A tripling of profits by General Motors Co was marred by incentives to lift car sales, raising doubts about the automaker's ability to maintain momentum since emerging from bankruptcy.

GM's first-quarter profit topped expectations on Thursday, driven by a recovery in the U.S. market on the back of strong demand for more fuel-efficient cars like the Chevrolet Cruze.

Analysts, however, raised concerns that GM was not able to match rival Ford Motor Co's ability to boost both volumes and prices, and GM's shares fell as much as 4.7 percent.

Even though the U.S. automaker's sales rose 15 percent to $36.2 billion against Wall Street's estimate for $35.6 billion, analysts said the increase was tarnished by the aggressive incentives early in the quarter.

It's great that they beat consensus, Morningstar analyst David Whiston said, but it's troubling to see them not get any help ... from pricing. That's quite a contrast from Ford, which is getting improvements from both volume and pricing. GM's only getting help from volume right now.

It was the first full quarter since GM's initial public stock offering last November. The company filed for bankruptcy in 2009 after the U.S. housing downturn and a spike in gasoline prices the year before that caused consumers to turn away from its high-profit trucks.

GM emerged from bankruptcy 40 days later thanks to a $52 billion taxpayer-funded bailout and the U.S. government still owns 32 percent of common shares.

Pricing for GM's cars and trucks fell in North America and stayed flat in its Europe and international operations, which mostly consist of GM's largest auto sales market, China. Pricing rose in South America.

The adjusted operating profit in GM's international operations fell by one-third from the year earlier.

Chief Financial Officer Dan Ammann said that GM recently announced a price increase on most of its vehicle lineup that went into effect earlier this week. Continued price increases may come as the year goes on.

From our point of view, it's a solid quarter. It's good progress. It sets up a good foundation for the balance of the year, Ammann said.

But GM's gains from vehicle pricing were weaker than those of Ford, analysts said.

Worth noting that GM's pricing did not surprise on the upside as Ford's did, J.P. Morgan analyst Himanshu Patel said in a research note, referring to the first quarter. GM's March to April incentive decline was not as steep as Ford's, suggesting Ford benefited more than GM.

GM's first-quarter operating margin in North America was just under 6 percent, compared with 10.3 percent at Ford.

GM shares were down 2.2 percent at $32.30 on Thursday afternoon after dropping as low as $31.50. GM shares debuted last fall at $33. Ford shares were up 0.7 percent at $15.25.

GM said it expects full-year adjusted earnings before interest and taxes to show solid improvement from 2010 helped by better pricing and lower fixed costs in North America.

GM's results followed those of Ford, which last week posted its best first-quarter profit in 13 years as higher prices for redesigned vehicles offset pressure from spiking commodity and oil prices.

Strong profits at Ford and GM in the past year are expected to be a major factor in upcoming negotiations with the United Auto Workers union. Both companies are in much better financial position than the last time talks were held in 2007.

However, GM Chief Executive Daniel Akerson said the UAW understands GM's cost structure needs to remain on par with its rivals, including Japanese automakers with U.S. plants and said the earnings impact of the talks would be at the worst, a neutral.

COMMODITY COSTS RISING

GM will have an intense focus on holding costs in check, Akerson told analysts on a conference call.

We are currently faced with increasing commodity costs, which we need to offset through cost reduction in other areas, supplier performance and increased prices, he said.

However, GM was heavily criticized by Wall Street for its lofty U.S. incentives in January and February that were then dialed back in subsequent months.

Ammann said GM's U.S. incentives are currently running slightly below the industry average and that they will remain there for the remainder of 2011.

In addition to strength in China, GM's sales in its home North American market are growing. GM's April U.S. sales rose 26 percent and it retook the top spot it lost to Ford the prior month.

GM's net income in the first quarter rose to $3.2 billion, or $1.77 a share, compared with $900 million, or 55 cents a share, in the year-earlier quarter.

Excluding such one-time items as sales of stakes in parts maker Delphi and Ally Financial, it earned 95 cents a share. That was 4 cents better than what analysts polled by Thomson Reuters I/B/E/S had expected.

Ammann said GM is set up well to profit from higher gasoline prices with a much more diversified portfolio than three years ago when gas prices last topped $4 per gallon.

TRUCK PRODUCTION MAY FALL

However, Amman said GM could cut truck production if the recent shift toward smaller, more fuel-efficient cars continues. This is a concern of analysts because trucks and big SUVs are more profitable for automakers.

GM's North American operations posted adjusted earnings in the quarter before interest and taxes of $1.3 billion, up $100 million from last year. It expects North American results to improve on average for the rest of the year.

GM's European unit broke even on an adjusted earnings before interest and taxes basis and is targeting break-even before restructuring charges for the entire year.

The automaker's liquidity at the end of the quarter rose to $36.5 billion after the sales of the Delphi and Ally stakes.

Ammann said GM has attained its goal of a fortress balance sheet at this point in time and the company was pleased with its debt position of $5 billion, unchanged from last quarter.

(Additional reporting by Deepa Seetharaman and Nick Carey in Detroit; Editing by Derek Caney, Dave Zimmerman and Matthew Lewis)

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