General Motors reports 41 per cent fall in profit on Europe business woes

General Motors' (GM) comeback from bankruptcy is in danger of stalling as the engine that powers it is running rough. The Detroit-based automaker has reported a fall of 41 per cent in net profit on a big loss in Europe.

GM's profit from April through June dropped to $1.5 billion - $1 billion less than the same quarter a year earlier. It had a $361 million pre-tax loss in Europe and $19 million of red ink in South America.

And there are signs that North America, GM's main income source, is also slowing. Profits there have fallen for two straight quarters, the first time that's happened since the company left bankruptcy in 2009.

In North America, pre-tax profits fell nearly 13 per cent to about $2 billion. International profits, including Asia, also dropped, by 3 per cent to $557 million.

The results are another sign that the US auto industry, a bright spot in the economy for two years, is heading into a rough patch.

The company is predicting lower third-quarter profits in North America as it incurs manufacturing and advertising costs for new models.

Also troubling was GM's market share. It fell in all four of the company's regions, including nearly a two-point drop in the US to 18.2 per cent.

CEO Dan Akerson told analysts that GM's performance was worse than last year in most key areas.

"That's not acceptable with this leadership team, and we're going to underscore that fact with our teams to keep everyone on point," he said.

The company's shares dropped 52 cents, or 2.6 per cent, to $19.14.

GM isn't the only automaker with European troubles or slowing growth in North America.

Last week, Ford reported that its second-quarter net income fell 57 per cent, largely because of a loss in Europe. And Chrysler's US sales growth has started waning. Sales were up 13 per cent in July over last year, but they grew more than 30 per cent during the first six months.

Chief Financial Officer Dan Ammann attributed the second-quarter drop in North American profits to a $200 million cut in pension investment income. GM recently switched the liability for its salaried worker pensions to an insurance company, costing the pension fund $29 billion.

Akerson and other GM executives say they're in the process of fixing the company's problems. Akerson expects a new agreement with German labour unions by the fall that could help GM run its factories more efficiently and profitably.

But GM wouldn't predict when it would make money in Europe, where it's posted 12 years of losses. The company has replaced its European CEO, is working to control costs in South America, and will update or revamp 70 per cent of its North American model lineup by the end of next year.

Indeed, GM is a much stronger company than it was before bankruptcy, where it shed billions of debt, closed factories and cut its work force to slash costs. GM has a strong balance sheet.

It's sitting on $38.5 billion in cash and credit lines. And the company still expects industry-wide US auto sales to total 14 million to 14.5 million this year, far above the 10 million level needed for GM to break even.

With inputs from Associated Press