Editor's note: An earlier version of this story overstated GM's streak of profits in Europe. The company had a second-quarter profit there after a first-quarter loss.
DETROIT -- General Motors today reported a $1.7 billion third-quarter profit, as strong pricing and healthy demand in North America helped offset losses in Europe.
GM's net income for the July-through-September period declined 12 percent from the third quarter of last year. It was GM's seventh straight quarterly profit since exiting bankruptcy in July 2009.
Revenue grew 8 percent to $36.7 billion.
GM CEO Dan Akerson said he was pleased that GM increased vehicle sales, pricing and profits in its two biggest markets: North America and China. But he said GM has "a lot more work to do, especially in Europe."
"We have opportunities within our control, and challenges outside our control, to work through as we pursue sustained profitable growth around the globe," Akerson said during a conference call with analysts.
Investors didn't greet the results warmly. GM shares sank $2.73, or nearly 11 percent, to close at $22.31 at 4 p.m. ET in New York Stock Exchange trading on Wednesday, as markets in general suffered from concerns about the economic turmoil in Europe.
Several analysts said GM's forecast for the fourth quarter was softer than they had expected. GM said weakness in Europe and higher marketing and engineering costs from planned product launches would weigh on profits, which it said would be flat from the same period in 2010. The automaker earned $1.34 billion that quarter, before interest and taxes.
Pricing helps, mix hurts
GM continued to rely on North America, where its profits rose 3 percent from the year-earlier period to $2.2 billion.
Better pricing added about $300 million to GM's bottom line in North America during the quarter, GM CFO Dan Amman said.
"Customers obviously are seeing the value in the vehicles we're offering," Amman told reporters at GM's headquarters here today.
But, a shift in mix toward less-profitable, smaller cars hurt profits by $700 million, Ammann said. Sales of smaller cars were weak during the third quarter last year, as GM was phasing out its Chevrolet Cobalt while sales of its replacement, the Cruze, were just beginning.
Higher volumes helped to offset the shift toward smaller-profit cars, though. GM said it delivered 745,000 vehicles in North America during the quarter, up 13 percent from a year earlier.
Profits at GM's international division, which mostly reflects GM's performance in China, fell 29 percent to $365 million. Ammann said earnings in China were up, but unfavorable exchange rates in other markets curbed profits.
European breakeven delayed
Europe's weak economy and debt crisis have stalled GM's comeback bid there. European operations lost $292 million in the third quarter after posting a net profit in the second quarter. But the loss in Europe was less than the $559 million GM lost there in the third quarter of 2010.
GM now does not expect to break even in Europe for the year before restructuring charges, which had been its goal, GM CFO Dan Ammann told reporters today.
"We obviously have significant macroeconomic challenges to address there," Ammann said.
GM has not generated an annual profit in Europe in over a decade.
Akerson called the losses in Europe "not sustainable and not acceptable" and hinted at further cost-cutting. GM already has reduced production capacity in Europe by about 20 percent since 2009, and cut some 8,000 jobs.
"We're watching in Europe what's going on systemically," Akerson said. "We need to lower our breakeven point even lower than we have today in Europe. More to come on that."
On Monday, GM said that it will install Karl-Friedrich Strackecq, head of its Opel division, to lead GM Europe, replacing the retiring Nick Reillycq.
GM lost $44 million in South America during the quarter after posting steady profits of around $100 million to $200 million there in recent quarters. In the third quarter of 2010, GM posted profits of $163 million in South America.
The automaker is in the process of replacing its aging product portfolio there, including an ongoing launch of the Cruze and a new version of the Cobalt.
GM Financial posted a third-quarter pretax profit of $178 million. It was not a subsidiary a year earlier.
Gaining U.S. share
The North American profits that represent the bulk of GM's third-quarter earnings reflect the automaker's U.S. sales, which have outpaced the industry so far this year. Sales have been buoyed by brisk demand for new vehicles such as the Chevrolet Cruze and Buick Regal, as well as production shortages at its Japanese rivals.
Through October this year, GM's total U.S. sales rose 15 percent, versus 10 percent for the industry. U.S. market share rose to 19.8 percent from 19 percent, according to the Automotive News Data Center
But GM's sales cooled in October -- rising just 2 percent, versus the industry's 8 percent increase. That has led some analysts to question whether GM's gains of the past 10 months have staying power as Toyota and Honda rebuild inventories.
Some analysts also have expressed concern about GM's inventory, which rose sharply at the end of October to an 82-day supply of vehicles, from 67 days a month earlier, according to GM. Bloated inventory levels could force GM to increase incentives, which would pinch profits.
Ammann said GM is comfortable with its inventory and reiterated its forecast that inventory levels would end the year at between 550,000 and 600,000 units. He said pickup supply would end the year at around 200,000 units, or a 90-day supply. It stood at 104 days at the end of October, GM said.
Still, GM's strong balance sheet and improved product lineup put it on much firmer footing than even a year ago, analysts say.
In an Oct. 27 note to investors, Moody's Investors Service cited GM's "increasingly competitive North American product portfolio" and its strength in China as two key reasons for raising GM's credit rating one level to Ba1, one notch below investment grade.