GM hit by European woes

GM's Opel division is the source of its problems

General Motors (GM), the world's biggest car maker, has posted a huge leap in earnings for the first three months of the year, but net profits were slightly lower after a restructuring charge at its European operations.

GM took a charge of $407m (£283m) for job cuts and write-downs at its ailing Opel and Vauxhall divisions in Europe.

But excluding that charge and other unusual items, GM's profits almost trebled to $645m, from $225m in the same quarter of 2001.

The main driver of GM's underlying earnings growth was a surge in vehicle sales in its home market, where aggressive discounting and credit policies have encouraged customers to take the plunge.

Taken in isolation, GM North America earned $625m in the first quarter of 2002, compared with $120m a year earlier.

Buoyed by the news, GM shares were up $1.90 to $63 in early trading in New York.

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"Strong vehicle sales in North America coupled with cost reductions drove our profit improvements," GM chief executive Rick Wagoner said in a statement.

"We know we must make significant progress in Europe, and we're working hard to make it happen."

GM's European automotive operations lost $125m in the first quarter even excluding the restructuring charge, compared with a loss of $86m a year before.

GM's German Opel brand is in the throes of a major restructuring, known as "Project Olympia", which includes cutting thousands of jobs and reducing production.

Opel aims to return to profitability next year, and regain market share from resurgent rivals such as Volkswagen and DaimlerChrysler.

GM's shares have risen by 45% this year, while rivals such as Ford have suffered modest declines.