assembly in a place like Venezuela and Ecuador. Everyone of those cars has an engine and a transmission, so trying to make sure that we get our, our powertrain capacity to align with vehicle assembly, particularly for flex-fuel for example in Brazil. Growing distribution in the Middle East and frankly leveraging our global footprint and manufacturing footprint to not only grow sales, but grow profitability, revenues, profitability and cash flow in a very substantive way. Shift gears talk about Delphi. Back to North America and some of the tough things we got ahead of us. Delphi was unable to merge under plan of reorganize is all you have seen. And about the investors terminated the investment agreement or EPCON on April 4. The GM Delphi settlement agreement is an agreement with the labor unions, remain in place, but they are not generally effective. In other words nothing is going to change, they are just not effective because they were intended to be effective when Delphi merged, but frankly nothing has changed in terms of the nature of those agreements or how we're operating with Delphi today or with labor. We have agreed as part of Delphi going out with their revised good blending facility to advance up to $650 million, during '08, which is in anticipation of the effectiveness of the GM Delphi settlement agreements, which again would take place when Delphi merged. That's within the amount that GM would have paid had Delphi merger bankruptcy in '08. So the way we think about it is we are really advancing the funds that we otherwise would have paid had they emerged for example, in April, as part of the agreements. It would be concurrent with the Delphi DIP extension, and we would receive an admin claim for these advances. The expectation is obviously as Delphi emerged however, we would have more advanced moneys we had due with them and it would be in effect offset. So, we have agreed to do that to help them as part of their extending their DIP line. We continue to work with Delphi and the various stakeholders, most particularly the unsecured creditors committee to facilitate Delphi's efforts to emerge from bankruptcy. We're very interested in having them do that. Clearly, a lot of things have been done over a little bit more than the last two years. But one of the things that clearly got in the way and the giant speed bump was, the pretty significant deterioration and the credit markets and specifically the lending markets for this sort of credit and they just simply weren't able to close. Although I might point out that Delphi was actually able to successfully raise the financing needed for them to emerge, they did so, but the investor group still chose not to close. Finally, we did take a charge of 7/10ths of a billion in the quarter. What that reflects is updated estimates for what our recoveries might be in the bankruptcy. Our liabilities are pretty well known. We know what they are, we know what the cost are. But what is uncertain is both the nature, value and timing of any recoveries. And as we look at the value recoveries, not only do we need to look at the types of instruments we might see, but we need to mark them or measure them based upon the spreads and the conditions that are extend as of March 31st, which were fairly inhospitable given what we are going on in the credit market. So we took mark and therefore our net liability went up 7/10ths of a billion dollars. Clearly our objective is to have Delphi emerge and then to make sure that we protect and maximize GM's fair recoveries as they do emerge from bankruptcy. So finally, outlook for the second quarter, volume and revenue growth overseas particularly in the key emerging markets, we see no slackening in that regard. We do believe we need to manage our North America business in a more challenging environment. Frankly, sitting here today we will have sales call, I guess tomorrow. But, April feels a lot like what we have seen in the first quarter. And we certainly see stimulus rising, both in the second quarter and in the second half. But nonetheless, we're pretty much operating the business assuming a tougher environment in the second quarter in North America. We need to execute our North America capacity actions. We have already announced that we plan to do on full size pickups and full size utilities. And then actively manage the special risk factors whether it is Delphi, Ray touched on GMAC and ResCap and I will be happy to take questions on that later in the call. And then American Axle. Again it is not something that we have been involved in other than the fact we're a customer, we’re being significantly impacted by it but you know we're very supportive of efforts on the part of both the UAW and the American Axle to try to find a solution to this difficult situation. A very complicated situation but one that, you know we will like to see them reach an agreement at the bargaining table so we can get back to running our business. We know what we need to do, we need to have them reach an agreement. Looking ahead, strong focus on managing the business for cash flow. With the negative OCF in the first quarter, certainly of the $3.6 billion of negative OCF, a little over $2 billion driven by the American Axle strike, but nonetheless we still, we still didn't generate cash in the first quarter. And it shows us that this remains a key focus for us. Our aggregate liquidity position is still healthy but nonetheless we need to drive the business and manage the business for cash flow. We do expect, particularly as we move up the second half of the year to begin to see the impact of the current special attrition program. We're really rolling that out in the 2Q. Executing key launches, such as the Traverse in North America, very importantly in Europe the Opel Insignia a leader in this year and bring our new capacity on line in Mexico, Russia and India. So that summarizes my comment. I think at this point Ray and I are ready to take questions.

(Operator Instructions) And our first question comes from the line of John Murphy from Merrill Lynch. Please proceed with your question. John Murphy - Merrill Lynch: Good morning.

Hey, good morning, John. John Murphy - Merrill Lynch: I just want to start on slide eight here and just take a look at a couple of these items. First on mix, and it looks like mix was relatively neutral in the quarter but you had some pretty heavy hits from the Axle strike and lost truck production there. Just wondering what the big offset was there and do you think you can keep that going, going forward?

What was interesting, John, is that that, we did have production disruptions in the first quarter actually for full sized utilities we were able to actually keep you know the plants running fairly well on our full-size SUV. We lost about 5,000 units in terms of the full-size SUV. In terms of what the expected mixed impact was, it wasn't as large as we had thought. And probably what you folks would have thought. We did have some people, in terms of model option mix related to richer content on some of our launch products. Just for perspective you know the new Malibu versus the prior Malibu, average transaction prices are $8000 higher, generation to generation. The CTS, averaged over 4000. CTS over 8000 higher in terms of average transaction prices. So clearly we're seeing with respect to these launch products, you know higher transaction prices. You know better content of vehicles, and that’s translating into a more favorable mix for us. John Murphy - Merrill Lynch: And then taking lower down the line there and looking at hedging $800 million positive. Is that something that’s repeatable going forward? And also, if you could call that out or maybe give us some color on where that was in other regions?

