GM Q1 earnings plunge on Europe troubles

General Motors' earnings fell by nearly two-thirds in the first quarter as the company's European operations racked up losses due to the eurozone crisis, the largest US automaker said Thursday. Strong results in China and GM's once-troubled North American unit more than offset Europe's $256 million loss. But GM chief Dan Akerson said the company will not be satisfied until all its regions are "solidly and reliably profitable." While GM is negotiating a number of cost-cutting strategies with its European unions -- including job cuts -- it does not plan to close factories despite significant overcapacity problems. GM's net income fell to $1.35 billion in the first quarter from $3.41 billion a year earlier. The bulk of the drop came from special items: GM posted a one-time loss of $612 million in the first quarter of 2012 and a one-time gain of $1.5 billion a year earlier. The results were better than expected -- 93 cents a share excluding special items compared with an average forecast of 85 cents a share -- but GM shares were down 2.4 percent at $22.38 in afternoon trade. "Going forward our plan is to deliver results like this but with a bit more balanced scorecard," Akerson said in a conference call with analysts. "I believe we'll get there." GM managed to increase global vehicle sales by 60,000 vehicles to 2.3 million in the first quarter, even as its share of the key -- and growing -- US market fell nearly two points. Earnings in North America rose by $400 million to $1.7 billion as margins grew to seven percent of revenue from 5.7 percent a year earlier. GM cautioned that North American profits in the second and third quarter will be "comparable" to the first quarter due to scheduled downtime at factories that produce full-size trucks. "We are aggressively eliminating complexity to reduce our costs, and at that same time, we are preparing for more than 20 major vehicle launches around the world in 2012 to drive revenue this year and farther into the future," said chief financial officer Dan Ammann. China was another bright spot after GM sold a record 745,000 vehicles there in the first quarter and said it was on track to reach its target sales pace of five million vehicles a year by the end of 2015. The $256 million loss in Europe -- compared with a $5 million gain in the first quarter of 2011 -- was "disappointing but not unexpected" Akerson said. It was due largely to slipping sales and market share amid weak overall demand and a strong dollar. "Europe obviously remains a work in progress," Akerson said. "We're working hard to identify new revenues and cost reduction opportunities to put the business on a path to sustainable profitability." GM has been working to reduce its bloated European headcount through attrition and buyouts and is in talks with its unions on plans to "match production to demand," Akerson said. GM Europe chief Karl-Friedrich Stracke acknowledged that "we need to do better" but hailed strong results in March and April and vowed to deliver better results in the future. "We are working on profitability plants for the whole company," he said in a separate conference call. "We need to improve the structure cost and have clear plans to do that." Stracke said Opel continues to work with its unions to address capacity utilization problems but said "we are not addressing any plant closures until 2014." "We have a clear contract with employees on overall locations and we are sticking to this commitment," he added. GM's international unit -- which includes sales in Asia, Africa and the Middle East -- saw earnings fall to $529 million from $586 million a year earlier. South American earnings were also down to $83 million from $90 million in the first quarter of 2011. Meanwhile, GM is making "good progress" on its recently announced alliance with Peugeot, Ammann said.