GM Says Improved Quarter Shows Signs of Stability

General Motors Co. says it lost $1.2 billion from the time it left bankruptcy protection through Sept. 30, far better than previous quarters and a sign that the auto giant is starting to turn around.

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General Motors, its river of red ink stemmed by a trip through bankruptcy court, reported a narrower quarterly loss and said it would start repaying billions of dollars in government loans that helped keep it alive.

GM lost $1.2 billion for the third quarter — far less than the $6 billion it lost in the first three months of the year, before GM was transformed by a stay in Chapter 11. The company credited a sharp reduction in debt and sales of new models.

In what it called a sign of progress, GM also pledged to start paying back $6.7 billion in U.S. loans. But the money will come from a contingency account full of government cash, leading critics to question just how healthy the automaker really is.

In one sign GM is indeed on firmer footing, it took in $3.3 billion more in cash than it spent in the third quarter. In the first quarter, the last one for which it reported results, GM burned through $10 billion in cash.

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GM warned it will face other costs that will bring down earnings in the coming months, including restructuring in Europe and as much as $700 million to shutter dealerships. And there are still questions about the strength of the auto market and the economy.

"We're seeing signs of, I won't call it a recovery, but certainly stability," CEO Fritz Henderson said.

The repayment of government loans will begin with a $1.2 billion installment in December. GM said it plans to repay the debt over the next two years and possibly as early as next year.

That money will come from a $16.4 billion contingency fund set up by the U.S. government in case sales worsened or other problems cropped up. The seemingly circular payment plan was already stirring controversy in Congress.

"What is the logic in repaying government loans with taxpayer dollars?" asked Brooke Buchanan, a spokeswoman for Sen. John McCain, R-Ariz.

Brad Coulter, director of O'Keefe and Associates, a financial consulting firm near Detroit, said using government money to pay off the government debt is partly a public relations move. But it also indicates rising confidence at GM, which may feel it won't need all the contingency money, he said.