You know, on commodity hedging, as you know we don’t FAS 133. Basically we took a mark-to-market in terms of our contracts in the quarter. That resulted in, you know, hedging gains there. I mean we can't predict what’s going to happen in the future depending on where market prices move on commodities. With respect to other regions, actually very small in Europe. We did have a small hedging gain. But that was more or less offset by the FX impact over in Europe. John Murphy - Merrill Lynch: Okay. And then next on incentives. I mean we have been hearing from a lot of dealers and there has been a lot of public commentary that you have been very restrained on incentives relative to your competition as of late. So much so that dealers seem to be clamoring for more incentives and we certainly think what you're doing is a great idea. I am just wondering if there might be more incentive activity to come in the future or is this really an indication that you're accelerating your capacity cuts in the near term and maybe with part of the problems you're having with your local unions?

You know one of our key strategies is managing inventory and there is a correlation in terms of your ability to manage your inventories aggressively and how much incentive you have to spend in the market place. So this has been a key strategy of ours over the past couple of years. I mean, the net price that you see in chart number 8, the deterioration, I mean that, again, clearly is related to the full-size pickup truck launched last year first quarter versus normal incentive activities this first quarter. But I mean clearly our challenge is to really balance production, balance inventory, in line with demand. We believe if we do that, we can manage our incentive levels at a level that we feel comfortable with, and most importantly manage our residual values and improve our residual values going forward. Fritz, you got any more comments there?

I would say, John, you know we're competitive in the market place. I think we're running 0 to 60 for example on full-size pickups in March. It didn't turn out to be very effective actually. We did well in the market. Our penetration was good but the segment itself declined pretty significantly. So our conclusion was, we did make some changes in April to try to be more aggressive where the customer was moving. But we're trying to manage our overall level of incentive activity period. I mean it’s about being more disciplined in terms of how we go to market with the fleets and being more disciplined in how we go to market at retail including a pretty strong focus on our brand, making sure that we ride our launch products really hard in terms of both brand advertising, for example, Malibu, making sure we get good healthy mixes of these products out there and Ray already talked about average transaction prices. We will stay competitive in the market but our objective is actually to focus on our brand, not the deal. And, I think, what that means is that we're going to be restrained in terms of sometimes, you know, providing the kind of level of incentives that some might want. I would say in general, our dealers are very supportive of what we're doing in terms of brand building. You know, obviously, we do know we have to stay competitive in the market place, but this is kind of a fine line and we're trying to play it the right way. John Murphy - Merrill Lynch: And then lastly I will hop out of the queue here. On the Axle strike, if it were to persist for a number of weeks more further out than what you're expecting or from now, would we see those production cuts that you have announced planned for July and September be cancelled. I mean, could we get this production cut in the second quarter just naturally or not naturally, from the Axle strike?

Well (inaudible) requirements in the US. I mean, we got our notifications out. You know we did it the right way. We took the action after a fair amount of thought. Clearly, because it is a pretty significant action both for us and for our people. If the strike goes on longer, we would want to look at what our inventory is, we have got in the second half of the year and maybe make minor tweaks, but I would consider the announcement we made permanent, at least with respect to '08. Because in fact, we see the market, we have a pretty realistic view of the market. And our view is on American Axle is kind of day-to-day week-to-week. If we have to adjust we will but at this point we don't foresee that. John Murphy - Merrill Lynch: So we should think of those 138,000 units of capacity as real capacity cut that may continue going forward on the capacity side.

Yes. John Murphy - Merrill Lynch: Thank you.

Our next question comes from the line of Rod Lache from Deutsche Bank. Please proceed with your question. Rod Lache - Deutsche Bank: Good morning everyone.

Good morning, rod. Rod Lache - Deutsche Bank: I have got three questions. First, I haven't heard you mention what the take rate was on the buyout, if you have that, and any color on the trajectory there. Secondly, comment on the nature of your steel contracts whether you're able to fend off these surcharges that we keep on hearing about. And then lastly, just more broadly speaking, it sounds like, costs are going up, meaningfully, for everyone, raw material costs, regulations, not just for GM, everybody in the industry and at the same time, seeing a pretty big drop in residuals, trade-in values since last summer, maybe even over 20% for some of the trucks. Does the discipline that you guys have on the pricing side have more negative implications longer-term per volume? How do you see that playing out relative to how you deal with the consumer trying to make these trades with lower residuals and higher prices?

I will take it. Kind of work backwards here. One, in terms of costing up, meaningfully it is true. I will answer your steel question first. In general, we came into the year, I think we showed a chart in January that talked about the expected inflation we would see in steel and other commodities and steel is pretty much performing as we thought it was going to do. So, I have seen a lot of things about surcharges but I would say we're seeing steel inflation but we're seeing steel inflation consistent with what we thought coming into the year. No surprises I guess this is the way I would put it today. Costs going up meaningfully and reductions in the residuals, it is true that reductions in residuals have been focused on trucks and SUVs. I just think in the end, we think the right thing to do is maintain the discipline. I mean it is economics 101. You are going to have some impact undoubtedly but trying to separate the impact of primary demand from what is happening with residuals versus what is happening with confidence and housing at this point I'm not a smart enough economist. I am not even an economist, let alone a smart one, but I had would say, our view is that, costs going into the vehicles whether it is raw materials or whether it is some of the technology which is going in, you know, we got to act. We got to maintain discipline because frankly the costs are real. We need to address it, and now is not the time to be breaking the discipline and frankly contracting margins. It is the wrong thing to do. And I think our view is primary demand will land where it is and we will just deal with it rather than try to artificially stimulate something which frankly we're very dubious it would actually be effective. So, that was your last item. Your first item was take rate on the SAP. Early, our SAP ends May 22nd, so we're not going to give you an update today. It generally ends about May 22nd in all the plants. Last time we did this, a very high percentage of the take rate took place in the last two weeks of the program. So, at this point, it would be too early for me to make a call. Rod Lache - Deutsche Bank: Great, thank you. You're welcome.

