Can General Motors Co. (NYSE: GM) Shake Off Trouble from Europe?

General Motors Corp. (NYSE: GM) reported today (Thursday) its biggest annual profit ever for 2011, but weakness from Europe could dull the share-price rally.

Net income for the 2011 fiscal year hit $7.6 billion, 62% higher than the $4.7 billion GM earned a year ago and more than the previous record of $6.7 billion in 1997. Revenue increased 11% to $150.3 billion.

General Motors Co. Stock Price History
(NYSE: GM)

Net income for the quarter hit $472 million, or 28 cents a share, down from $510 million, or 31 cents a share, a year ago.

North America was GM's biggest income driver, accounting for $7.2 billion of the year's profit. GM suffered a $747 million loss in Europe, where consumer spending is struggling.

"We clearly have work to do in Europe," GM Chief Financial Officer Dan Ammann told reporters. "We have work to do in the South America business. Frankly, we have work to do all around the company in terms of cost opportunity."

Investors remain wary over how successful GM will be at maintaining its profit rise as long as Europe remains weak - and looks increasingly weaker.

"Just because things were looking OK at the end of last year doesn't mean that they will continue to look OK," Richard Cookson, chief investment officer of Citi Private Bank, told MSNBC. "Our best guess is that conditions will continue to deteriorate. This is going to be unpleasant, to put it mildly."

How General Motors (NYSE: GM) Will Deal with Europe

European officials said Thursday that Eurozone auto sales fell 13% in January from the year before, due to a deepening recession in the region.

GM plans to restructure its Opel unit to limit future European losses. For the year, Opel reported a loss of $700 million. GM had originally aimed to break even in Europe but changed its outlook in November.

Open union leaders urged GM execs to move production facilities from South Korea to Europe to cut costs and improve efficiency.

To offset struggling European operations, GM in 2012 plans to raise prices again but not raise salaries, increasing its profit margin. Raising prices worked for GM last year; it charged more for vehicles in North America and which helped boost total sales rose 3%. Higher vehicle prices added $800 million in earnings to the quarter.

Now it needs other regions to contribute more to sales.

"The good news is they've done a nice job getting North America back on track; the bad news is the rest of the world," Edward Jones analyst Matt Collins told Reuters. "In order to get the stock moving again, they really need to address international profitability and the pension."

The company ended the year with U.S. pensions underfunded by about $13.3 billion, or 12%. That's up from last year's pension gap of $11.5 billion, or 11%.

GM aims to shorten the gap this year by freezing pension contributions and switching to a 401k-type contribution system.

When the company's stock does rise, the government will sell the remaining 26% of the company it still owns. It has been waiting to get rid of the remaining shares until it could get more back.

GM stock got an earnings boost of about 8% to hit almost $27 a share by 2 p.m. Thursday. The stock is still below its IPO price of $33.

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