GM Cuts Forecast for ’04 Profit

General Motors Corp., the world’s largest automaker, on Thursday lowered its 2004 profit forecast after posting its first loss on North American car manufacturing in six years.

In another blow, Standard & Poor’s cut GM’s debt rating to the lowest investment grade on concerns about the company’s inability to profit from car sales.

Chief Executive Rick Wagoner said the company would cut one-fifth of its European jobs after posting wider losses there.

Third-quarter net income rose 3.5%, far less than analysts’ forecast, with all the profit coming from the General Motors Acceptance Corp. unit, which makes auto and home loans.

Net income in the quarter rose to $440 million, or 78 cents, from $425 million, or 79 cents, a year earlier, when there were fewer shares outstanding. Analysts’ average estimate for the quarter was 96 cents a share, according to Thomson First Call.

Revenue was up 3% to $44.9 billion.

The GMAC unit earned $656 million in the quarter. Automotive operations had a loss of $130 million, GM said.

“The numbers across the board are very, very negative,” said Dan Genter of RNC Genter Capital Management, which owns some GM bonds. “They’re not able to make money selling cars. GMAC is carrying them.”

Citing profit worries, Standard & Poor’s lowered its rating on GM and GMAC bonds to BBB-minus from BBB. A junk rating would be BB or lower.

GM shares tumbled $2.46 to a 52-week low of $38.84 on the New York Stock Exchange.

GM trimmed its 2004 profit forecast to $6 to $6.50 a share, excluding one-time items, from a mid-year forecast of about $7.

Wagoner said surging health-care costs for employees were putting GM at a “significant disadvantage.” He said GM needed to “move more quickly” to address cost issues in general.

The company’s U.S. market share has slipped this year to 27.1% from 28% as Asian carmakers such as Toyota Motor Corp. have sold more cars.