General Motors Corp. (GM) on Thursday said it expects earnings this year to fall, due partly to a $1 billion rise in health-care costs, and the automaker also pushed back a longer-term profit target.

The world's largest car company, hurt by high U.S. sales incentives and an aging lineup of pickups and sport utility vehicles, said it expects 2005 earnings to drop to between $4.00 and $5.00 per share, excluding any one-time items.

Analysts on average expect GM's earnings this year to total $4.91 per share this year, down from an estimated $6.31 for 2004, with both forecasts excluding any one-time gains or charges, according to Reuters Estimates.

GM, the largest private provider of health-care services in the United States, supporting hundreds of thousands of employees, retirees and their dependents, has been saddled with mounting "legacy costs" from its health-care and pension plans, analysts said.

"These legacy costs are ever more of a millstone around the company's neck — financially, competitively, any way you want to slice it," said analyst David Healy of Burnham Securities.

Including the rising health-care costs, earnings from GM's core North American automotive operations are targeted at $500 million this year, less than what GM expects to earn from the Asia Pacific region.

Despite the strengthening U.S. economy, analysts expect high sales incentives, lower vehicle production in North America and rising interest rates to weigh on GM's profit this year.

GM expects to earn $600 million from its Asia Pacific automotive division, which includes its fast-growing operations in China and its stake in Korean automaker GM Daewoo (search).

The financial-services arm, GMAC, is expected to generate net income of at least $2.5 billion in 2005, likely down from record profit in 2004 as a result of higher interest rates, the company said.

GM's European automotive operations are expected to lose about $500 million, including restructuring charges, the automaker said. GM's planned restructuring of the money-losing European automotive operations includes cutting 12,000 jobs, or about a fifth of GM's work force on the continent.

GM also said it would write off its stake in Fiat's automotive arm to zero from $220 million, taking the corresponding charge in the fourth quarter of last year. In 2002, GM wrote down its stake from $2.4 billion.

GM said it still has a goal of reaching annual earnings of $10 per share, but that it did not expect to hit that target until 2007 at the earliest. The automaker said previously it hoped to hit $10 per share by mid-decade, which officials said spanned the years 2004 to 2006.

Earnings for 2004 are expected to be in line with its original target and previous forecast of $6.00 to $6.50 per share, excluding special items.

GM shares fell $1.07, or about 2.8 percent, to close at $37.32 on the New York Stock Exchange (search) on Thursday. The stock hit its lowest levels since October.