General Motors lost $3.2 billion (£1.7 billion) in the second quarter as it absorbed heavy charges for its massive restructuring programme.
But the world's largest automaker reported an operating profit that beat Wall Street estimates and its sales surged 12 per cent.
Investors sent GM shares up more than four per cent in pre market trading.
The loss of $5.62 (£3) per share in the April-June period compared with a loss of $987 million (£532.6 million), or $1.75 (94p) per share, for the same period last year.
Without the one-time charges, GM's operating earnings were $1.2 billion (£647.5 million), or $2.03 (£1.09) per share. That was significantly ahead of the 55 cents per share forecast by analysts.
Revenue for the American giant climbed to $54.4 billion, (£29.3 billion) compared with $48.5 billion (£26.17 billion) in the second quarter of 2005.
GM Chairman and chief executive Rick Wagoner said :"We're particularly pleased with the speed with which our people have implemented our turnaround plan. Conventional wisdom is that you can't turn a ship as big as GM around quickly. We aim to prove that conventional wisdom wrong."
Mr Wagoner said the company had increased its target for reducing annual costs in North America to $9 billion (£4.8 billion) from $8 billion (£4.3 billion) by the end of 2006.
"Our turnaround has not just gained traction, it's accelerating into high gear," he said. "While significant work still remains, our ability to identify and initiate $9 billion in cost cuts over the course of the past year is unprecedented in this industry."
The second-quarter loss included a total of $4.3 billion (£2.3 billion) in special charges, including a $3.7 billion (£1.99 billion) after-tax charge related to buyouts and early retirements, which allowed GM to reduce its hourly work force by 34,400.
One-time items also included a loss related to the pending sale of a 51 per cent stake in finance arm GMAC, a gain on the disposition of Isuzu stock and other restructuring charges.