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General Motors cuts profit forecast

General Motors (GM) has posted disappointing quarterly earnings and cut its 2004 profit forecast due to mounting losses in Europe and slowing growth in China.

The company, which yesterday said it will slash its European workforce by up to 12,000 jobs or one-fifth of the region's total, reported third-quarter results at the low end of its own forecast.

GM's earnings rose to $440 million (£245m) from $425 million a year earlier, but they climbed only after GM recorded a one-time gain of $250m (£139m) after taxes for reserves set aside for product-liability reasons.

For the first time in about a decade, except for the strikes in the third quarter of 1998, GM lost money from its automotive operations, GM chairman and chief executive Rick Wagoner said. GM's global automotive arm lost $130m (£72m) in the third quarter against profit of $34m (£19m) in the year-earlier quarter as its core North American arm fell into the red.

Profit of $656m (£365m) from GM's credit arm, up from $630 million (£350m) previously, countered losses from its automotive operations.

The job cuts in Europe, including about 8,000 in Germany, were a "first step," and three European car plants will have to boost productivity and quality in order to survive, GM officials said.

The job cuts were intended to help reverse losses since 1999 in the region, where a mix of high labor costs, intense competition from Asian competitors and currency headwinds have buffeted results.

Earnings from China, where the government has slowed growth to stem inflation, fell to $80m (£44.5m) from $132m (£73.4m) previously, GM said.

GM and its Chinese partner are investing $3bn in China over the next three years to raise its annual capacity there to 1.3 million vehicles.

Ford is scheduled to release its third-quarter results next week.

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