You're welcome.

Our next question comes from line of Brian Johnson from Lehman Brothers. Please proceed with your question. Brian Johnson - Lehman Brothers: Couple of questions as well. Just to clarify on the plant activity with the Warren act. You're implying that is a potentially permanent move. The 138,000 if we annualize that looking at those plants we will be closer to 400,000 of production take out, capacity take out?

No, actually that's too high. I think in terms of the permanency of it obviously we certainly mounted for the end of the year will obviously assess, but given what’s happened with both primary demand and segment shift mix we're taking the action and doing it with the thought and this could very well continue beyond '08. If the market responds very aggressively and positively, frankly adding is always good, but we're not planning for that. But to annualize the 138 wouldn't be right. That number would be considerably less than 400. Brian Johnson - Lehman Brothers: So it is not half of the capacity in each of those plants?

No, plus remember if you look at our full size aggregate capacity, we have touched four of the plants, but a couple of plants we haven't really touched. We have tried to balance it in a rational way, but it is not a having total pick up or SUV capacity. Brian Johnson - Lehman Brothers: Okay. Not even in those plants that lose half their shifts?

Those plant, yeah, those plants that we go from 2 to 1 shifts yeah. We have options in the event we need to adjust for line rates and things like that, but at this point it would be unfair to speculate about that. We're trying to align the capacity with where we think the demand is and yes factually it is half the capacity of those plants. Brian Johnson - Lehman Brothers: And that is what would go in at least demand capacity utilization?

Correct. Brian Johnson - Lehman Brothers: Secondly, on cash flow your guidance for the year had been flat on operational cash flow, given the cash burn of Axle, as well as just in general market condition, where do you think you are on that now?

I guess Brian looking at both the EBT and cash flow, we clearly we see some challenges in North America with respect to the market compared to our viewpoint at the beginning of the year. At the same time when we look at some of the overseas markets the operations outside North America, they are actually turning out to be more positive than we thought too. So, we see both pluses and minus right now, for our global operations. Still too early in terms of how do we balance both of them. So our viewpoint is, that hey, we're looking at, we're managing North America carefully, hope the Axle strike we get that resolved and as you know when the strike resolves we are going to see reversal in terms of the working capital impact. And that will be beneficial for operations. Brian Johnson - Lehman Brothers: And can you walk us through the accounting and cash impact of the hedging gains on commodities?

On accounting basically you have a mark-to-market so therefore it is a gain that we record in our first quarter results. In terms of the cash impact, when these contracts mature over the course of the hedging horizon we will realize the cash benefit in order to offset the underlying costs of that particular commodity. Brian Johnson - Lehman Brothers: And on your Page 23, is the commodity gain, is that is just buried in other accruals?

Yes, I believe it is in the other accruals. We believe so. Brian Johnson - Lehman Brothers: Okay. Thanks.

Next question. Brian, is the phone call just removed we lose everybody? Operator next person please.

Our next question comes from the line of Jonathan Steinmetz from Morgan Stanley. Jonathan Steinmetz - Morgan Stanley: Thanks, good morning everyone.

Good morning, Jonathan. Jonathan Steinmetz - Morgan Stanley: A few questions. First on the hedging. I have an even more basic question here which is were there one or two underlying commodities that actually drove the gain just so we can try to think going forward as we see spot prices evolve as to how that is going to manifest itself into your financials.

Actually it was quite across-the-board. We have seen general commodity price increases over the course of the quarter. Actually over the past year, so I can't really say that was one or two that caused that gain. I mean, you guys probably follow the commodity markets as well, and you have seen a lot of volatility with a trend upward over the past quarter. Jonathan Steinmetz - Morgan Stanley: Well, I guess, where do you have the most exposure? I would think you could hedge precious metal items but seems like it is harder to hedge steel or oil. I wasn't aware that you hedged oil.

I think we got aluminum, aluminum is our primary exposure. All the platinum, the PGM metals. Jonathan Steinmetz - Morgan Stanley: Okay.

We have got aluminum, then we have lead, we have copper, we don't hedge steel but we do hedge a little bit of gas, natural gas particularly to run our plants. We hedge the precious metals to the extent the markets actually exist. And some of these commodities are so thinly traded that the hedging markets have only begun. They are very nascent. Our hedging rights intend to be fairly short term. We look out six months or so, we don't take very long periods of time. I mean, in some cases we will look out, but it’s not like we're looking out two or three or four years ahead. We're basically trying to hedge our exposures as we see, in a relatively short time horizon. Jonathan Steinmetz - Morgan Stanley: Okay, that's helpful. Turning to slide 12 on Europe. You mentioned a number of items in the release, including warranty commodity hedges, favorable material. Could you give a little bit of the flavor of the walk you do in North America just on what the dollar amounts on some of those items would have been?

