NEW YORK (CNNMoney) -- General Motors reported strong first-quarter earnings on good results in its domestic market Thursday, but its bottom line took a hit from rising losses and special charges in Europe.
The world's largest automaker reported operating earnings of $2.2 billion, excluding special items, up 7% from a year earlier, and significantly better than expected by analysts.
But the company's net income was hurt by problems in Europe that forced it to change how it accounts for its factories there, recording them as less valuable.
GM (Fortune 500) reported operating earnings of $1.7 billion in its North American auto unit when excluding special items, up from $1.3 billion on that basis in the first quarter of last year.,
The company also raised its industry-wide U.S. sales target for the year by 500,000 vehicles to between 14 million to 14.5 million. Other forecasters have already raised raised their targets to that range.
GM did say it believes that stronger U.S. sales mean its North American profits in the second and third quarters will be roughly equal to first quarter results.
But the outlook is much bleaker in Europe. GM's unit there swung to an operating loss of $256 million from a $5 million profit in the prior year. And that loss doesn't include a $590 million special charge related to the write-down of its European assets.
"Europe remains a work in progress," said GM CEO Dan Akerson. "We'll continue to work on both revenue and cost opportunities until we have brought GM to competitive levels of profitability."
Weak European sales were also a big part of the reason for a drop in earnings at GM rival Ford Motor ( , Fortune 500) when it reported results last week. Labor laws in Europe make it more difficult and expensive to close excess auto capacity there, resulting in much more excess capacity in Europe than in the United States.
Experts believe it will cost U.S. automakers billions of dollars to fix problems and end losses in Europe.
The results mean GM earned 93 cents a share excluding special items, down slightly from 95 cents on that basis in the prior year, but far better than the 85 cents a share forecast by analysts surveyed by earnings tracker Thomson Reuters.
The charges related to writedowns of assets in Europe and other items reduced net income for the company to $1.3 billion, down from the $3.4 billion it earned a year earlier, when nearly half its profit came from one-time gains from sales of GM's interests in Delphi Automotive and Ally Financial's preferred stock.
Still GM's revenue rose 4% to $37.8 billion, slightly better than forecasts, as the number of vehicles sold worldwide rose 3% to 2.3 million.
|Albertsons to buy Safeway|
|GM raising Corvette prices|
|Boeing reports wing cracks on Dreamliners|
|Everything must go: There's a flood of store closings|
|Here's why Bitcoin matters|