Updated from 10:31 a.m. EDT

General Motors

(GM) - Get Report

on Tuesday reported record second-quarter profits of nearly $1.8 billion, topping Wall Street estimates, due in part to strong revenue growth in its U.S. automotive financial-services sector.

The world's largest automaker reported record revenues of nearly $1.8 billion, or $2.93 per diluted share. Those figures are up from $2.66 a share, or $1.7 billion, in the year-ago period.

The latest earnings far exceed the consensus forecast of $2.82 among analysts surveyed by

First Call/Thomson Financial

.

Revenues rose to a record $48.7 billion from $45.1 billion a year earlier.

Most of GM's earnings came from its North American auto business, though profits in that sector declined 5%, from $1.48 billion to $1.41 billion. Detroit, Mich.-based GM said the decline was due to the costs of new vehicle programs for North America and investments in e-commerce.

In a conference call Tuesday morning, Ronald Zarrella, executive vice president and president of

GM North American

operations, said the decline in U.S. sales was offset by an increase in sales in Canada and Mexico.

Earnings in Europe also declined 11%, from $187 million in the second quarter of 1999 to $166 million this year. GM said profits were hurt by costs from launching new models.

"We have seen some softening in Germany, but that's relative to a very strong market overall," said Patrick Campbell, executive director of investor relations, in a conference call Tuesday. He added that 2000 sales in Europe should reach record or near-record levels.

In a statement issued Tuesday, Chief Executive Officer G. Richard Wagoner Jr. said, ``The key North American and European markets remained very strong during the second quarter, and our automotive operations in those regions remained solidly profitable."

Revenues from continued strong sales were offset by development costs for new vehicles and losses.

Zarrella said he expects a "relatively strong" second half of the year, with additional upside potential on what he called an improved product mix, including the introduction of new products like the Pontiac Aztec and a line of one-ton pickup trucks.

"We're pretty optimistic about the balance of the year," added Campbell. "We're positioned to attain record earnings-per share."

GM closed Tuesday regular trading up 7/16, or 0.72%, at 60 13/16.