Actually John, they were actually quite small in nature, in terms of pluses and minuses. We had a bit of a favorable material impact, in Europe. We hedged some commodity hedging gains a little over $100 million. But we also had some unfavorable exchange about $100 million. So therefore, it was actually a fairly, the variances were actually fairly small quarter-to-quarter. Jonathan Steinmetz - Morgan Stanley: The warranty one was also less than $100 million or so.

Yeah the warranty was actually less than 100 as well, that's correct. Jonathan Steinmetz - Morgan Stanley: Okay. And I guess regarding the Axle situation. And I know it is delicate. But when do you look to get more involved in and I would imagine you are behind-the-scenes but you have a bunch of suppliers who aren't going to get paid a lot of cash on June 2. When do you look to get more involved? And do you have any program in place to maybe temporarily try to help some of these smaller suppliers if that becomes an issue going forward?

It is a delicate question. And you know, what we have tried to do is be hopeful where we could be, in terms of with the UAW and with American Axle because we really do not want to be involved, because, it is just American Axle has been in the business for 14 years, and you know our view is it would be good to have American Axle and the UAW actually reach an agreement without our direct involvement. In terms of the impact of the smaller suppliers, certainly everybody is feeling the impact of there, in the short term. Ourselves, we're feeling it as are some of our tier 2s and tier 3s. We don't have a program today in place to try to address that. Historically with suppliers, where we have had issues, we try to work with them. Kind of on a case-by case basis but we don't have some broad program like that. Jonathan Steinmetz - Morgan Stanley: Okay thank you very much.

You're welcome.

Our next question comes from the line of Chris Ceraso from Credit Suisse. Please proceed with your question. Chris Ceraso - Credit Suisse: Thanks. Good morning.

Good morning, Chris. Chris Ceraso - Credit Suisse: Ray, you mentioned that when the strike ends there should be some unwind on the working capital. Is that true even if you don't rebuild the units that you lost?

Well, what will happen is that we will, we will go back to like a regular production, in terms of the plants that are shut down. So therefore, we will start building up our payables again as we start our production. So, there will be a reversal in terms of the working capital impact. The degree, based upon the production schedule that we set going forward. Chris Ceraso - Credit Suisse: Okay. Next question on the balance sheet and the cash flow. I think you had $2.5 billion that was supposed to go out the door early in the year for the new VEBA. Has that happened? Is that reflected on the 3/31 balance sheet?

No, actually this is Fritz. I mean, this VEBA actually doesn't exist really until we actually kick it in. You know, you don't see it but I think I covered it at the year-end. We have made all of our required contributions. You recall, we financed $4 billion note. I am going to call on Walter here in a moment, but we basically rather than put $4 billion in restricted cash, we delivered a note to the VEBA, excuse me, not VEBA, the special asset account, the TAA. But the VEBA since it is not actually in implementation, it wouldn't be that way until likely 1/1 2010. You don't see a lot of that on the balance sheet. Walter, you want to comment?

Yeah. I just think what you're referring to is, you know when we originally did the deal, we said there would be $2.5 billion contribution that ultimately ended up being $4 billion and we turned that into a note. So that contribution, that cash out outflow won't occur until sometime in the future.

Did you hear that, Chris? Chris Ceraso - Credit Suisse: I got it, yeah. Thanks. That's helpful. On page 5, you showed the taxes, 259 unfavorable. I understand the regional treatment and the valuation allowance in the US. Is there any one-time unfavorable item in there? Or is that just taxes that you're paying where you are making money?

Yeah, that's the traditional book tax expense related to our tax paying entities. Chris Ceraso - Credit Suisse: Okay. So that's just based on your level of profitability in those regions in the quarter?

Yeah, the special item for taxes is carried. It would be the valuation allowances in Spain and the UK. And we actually identify that separately.

That's a disclosed item there. Chris Ceraso - Credit Suisse: Right. Okay. Last one I think, can you give us a sum of the overall international ops impact of FX on both revenue and EBT? So, outside of North America what was the combined revenue benefit and/or profit benefits?

I mean the translation impact on revenues was about $1.8 billion for our operations on a revenue basis. On EBT basis, I am not quite sure. We can get back to you on that one. I mean, I looked at it and it’s not quite as big as you think because Europe, we're not highly profitable. But we have some impact obviously in Brazil and some of the other Latin America markets but it’s not quite as big as you might think. It does have pretty significant effect on revenue. Chris Ceraso - Credit Suisse: Right and on EBT it’s favorable but not huge?

Yeah, I mean we will get back to you. Chris Ceraso - Credit Suisse: Okay. Thank you very much.

(Operator Instructions). Our next question comes from the line of Himanshu Patel from J. P. Morgan. Please proceed with your question. Himanshu Patel - JPMorgan: Hi. Good morning, guys.

Good morning, Himanshu. Himanshu Patel - JPMorgan: I have a question on, just big picture on the balance sheet. Obviously the Delphi situation has gone from, you know, bad to worse. Your industry volume expectations are down. Is there any thought here to doing some liquidity enhancing options. Whether it is asset sales or renegotiating any of the terms of the UAW VEBA payment or whether it is coming to market, with some sort of issuance either on the fixed income side or on the equity side?

I guess Himanshu, as Fritz indicated we're very, very much focused on liquidity and trying to manage our business for liquidity. I think we have got a lot of focus right now in terms of working capital within our company. We have done a pretty good job last year on the various initiatives. We continue to work on it this year on the first quarter. So, therefore, I mean that's our priority right now in terms of looking at how we squeeze more cash out of our business. I mentioned that our capital spending will be up year-over-year. This was something that we decide we needed to do. At the same time we're carefully looking at the increases that we're making capital spending to make sure that they are both prioritized properly and we're getting the best bank for the buck in terms of our capital. So there is a lot of effort within our company from an operational perspective, in order to improve our working capital position and our cash flows.

