GM Profit Drops 14% As Europe, U.S. Units Weaken

General Motors Co.'s net income fell to $1.8 billion in the third quarter from $2.1 billion in the same period a year earlier.

Revenue rose 2% to $37.6 billion, and global sales improved almost 2% to nearly 2.3 million units. Rising earnings in Asia and South America helped offset shrinking profit in North America and widening losses in Europe.

Analysts were cheered that GM's free cash flow surged to $1.2 billion in the quarter for $258 million a year earlier.

The company's third-quarter operating loss in Europe deepened to $478 million from $292 million loss a year earlier. Revenue fell 18% to $5.1 billion, and sales dropped 7% to 382,000 vehicles.

GM Europe has shed 2,300 jobs this year through attrition and expects to reach its target of 2,600 jobs by year-end. The unit, which lost $1.1 billion from January through September, predicts its full-year deficit of $1.5 billion to $1.8 billion.

GM anticipates "slightly" better results in Europe next year but does not expect those operations to break even until about 2015.

In North America, operating earnings fell $400 million to $1.8 billion in the third quarter because of higher warranty costs, the company says. Revenue in the region grew 7% to $23.3 billion as sales inched up less than 2% to 759,000 units. Production expanded 3% to 763,000 units as an 18% jump in car output offset a 5% decline for trucks.

International Operations which include Asia Pacific, Russia and the Middle East boosted operating profit to $689 million from $365 million. Pricing pressure in China hurt income there, so other foreign markets contributed most of the gains, according to GM. The unit's revenue grew 10% to $6.7 billion. Production volume, including joint ventures, climbed 9% to 1.1 million units. Sales rose 6% to 857,000 vehicles.

The company's South American operations swung to a $114 million quarterly profit, reversing a $44 million loss in July-September 2011. Production dropped 9% to 222,000 vehicles. Revenue declined nearly 2% to $4.3 billion despite a 2% sales gain to 283,000 vehicles.

GM Financial increased its operating profit 12% to $200 million.