General Motors Corp.'s earnings rose by an unexpectedly slim 3.5 percent in the third quarter, hurt by continued use of costly incentives to lure American buyers and by poor results in Europe, where the company plans to pare operations and slash 12,000 jobs.

GM's global automotive business lost $130 million in the quarter.

The world's largest automaker lowered its earnings forecast for the year yesterday, a few hours after announcing it plans to cut roughly 20 percent of its workforce in Europe by the end of 2006 in hopes of saving about $600 million a year.

Standard & Poor's lowered its long-term credit rating on GM yesterday and related entities to "BBB-minus," its lowest investment-grade rating. The action came one day after Fitch Ratings downgraded GM. The moves could raise borrowing costs for the company.

The company behind the Chevrolet, Buick and Pontiac brands earned $440 million, or 78 cents a share, in the July-September period, far below the Wall Street consensus of 96 cents a share compiled by Thomson Financial. The results compare with $425 million, or 79 cents a share, in the same period a year ago.

Revenue rose 3 percent in the quarter, to $44.9 billion from $43.5 billion a year ago.

The company said 90 percent of the job cuts in Europe would be made in 2005. It said the overhaul of its money-losing Opel, Saab and Vauxhall operations was necessary because of sluggish demand, growing challenges from European and Asian brands and price competition.

"Competition in the automotive business around the globe remains intense, and we're seeing negative pricing in most major markets," said GM chairman and chief executive G. Richard Wagoner Jr. "Our automotive earnings in the third quarter reflect these challenging market conditions and were frankly disappointing."

In a report, S&P said its ratings downgrade primarily reflects heightened concerns about profit potential for GM's automotive business. In addition to increased offerings from domestic and foreign competitors, soaring oil prices raise the risk of a market shift away from sport utility vehicles and pickups, which S&P said "contribute to a highly disproportionate share of GM's automotive profitability."

"Even with robust industry sales in North America and an improving cost position, GM has been unable to achieve satisfactory profitability in North America in recent years," said S&P analyst Scott Sprinzen.

GM's consolidated debt as of Sept. 30 was $284 billion, S&P said.

GM said its market share grew in all four global regions in the most recent quarter.

General Motors Acceptance Corp., which has contributed heavily to profits in recent quarters, earned $656 million, up from $630 million in the corresponding quarter a year ago.

The $130 million loss at GM's global automotive operations compared with a profit of $34 million a year ago.

In North America, GM reported a loss of $22 million, compared with earnings of $128 million a year ago. The company was hurt by lower production to offset bloated U.S. inventories and a continuation of heavy consumer incentives to spur demand.

GM's sales in the key U.S. market rose a surprising 20.5 percent last month from a year ago, but the company led the industry with an average incentive of $4,340 a vehicle.

Heinz Gabriel and other employees leave an Opel plant in Germany. General Motors plans to cut 12,000 jobs in its European operations, including Opel.