In terms of the UAW and VEBA, Himanshu, I think the $4 billion note, you know, I think with a good common sense approach that we took with the UAW it made sense for them made sense for us. There is no action, there is no activities at all underway or even thought of with respect to renegotiating any part of the UAW agreement. Himanshu Patel - JPMorgan: Okay. Then Fritz, on a related question, if the balance sheet was not a constraint, I mean, you're starting to take some welcomed actions on the capacity front. What about on brands. You know, let's say for a second there were no capital constraints on the company. Would you consider longer-term becoming more aggressive on pruning some of the brand portfolio?

Say first of all, it is a good assumption but I can't operate assuming we don't have capital constraints. But, let me see if I can address the question. I think our view is particularly here in North America, that the alignment activities that we have underway, is the right way for us to go. We have been taking I think, reasonably decisive action to try to bring BPG, for example, dealers together. That has worked out well. I think, our approach has been rather than wholesale thing end brand, it has been more about how do we actually provide dealers with a good return on their investment. We get our brands aligned, we get our distribution aligned and then we can basically martial our resources and do fewer and better products of each of those brands. The costs of saying I just want to do away with a brand, it might make you feel good, actually it shouldn't but it might make you feel good day one but when you look at it as a business proposition not a very good decision just given the kind of costs that are involved in doing it. We have direct experience it was called Oldsmobile and it was pretty painful. And so, our approach is much more about how do we align our distribution. Focus our resources so that we're doing fewer, better products amongst each individual brand and do it that way and that's in North America. Outside North America, we have some individual brand issues in individual countries but this question is most often focused on our business here in North America. Himanshu Patel - JPMorgan: Okay and then on the capacity front. You're taking down manned capacity. Can you just refresh us on the terms of the UAW contract? Do you have any flexibility to take out an entire plant?

The way it works is, obviously you have a no plant closing part of UAW agreement. But it doesn't stop you from actually adjusting your manned capacity and adjusting your shifts based upon market volumes. I think everybody understands, with the market going where it is, that you need to adjust. And so, I think as a practical matter we're going to respect and honor the commitments we have made in the contract in terms of permanent plant closures, we don't have that. Number 2, if you look at the actions we took, we actually looked at bill combination, the mix between heavy duty and half-ton full-sized pickups to mix with utilities and frankly, all in the right decision was taken to take the four shifts out of four different plants rather than take, or concentrate more of the reduction in one plant. Himanshu Patel - JPMorgan: Okay. Then one, I just wanted to clarify something, the ASPs on the Malibu, did you guys say they were $8,000 higher?

No, sorry the ATPs on the CTS were 8,000 higher. ATPs on the Malibus about 4,000 higher. Himanshu Patel - JPMorgan: Okay, great, thank you, guys.

Our next question comes from the line of Itay Michaeli from Citi. Please proceed with your question. Itay Michaeli - Citi: Great. Good morning. Just to refer back to material costs I think at the beginning of the year you guided for a $2.1 billion favorable net performance globally. If I minus where you are globally for net materials and if you still feel comfortable and also that does include the commodity hedge gains?

Right now, we're forecasting, truly it is a more challenging environment, there is no doubt right now due to the rising commodity prices. We're still trying to move towards those targets. We’ve got some headwinds due to commodities, increases in commodity prices. We do have hedging in order to try to protect us there. I guess it is still early to tell. The teams are still very aggressive in terms of their global sourcing initiatives, and initiatives in order to make changes, technical changes to drive down material costs. So at this point in time it’s too early to tell.

In terms of commodity hedge gains we do not include that in material cost performance. Itay Michaeli - Citi: Okay.

We obviously show over time net cost with material costs inflation is, when we report an annual basis how it effects our material cost, but the hedge gains are not included in material cost performance. Itay Michaeli - Citi: Okay, that’s helpful. And just a follow-up on liquidity, Ray I think you spoke last month about looking at about $0.5 billion of an opportunity to enhance liquidity. Was that part of the $400 million net gain or net increase in debt? Or is that incremental to what you saw in the quarter?

What I said the liquidity enhancement initiatives include a combination of activities related to expense, related to capital, related to managed working capital. So it is kind of that number its kind of buried in terms of a whole bunch of different accounts there. Itay Michaeli - Citi: Okay. All right. That's all I had, thank you.

Our next question comes from the line of Brian Jacoby from Goldman Sachs. Please proceed with your questions. Brian Jacoby - Goldman Sachs: Hi guys.

Hi Brain Brian Jacoby - Goldman Sachs: Just a question on the cash flow side again, maybe regarding the new healthcare VEBA trust, I know you put that note in place. But I thought there were some time payments that were going to come or additional payments of between $2 to $400 million that maybe were going to hit in the first quarter. Did those not hit in the first quarter?

Well, I will let Walter answer the question.

There are time payments over the course of the year. I think it is about $600 million. And I think there were some small amounts in the first quarter. But if you pick those it was fairly consistent through the year.

I think actually the first large one is April 1.

Yeah, it was April. It has happened but it wasn't the first quarter.

It wasn't the first quarter. Brian Jacoby - Goldman Sachs: Okay and I assume, when we look at your cash flow that, those amounts now in going forward are going to be just kind of buried in the Pension/OPEB Expense line item of that cash flow statement or are you going to call them out separately? You had $700 million in first quarter '08.

Actually, we probably I mean I think we thought we would end up any cash that is in there since it is actually, the VEBA doesn't exist it would be restricted cash. We haven't walked through how we would, how we would go about it. We would need to do that in the second quarter.

