GM profits sink 40 % amid Europe woes

General Motors reported a 40 percent drop in second-quarter profit Thursday as troubles deepened at its European unit and a strong dollar undermined the value of overseas revenues. GM chairman and chief executive Dan Akerson noted that despite a "difficult global environment" the largest US automaker has now posted 10 consecutively profitable quarters -- "a milestone the company has not achieved in more than a decade." "Still the fact remains that most of our key metrics were unfavorable compared with a year ago," Akerson said in a conference call. "That is not acceptable." Net income fell to $1.5 billion from $2.5 billion in the second quarter of 2011. Net revenue also declined substantially, to $37.6 billion from $39.4 billion a year earlier. "The decrease was due almost entirely to the strengthening of the US dollar versus other major currencies," the Detroit-based automaker said in a statement. GM Europe was the heaviest drag on financial results, under pressure from the eurozone sovereign debt crisis and massive overcapacity issues. The division had a $400 million loss compared with $100 million profit in 2011. Some relief could come once a deal is reached with unions to restructure GM's European subsidiary Opel-Vauxhall, although that will likely also result in one-off costs and could take a while to show up on the balance sheet. "Opel management and German unions are continuing to discuss a broad range of issues that will help ensure the sustainability of the business, including productivity, cost and capacity," Akerson said. "We expect to have a comprehensive agreement in place sometime this fall." In late June, Opel's supervisory board approved a plan that involved deep restructuring, huge investment in the product range of the Opel and Vauxhall brands, and a new marketing strategy. Akerson said the company has made progress on the key components of the European restructuring plan -- "building a stronger team, investing in new products and addressing our cost and capacity." North America remained the group's most profitable region, with income of $2.0 billion, down nine percent from the 2011 second quarter. "GM North America is a powerful earnings engine with the potential to become even stronger," Akerson said. The South American business was at break-even, after a $100 million profit a year ago, and GM is investing heavily in new products there. Its international division -- which includes Asia and Africa -- saw income essentially flat at $600 million in the quarter. "Staying on offense has helped us to increase our year-over-year sales and share in China and positions us for growth in key markets like Russia," Akerson added. GM increased global vehicle deliveries by 100,000, to 2.4 million in the second quarter, as its share of the key -- and growing -- US market fell 18.2 percent from 20.0 percent a year ago. GM Financial was the only unit to show growth, doubling profit to $200 million. GM shares, which had been trading higher earlier, were down 2.3 percent in afternoon trade at $19.20. Earnings of 90 cents per share beat market expectations of 74 cents, but revenue missed the $38.58 billion estimate.