General Motors tempers its $1.7 billion third-quarter profit with expectations for softer financial results over the next three months and the likelihood the auto maker’s struggling European operation will not achieve its year-end break-even target.

GM also delivers somber results from South America. Financial returns and market share in one of its strongest markets suffered from a combination of an aging product portfolio and rising inflation, making production more costly.

The auto maker now expects a weaker fourth quarter to end the year, with seasonal factors in North America such as increased marketing spending and higher manufacturing costs weighing on results. Returns are forecast to be similar to fourth-quarter 2010, when earnings totaled $510 million.

“All-in-all, a solid quarter,” GM Chairman and CEO Dan Akerson says of the auto maker’s July-September financial performance, where revenue gains in North America and China carried the day. “There is much more work left to be done.

“We need to do a better job in Europe and South America,” he says during a conference call today to discuss third-quarter financials with journalists and Wall Street analysts. “The results there are not sustainable and are not acceptable.”

Specifically, GM plans to revisit its European restructuring plan as economic conditions continue to sputter in the wake of the global recession, torpedoing expectations of breaking even there this year.

More bad news comes today from the region, with Italy’s key sovereign-debt measures rising to the same levels that forced Greece and Portugal to seek bailouts from the European Union.

“Clearly, there is a lot of uncertainty,” GM Chief Financial Officer Dan Amman says. “Our assumption is the market will not improve materially.”

GM Europe must make moves to reduce costs and raise revenue, he says.

One option would be calling its labor unions back to the table for additional concessions. The auto maker already has shed thousands of jobs and closed facilities over the last two years in an effort to restore profitability to a business it wanted to divest as part of its U.S. bankruptcy.

One tailwind in Europe would be GM’s recent heavy investment in new products, which Amman expects will lead to stronger pricing and help move the revenue needle higher.

In the third quarter, GM Europe’s loss narrowed to $292 million from $559 million in like-2010. Revenue grew 8.8% to $6.2 billion from $5.7 billion year-ago, but it also marked GME’s worst quarterly sales performance so far this year.

GME vehicle deliveries increased 4.6% to 407,000 units from 389,000 year-ago, while its market share dipped just slightly to 8.8% from 8.9%.

GM’s share in Germany inched up to 8.6% from 8.5%, but its piece of the U.K. market tumbled to 11.9% from 12.6% on fewer fleet sales.

In South America, GM continues to see Brazil as holding great potential for the region, although austerity measures taken recently by the new government to protect it from the global financial crisis have driven up inflation.

As such, GM’s cost of doing business in the region jumped and an aging product portfolio that will not turn over until next year drove down the auto maker’s South American third-quarter share to 18.7% from prior-year’s 19.8%.

GM’s piece of the Brazilian market fell to 17.1% from 18.3%, although deliveries climbed 3.4% to 277,000 units from 268,000. Revenue grew 10% to $4.4 billion from $4.0 billion in like-2010. But reflecting the higher costs, Brazil broke even in the quarter after posting a $200 million profit year-ago.

GM recently instituted an attrition program in Brazil to mitigate future costs. “What we’ve seen in the last quarter or two is quite an inflationary environment in general,” Amman says.

“And we have begun to take some actions around head-count reduction to make sure that we’re getting the cost structure and the break-even point where it needs to be to really support that product portfolio when it gets into the marketplace and get the profitability of that business back to where it should be.”

Akerson reiterates comments made to WardsAuto from local leadership last month that the newly launched Chevy Cruze and Cobalt small cars are turning in early market-share improvements. Seven more launches are planned for next year.

In its home market of North America, GM earned $2.2 billion in the third quarter, up 4.8% from $2.1 billion year-ago. Revenue improved 1.9% to $21.9 billion from $21.5 billion.

Sales jumped 16.9% to 745,000 units from 660,000 in like-2010, driving share up to 18.8% from 17.7%. In the U.S., the auto maker’s share grew to 19.7% in the quarter from 18.3%.

GM’s international operations, which include China and India, posted income of $400 million, down 20% from $500 million in like-2010. Revenue surged 23.5% to $6.3 billion from $5.1 billion.

Vehicle deliveries rose 8.7% to 816,000 units from 745,000 year-ago, with share expanding to 9.4% from 8.7%. GM’s share in China moved up to 14.1% from 13.6% and in India climbed to 3.7% from 3.0%.

Akerson says GM’s market-leading growth in China now stands at about 2.5 times that of the local industry, and the auto maker continues to invest in its business to meet demand.

“Over the next 12 to 18 months, we have a couple more plants going on line, so if this market continues to grow, and it looks like it will, we’ll be in a better position than we were last year,” he says. “China is a good story if it holds, and we believe it will.”

Globally, GM delivered 2.2 million vehicles in the third quarter, up 8.9% from 2.1 million in like-2010. Its worldwide share increased to 12% from 11.4%.

GM’s overall revenue increased 7.6% to $36.7 billion from $34.1 billion. The auto maker finishes the third quarter with about $39 billion in available liquidity.