We will call it up for you where it is in the second quarter how about that? Brian Jacoby - Goldman Sachs: Okay and then along the lines of cash flow. Just you know you said at the end of the year '07 that operating cash flow would be about flat, right, for '08. And obviously the environment is tough and Delphi, looks like you are going to loan some money to them. Depending on how that works out when they come out of bankruptcy you might have to lend them more than $600 million, and then you have the Axle situation. Are you guys still comfortable with just the year-over-year '08 versus '07 of operating cash flow of about flat? And along those lines, I mean you do have other liquidity sources, your GMAC stake is not pledged any more. I guess you could have another credit facility in place and pledge that asset. I mean you guys have you thought along those lines when looking at cash flow and just looking at overall liquidity?

I mean as I indicated earlier, Brian, we see pluses and minuses with respect to earnings and cash flow for this year. We're trying to balance both of them right now in terms of looking at the implications for cash flow. At the same time, in terms of liquidity, I mean clearly the US capital markets are pretty difficult right now. We do see that in the overseas operations that we can access liquidity and we have taken some actions already in the first quarter to borrow in the overseas markets. With the strong performance that we're seeing in the overseas operations it allows us to access some of these markets. We're basically looking at all options in terms of how do we continue to generate liquidity for our business. And just wanted to emphasize that, from a managed working capital perspective, that is a high priority for us and we believe that, there is still a lot opportunities in that area. Fritz Henderson : Ray wasn't there in the first quarter. When we let the GMAC facility expire at the end of the year, we did announce, say at the time that we might want to come back to that. We don't have any plans to do that today but you're right it is not encumbered today. We just haven't viewed it at the right time. And then at Delphi one of the points I made is, what we're advancing is actually amounts that we had otherwise built into our plants. It is a special item. We identify it, you see it. Whether or not we have to do something beyond that at this point is speculation. But what we try to do is actually structure something so that it is within what we otherwise owe. We do not historically would not historically include funds like this in OCF. It would be a special item but we will obviously identify it for you so you can see it. Brian Jacoby - Goldman Sachs: Okay one last one your debt picked up a little bit, sequentially, cash flow wise, $400 million it looks like balance sheet wise it was up about $600 million. What did you, where was that, where did that come from?

Yeah just a little bit of translation there. Brian Jacoby - Goldman Sachs: Okay.

The incremental debt has been raised overseas. But there is translation to get to that other number, the slightly higher number you mentioned. Brian Jacoby - Goldman Sachs: Okay, thank you.

Thanks Brian.

At this time we will now proceed with the media portion and our first media question comes from the line of Thomas Walsh with the Detroit Free Press. Please proceed with your question. Thomas Walsh - Detroit Free Press: Good morning guys.

Hey, Tom. Thomas Walsh - Detroit Free Press: Can you hear me?

Yeah we can hear you okay. Good morning. Thomas Walsh - Detroit Free Press: Good morning. Just I wanted to go back and revisit the dealer inventories for a bit. The decline that we saw in dealer inventories during the quarter, how much of that would you attribute to the Axle situation, and how much to just ongoing efforts?

Well, Tom, we said we lost 100,000 units of Axle production -- excuse me of production largely of full-size pickups, full-size UTs as a result of the American Axle strike. But obviously we reduced volume even beyond that, so, you know, at that point we are just trying to guess what piece is due to what, but I but it’s really driven by two things, one American Axle strike, and second obviously just further actions to reduce dealer inventory. Thomas Walsh - Detroit Free Press: Got it. And in that vein, and just the right size in question, in the flurry of buzz around Kerkorian's investment in Ford the other day, there was a lot of talk in various reports that, you know, maybe Ford has come further in its right sizing and restructuring than GM has which I think a lot people had GM ahead before. What is your thinking in that vein?

Well, let me see if I can take a crack at this. I think I said before, I do work for General Motors, not Ford. But, you know, I also say in terms of executing our plan, we see good cost performance. Let me just focus at current line of business. Good cost performance in North America. Losing $600 million in North America is not an acceptable result at all, but to have achieved it with that kind of production disruption, we think there are some positive signs there but we're not real happy with our results. Our retail performance of our new launch products continues to be strong. I think both we and Ford will obviously struggle with the change in mix through the year. We have customers who moved to past cars and to crossovers and away from the traditional body and frame trucks and SUVs. Our inventories did decline significantly in the first quarter. From a balance we look at North America as, we're not happy with the result but there are some things we can build on there. Europe, we looked at our overall level of results in Europe and we said we have certainly about 2% margin, not satisfactory, better than the prior year, as Ray said a host of small things, but we still have work ahead of us in Europe, no question. And then if I look at our performance in Asia-Pacific and Latin America, Africa, and Middle East, you know quite strong. So, automotive -- being in the black on automotive operations in the first quarter adjusted basis improved from the prior year even with a pretty significant down-take in North America volumes, in part driven by the American Axle strike and in part driven by a plan to reduce dealer inventory. It is not an acceptable level of performance, but as we look at it, you know there are some things we can look at and say our plan is we're continuing to execute it. But I am not going to get into the business of trying to compare us with Ford or us with anybody else. We got to get GM turned around. Thomas Walsh - Detroit Free Press: Okay. Thanks guys.

Yup. Thanks Tom.

Our next question comes from the line of John Stoll from Dow Jones. Please proceed with your question. John Stoll - Dow Jones: Hi, can you hear me?

