General Motors Corp. (GM) posted an unexpected quarterly loss on Wednesday as stubbornly high costs for everything from materials to worker health care to consumer incentives outweighed strong results from its finance arm.

The news capped a nightmarish second quarter for GM, which is struggling to regain market share from Asian rivals and saw its debt cut to "junk" status by the Standard & Poor's rating agency in May.

GM shares were down 69 cents, or nearly 2 percent, at $36.14 on the New York Stock Exchange (search).

The world's largest automaker, which triggered alarm bells on Wall Street when it reported a $1.1 billion loss in the first quarter, said its second-quarter net loss was $286 million, or 51 cents per share.

Excluding one-time items, GM lost $318 million, or 56 cents per share. Wall Street analysts' average forecast was a profit of 3 cents a share before special items, according to Reuters Estimates.

Earnings forecasts for GM have varied widely since the company withdrew its earnings and cash flow forecast for the 2005 calendar year in April, citing uncertainty about its efforts to resolve a mounting "health-care cost crisis."

GM said its automotive operations lost $948 million in the second quarter. A loss in North America of $1.19 billion offset profitable results in Europe, Asia and the Latin American and Mideast regions.

Like cross-town rival Ford Motor Co. (F), GM has been hit hard by this year's dramatic slowdown in sales of mid- and full-sized sport utility vehicles, its most profitable models.

Analyst David Healy of Burnham Securities said GM's North American loss was about twice as big as he expected. He said he would probably widen his full-year loss estimate from the current $3.44 per share, already one of the biggest loss forecasts on Wall Street.

"To use that old cliche, I think the light at the end of the tunnel is the train coming the other way," said Healy, who sees little potential upside for the embattled automaker.

"My guess is a larger loss in '06 than in '07, but it's awful early days," he said.

GM said second-quarter revenue slipped to $48.5 billion from $49.3 billion a year earlier.

General Motors Acceptance Corp. (search) , the company's finance unit, had net income of $816 million in the quarter, down from $846 million a year earlier.

GM, which expects its health-care costs to total nearly $6 billion this year, has been in talks with the United Auto Workers union since April to try to slash some of the health-care benefits that Chief Executive Rick Wagoner (search) blames for hurting the company's ability to compete.

The UAW's president, Ron Gettelfinger, has questioned the severity of GM's financial problems, however. And there has been no indication that the union will cede any significant ground on benefits that are the gold standard of the manufacturing sector.

On a conference call with analysts and reporters, Chief Financial Officer John Devine declined to comment when asked if GM's negotiations with the UAW were making progress. But he stressed that U.S. health care was GM's biggest cost issue. The company is the nation's largest private provider of health care.

"It's obviously put North America in a serious crunch," Devine said. "Health care relief is a fundamental driver of us being successful going forward."

GM's health-care costs are estimated at about $1,500 per vehicle.

Devine also said GM was targeting plant closings in North America to eliminate excess production capacity.

Discussing GM's weak performance in North America, he cited lower production volumes, as GM moved to sell down bloated inventories of unsold cars and trucks, and rising raw material costs, as well as health-care costs.

GM provided no outlook for its financial results in the third quarter. Analysts, on average, expect earnings of 9 cents a share before one-time items, according to Reuters Estimates.

GM closed the second quarter on a rare high note, boosting its U.S. sales by 41 percent in June.

But the auto industry's discount king also boosted its consumer incentives to an average of $4,458 per vehicle in June, according to industry tracking firm Autodata Corp. That was more than any of its competitors and more than four times the incentives offered by its chief Asian rival, Toyota Motor Corp (search).

Analyst Rob Hinchliffe of UBS said price cuts and higher consumer incentives clearly hurt GM's results in the second quarter, and he expects more of the same in the current quarter.