NEW YORK (CNN/Money) - General Motors Corp. posted improved third-quarter operating profits Tuesday that drove far past Wall Street expectations, although a large charge resulted in a reported net loss.

The world's largest automaker also raised its earnings guidance for the rest of the year.

GM (GM: up $1.53 to $34.79, Research, Estimates) shares jumped about 5 percent in midday trading, helping fuel a solid rally in the broader market.

The world's largest automaker earned $672 million, or $1.20 a share, in the quarter, including operations at Hughes Electronics but excluding other items. That's up from $473 million, or 85 cents a share, on the same basis a year earlier. Analysts had forecast profits of 99 cents a share on average excluding one-time items, according to First Call, which tracks Wall Street estimates.

Including charges of $1.42 billion, or $2.62 a share, to write down its investment in European automaker Fiat and for other items, GM reported a net loss of $804 million, or $1.42 a share, wider than the net loss of $368 million, or 41 cents a share, a year earlier. The company estimated that its 20 percent stake in Fiat, which it bought for $2.4 billion in 2000, is now worth only $220 million based on its internal analysis.

The company has been weighing purchase of the remainder of the troubled Italian car maker. GM Chief Financial Officer John Devine said the company's writedown is not based on any inside information about Fiat or part of a pricing negotiation with the Italian automaker's corporate parent.

GM said it expects to earn $1.40 a share in the fourth quarter and $6.35 a share for the full year, including the results of Hughes but excluding special items. That's better than the company's earlier guidance of $5.60 a share on that basis for the full year.

GM's fourth-quarter guidance is a bit behind the First Call consensus forecast of $1.48, but the better-than-expected third quarter means that the new full-year guidance still tops the $6.31 a share First Call forecast for 2002. The company earned 60 cents a share in the year-ago fourth quarter, and $3.23 a share for 2001, excluding special items in both periods.

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Revenue rose to $43.6 billion from $42.5 billion, also topping average forecasts of $42.8 billion. Revenue was basically flat at GM's core North American auto operations, but gains in Europe and its financing unit helped lift the total. Total vehicles sold worldwide slipped to 1.92 million from 1.93 million.

The company also raised its fourth-quarter North American production target by a small margin, 11,000 to 1.4 million vehicles, which is well ahead of the 1.29 million vehicles produced a year earlier.

The company said the performance of its pension fund assets has continued to be hurt by overall market declines. After being off 3 percent for the first six months of the year, the assets ended the third quarter off 10 percent year to date. The company already has made $2.2 billion in contributions to pension funds in the first three quarters of the year, but strong cash flow from automotive operations has allowed it to increase its net liquidity to $3.3 billion from $1.0 billion at the beginning of the year.

"Clearly we are going to have to put more of our operational cash flow into pensions than we'd like or we had planned earlier," Devine told investors. The amount of the contribution has yet to be determined and will be based upon market conditions, but the pension expense is expected to rise to $1 billion, or $1.80 a share, next year, assuming no further deterioration in pension assets or interest rates.

Devine gave no additional details about the company's plans for Hughes (GMH: up $0.23 to $8.75, Research, Estimates), which it is trying to sell to competing satellite television operator EchoStar Communications (DISH: up $0.12 to $17.01, Research, Estimates). Last week regulators at the Federal Communications Commission moved to block the proposed $18 billion deal. Devine repeated earlier GM statements that the company remains committed to the deal.

"We think this has been the best deal for shareholders and we're doing everything to get this done," he said. "If the merger is not approved, we believe we do have alternatives. This is not the time to discuss them."

GM has been a leader in setting incentives in the market, unveiling a round of zero-interest financing that was in place for much of the quarter. Devine told CNNfn that it would be wrong to attribute all the company's gain in market share to the incentives.

"There's a lot of focus on incentives appropriately, but we look at our business as more than incentives," he said. "We have to get our market share up, we need to get our costs down. When you put that together, we had a pretty good quarter in a pretty tough environment."

GM's figures show that North American market share increased to 27.8 percent from 27.4 percent in the quarter, and excluding the fleet sales to businesses, the share of retail sales to consumers was up even more, to 27.0 percent from 26.2 percent a year ago.