General Motors Corp. (GM) said on Monday that it raised its earnings outlook due to continued cost-cutting and the strong sales outlook for the year, despite reporting a 12 percent drop in its May U.S. vehicle sales. 

GM, the world's largest automaker, said it expects second quarter earnings of $2.50 per share, excluding its Hughes Electronics Corp. unit, versus its prior guidance of $2.00 per share. Including money-losing Hughes, GM expects earnings of $2.40 per share for the second quarter, up from its previous forecast of $1.90. 

For the year, GM said it expects earnings of $6.00 per share, excluding Hughes and special charges, up from its previous guidance of $5.00 per share. Including Hughes, the 2002 earnings guidance is $5.60 per share, up from $4.60 per share previously. 

GM said it remains optimistic about the remainder of the year, and set a third-quarter North American vehicle production forecast at 1.245 million vehicles, up 0.6 percent from the third quarter last year. GM also raised its second quarter North American vehicle production forecast slightly. 

GM shares rose 40 cents to $62.55 on the New York Stock Exchange in early afternoon trading, reversing from earlier losses.