General Motors Corp.’s third-quarter earnings rose 3.5 percent, but the company’s automotive business lost $130 million primarily because of heavy losses in Europe and lower production and intense pricing pressure in North America.
The world’s largest automaker also lowered its earnings forecast for the entire year on Thursday only hours after announcing it plans to cut 12,000 jobs in Europe, or roughly 20 percent of its work force there, by the end of 2006 in hopes of saving $617 million a year.
GM said it earned $440 million, or 78 cents a share, in the July-September period, far below the Wall Street consensus of 96 cents a share compiled by Thomson First Call. The results compare to $425 million, or 79 cents a share, in the year-ago period.
GM said revenue rose 3 percent in the quarter to $44.9 billion.
The company said 90 percent of the job cuts in Europe would be made in 2005. It said the overhaul of its money-losing Opel, Saab and Vauxhall operations was necessary because of sluggish demand, growing challenges from European and Asian brands and price competition.
“Competition in the automotive business around the globe remains intense, and we’re seeing negative pricing in most major markets,” GM chairman and chief executive Rick Wagoner said in a statement. “Our automotive earnings in the third quarter reflect these challenging market conditions and were frankly disappointing.”
On positive notes, GM said its market share grew in all four global regions, and that its GMAC finance arm posted a ninth consecutive quarter of improved earnings.
The European retrenchment “provides for the majority of the cuts to be in Germany, with a heavy emphasis on managing and engineering,” the company said in a statement.
However, it said negotiations with employee representatives would determine which of its 10 European manufacturing plants are affected.
“The details we must negotiate with our workers councils, beginning today — and we hope to have an agreement by the end of November,” GM Europe spokesman Ruediger Assion said.
GM Europe currently has 62,000 employees.
“This is a pretty sober day for us,” GM Europe chairman Fritz Henderson told reporters. “The impact — 12,000 people — is not just numbers, not just paper, it affects their families and communities.”
“But it’s apparent our business needs to be significantly improved. We are not making money.”
Henderson did not rule out closing a factory, but added that the savings “can be accomplished without closing plants.”
General Motors has shaken up the management of its European operations by combining some functions of its different brands at divisional headquarters in Zurich, Switzerland, and has built a new, efficient $650 million plant in Ruesselsheim outside Frankfurt, the home of its German subsidiary, Adam Opel.
Opel has won plaudits from analysts for improving a once-lackluster model line under former CEO Carl-Peter Forster, who in June was moved up to serve as president of the European operation.
Germany’s economics and labor minister, Wolfgang Clement, scrapped a planned meeting Thursday with his French counterpart to travel to the western city of Bochum, home to an aging Opel plant where 7,600 employees produce the Astra model, for talks with the works council and local officials.