General Motors Corp. (GM) on Wednesday said its earnings fell 37 percent due to growing U.S. health-care costs and bigger losses from its European automotive operations.

The world's largest automaker also warned it may only break even in the first quarter.

GM said its net earnings including one-time items fell to $630 million, or $1.11 per share, from $1 billion, or $2.13 per share, in the fourth quarter of 2003.

Excluding one-time items, GM earned $569 million, or $1.01 per share, beating Wall Street expectations. On that basis, analysts had expected a profit of 92 cents per share, according to a survey by Reuters Estimates.

GM shares rose 31 cents, or about 1 percent, to $37.08 on the New York Stock Exchange (search).

"You can buy GM now at a P/E (price-to-earnings ratio) of seven times '06 earnings. That is historically at the low end of GM's range when I look at this over the last 10 years," said David Sowerby, a portfolio manager with Loomis Sayles and Co. in Bloomfield Hills, Michigan.

GM, which last week said it will post weaker earnings this year, said it expects break-even or better results in the first quarter, due to cuts in vehicle production and sales of lower-margin cars and trucks. Wall Street analysts expected GM to earn $1.01 per share in the first quarter.

GM recorded several one-time items in the fourth quarter of 2004 that resulted in a net gain of $61 million, or 10 cents per share. Included in that was a gain on GM's stake in XM Satellite Radio Holdings Inc. (XMSR) and the write-down of its stake in Italy's Fiat Auto as well as two of GM's U.S. vehicle assembly plants.

Sales rose to $51.3 billion from $48.8 billion.

GM's global automotive operations recorded a profit of $235 million in the fourth quarter, down from $396 million a year earlier. In the third quarter of 2004, GM's automotive operations posted a loss.

GM's North American automotive operations earned $416 million in the fourth quarter, up slightly from $397 million, due to cost cuts and tax settlements that were partly offset by lower production.

Some analysts had said that GM's North American automotive operations could lose money in the fourth quarter, due to mounting health-care costs and high incentives.

"The costs that the company faces — health care, pensions — remain sobering," Sowerby said. "On the plus side, when I look at GM versus some of the domestic producers, they have made favorable gains on their return on cash flow."

GM's European operations lost $345 million in the quarter, compared with a loss of $66 million in the year-earlier quarter. Late last year, GM announced plans to cut 12,000 jobs in Europe, about a fifth of its work force in the region, over two years to cut costs as it tries to return the operations to profitability.

GM's Asia-Pacific automotive operations posted a drop in fourth-quarter earnings to $117 million from $177 million previously, due partly to weaker earnings from its Chinese affiliates.

Earnings from GM's financial services unit GMAC fell to $611 million from $630 million previously.