Yes, John. Hi, John John Stoll - Dow Jones: I guess one question I have is this inventory reduction was in the cards regardless of, Axle went on strike or not. It seems like you had far too much coming into the year. And just in simple terms would it -- is it far more costly to have gone this route than being able to control it on your own, obviously you want to keep things in control, but are you able to quantify the difference between what a strike induced inventory reduction versus your own ability to do that without the aid of UAW and Axle?

You know, John, I mean it is difficult to quantify. There are a couple of variables here. Alright? With higher inventories, the thing I always get nervous about is higher incentive costs. And that is actually a major driver in terms of dealer stock reductions and so, while we don't have specific numbers, as Fritz indicated, we didn't plan on this strike. It happened. We're taking advantage of it and in terms of trying to get our inventories aligned, we can only speculate what if there was not a strike what would we do? Traditionally with these levels of dealer stocks traditionally you take several actions. One of them maybe trying to reduce inventories through sales incentives, and we have learned in the past that it is very, very expensive, especially with high value-added products like large-size SUVs and large-size pickup trucks. John Stoll - Dow Jones: I'm just trying to get my arms around how to portray this. Axle was one way to do something that needed to be done anyways. And so, should there be a real caveat in thinking the Axle strike really affected operations or was it just a poor planning for a market that caught you by surprise.

Well, you want me to take that? I would say, I made the comment before that we would traditionally build inventory between 12/31 and March 31. We came into the year certainly not expecting to build inventory to the same degree we historically did. We came into the year with aggregate levels of inventory, certainly in reasonable shape. We thought coming into the year that the market would be in the low 16s with like I'd say a 15.7 start rate. It turned out 15.6. So I would say an aggregate, would pretty much the market, in aggregate performed like we thought. What we didn't see is $120 a barrel oil. And so, you saw even faster mix shifts. If anybody knew the oil was going to $120 they would have traded it. As opposed to worked in an auto company. I think we missed that as a lot of people did. The changes in the market mix have accelerated faster than we would have thought. In terms of trying to put it in context there is no question. We lost 100,000 units of production in the first quarter. How would you have dealt with that throughout the rest of the year? What would you have cut? How much would you have changed your incentives? You are again getting into a speculative world. The truth is it resulted in significant reductions in our inventories both as a dealer and then specifically in the full-sized pickup. I think you will see reductions in full-size utilities in the month of April. When Ray showed his variance chart on page eight he showed the impact of volume and mix. He said that American Axle was included in there. The reason we did it is because if you're not costing yourself retail sales it is hard to be precise and say yes or no. I can say for sure we lost 100,000 units of production in the first quarter, though. John Stoll - Dow Jones: Okay. And is it safe to assume that we will see similar impact in the second quarter, given the fact that the strike has already has impacted the month of April? On top of that you have got the Delta plant down now going on for close to two weeks. Looking at the second quarter it doesn't look like the situation is going to improve in terms of the headwinds that you're facing.

Well, we will have our sales call tomorrow. I think it is May 1st. We'll update you on what the lost production was in the month of April actually. John Stoll - Dow Jones: Is it safe to assume that would be affecting retail sales at the crossover level, right?

Nick, you want to answer that?

Right, what.

He's asking about losing production at the Lansing Delta Township.

Yeah it eventually, if the strike doesn't get settled it will start affecting us. It has not really bit in April. We're obviously concerned about it continually. John Stoll - Dow Jones: Okay. One last question. Do you agree, are you basically pointing now a little differently in terms of GMAC's profitable given the fact they appear to have backed off any assumption if they are going to make or any strong guidance that they are going to make money in 2008?

Well a couple things I would say about GMAC, John. First, when they announced earnings yesterday they talked about the fact that they are still working to try to be profitable in '08. Clearly they identified that if the capital markets. It certainly worsened from here. You could see that resumption of profit could be pushed in '09. They have not given up. Clearly what we see in terms of the first quarter mortgage market has been particularly internationally. If you looked at how GMAC performed, specifically the ResCap performance, there were some good signs within the results. What really hit us hard in the first quarter were the mark-to-markets on internationals assets which we frankly didn't see coming into the year. That's the significant change relative to first quarter. Clearly as a result we will plan accordingly. We do continue to work with GMAC and Cerberus to make sure we reduce the risks of the business. We basically resize particularly ResCap. The international mortgage market has caught the same disease that the US mortgage market has and in some cases even more extreme. John Stoll - Dow Jones: You expect to hit the balance against GMAC at this point? I am trying to figure out if the progress that you're seeing. It makes you think that the impairment that you have taken is enough. Should we expect more impairments in the future if the situation continues to deteriorate?

Let me touch on the impairment actually. We hold GMAC on an equity method. We test that asset for impairment. We tested at year end we didn't have impairment. When we tested it at March 31 our conclusion was that we had in other than temporary impairment. And that is an important distinction in the accounting literature. What it means is we looked at the valuation of the pieces of GMAC and generally market multiples of mortgage businesses. They are trading at significant discounts to book. The conclusion was that we couldn't foresee when the mortgage market would improve. We can't see if it is going to get worse. We certainly could not necessarily predict when it would improve and when valuations might improve. therefore our conclusion was we were best served taking a mark. The view is it is other than temporary because if it is temporary we wouldn't have marked it actually. But, the conclusion was that it is other than temporary. And so we marked it. A couple of interesting things about it are that it is a non cash charge and that it doesn't affect what we're doing in terms of the business with GMAC and Cerberus. Executing the plan means getting North America's finance business on the right footing and reducing the risk of ResCap. This specifically doesn't really change anything in terms of what we are trying to do but it is something we felt we needed to do under the circumstances. John Stoll - Dow Jones: Okay, thanks.

Our next question comes from the line of David Welch with BusinessWeek. Please proceed with your question. David Welch - BusinessWeek: Good morning, guys.

Good morning, David. David Welch - BusinessWeek: How much would you have cut if the Axle strike doesn't happen. You can't quantify it but there are couples of comments here that were made over the course of the call that I am trying to reconcile. One is that the Axle strike and the resulting cuts in production and inventory haven't hurt your ability to meet customer demand for those products. So, if that's the case, it has cut your inventory, and you would have been building that up some. It tells me that a big chunk of this $800 million loss, due to the Axle strike, probably would have happened anyway. I can't quantify it either but how do you respond to that? Am I off-base here? It sounds like if you're meeting customer demand just fine with the reduced level of production due to the strike that is going on two months. Something tells me you would have made massive cuts anyway.

Yeah, let me see if I can't address it as directly as I can, David. It affected our first quarter. Your question is over the course of a year if this an effect? That lands in the category of who knows? I mean obviously we're making a call that even with the lost production from Axle strike we need to adjust our capacity, for example, in full-sized pickups and full-sized utilities. So we are taking a view as to where that market is going to be and we're not going to run out and try to regressively rebuild tons of inventory. The truth is if the market improves in the second half as we thought it might have, if oil falls $120 a barrelthings could change. I do know this. It affected us in the first quarter. That is how we look at it. How it affects the course of the year is a very different question. That will be a function of what happens in the market for the year. David Welch - BusinessWeek: Okay. But it appears that you guys are buying out more workers now. You had to make production cuts that you announced the other day that have nothing to do with Axle. It seems like you guys have done a massive amount of restructuring over the past two years only to get to a point where you need to do more. When are you guys going to get ahead of the curve on this thing?

Addressing the need to do more part, what has been accomplished is $9 billion out of the costs of the operation. But you basically have to adjust. It is not as if you can sit there and stay static and say okay we have done it all. You have to do more. I think the UAW agreement we have provides us with some good opportunities to continue to reduce costs and do it the right way. By the way, I made the comment before, make no mistake. When our products are hot we're going to try to find ways to build more of it, too. We don't have anything we can specifically point to today but what we try to do for example when we announced the shifts coming out was that we're looking at increasing production where the customer is moving to. We will see how we do that over the course of the year. But, I would say in terms of getting ahead of the curve, look, you know two years ago, would you have guessed the oil is a $120 a barrel? No. You know, I don't think you would or anybody would have. Some people did but you know frankly it was not the median expectation. So therefore you have to adjust. That's how I would put it. I would say all the things that we have done were necessary and important. And frankly had we been dealt a better hand in terms of the market you know we would be in a different position. But the truth is the market is weaker. The mix shifts have moved against us and you know we have to adjust. I think in terms of looking forward we have some interesting launches coming at us, whether it is additional crossovers, cars, we have a lot of launches coming at us in the next 12 to 24 months, where the customer is moving. You know while we're going to try to continue to maintain a strong position in trucks and SUVs, I think we know we need to improve the overall diversification of our profitability base if you will. We need to learn how to make more money on cars. We need to learn how to make more money on crossovers and we need to continue to tighten our belts and take the right steps from a cost perspective. No other choice. David Welch - BusinessWeek: Okay. And last one here, the pension/ OPEB manufacturing, improvement by $500 million. $400 million of that is manufacturing attrition. What is that? That is just taking workers out and hence reducing wages? Or is there some aspect of hiring them back into the Tier 2 wage? How depend that come to be?

No, David, that is just simply due to the fact that last year, in the first quarter there were still a certain number of workers who had accepted the attrition program from 2006 that were still working in the plants. We had higher labor costs last year in the first quarter. Those workers have actually exited. So therefore, quarter-over-quarter we're benefiting from the lower labor costs right now. David Welch - BusinessWeek: Workers have left and you're not paying them basically.

That's correct, that's correct. David Welch - BusinessWeek: Okay. And the pension/ OPEB part of that, the $100 million, give me a little detail on how you came to that.

Well, that's basically due to the higher returns we had last year. Therefore, the benefit that flows in through FAS 87, as well as higher discount rates actually flow through in terms of lower OPEB expense charges. David Welch - BusinessWeek: Got you. Okay. Alright, thanks guys.

Our final media question comes from the line of Jamie LaReau with Automotive News. Please proceed with your question. Jamie LaReau - Automotive News: Hi, there. I just have two questions for you. First one, if you could Fritz or Ray, just elaborate a little bit more on how you arrived at the $800 million loss figure for the American Axle strike related losses. And the second one is how much do you estimate increasing your capital spends for the remainder of this year versus last year?

On the first one, Jamie, our estimation was in terms of our foregone contribution margin on the units that we did not build. This is offset by some structural costs savings in our manufacturing operations. That is how we arrive at our estimate of $800 million. In terms of capital spending, we will be spending more money than last year as I indicated. I don't want to give any guidance in terms of how much. Cearly we believe it is important to continue to spend on our product portfolio. We recognize there is a mix shift going on in the market place, so we have got a high priority in terms of some of our crossovers and passenger cars in the future. The other area of focus is really the area of advanced technology and so we are putting more money into that area as well and developing hybrids as well as our other vehicles for the future with advanced technologies. That will remain a key focus of our organization going forward. Jamie LaReau - Automotive News: Okay, thank you.

This does conclude the Q&A session for this call. I will now turn it back to Mr. Randy Arickx, please proceed.

Thank you, operator. Thank you everybody for your time this morning. We will be talking to many of you tomorrow during our sales call. Thank you.

Ladies and gentlemen that does conclude the conference called for today. We thank you for your participation and ask that you please disconnect your line. Have a great rest of the day everyone.