The Detroit-based automotive empire General Motors has bounced back from the brink of financial oblivion to achieve its first profit for almost three years, as American motorists returned to car showrooms in spite of ongoing sluggishness in Europe's motor industry.

GM, which owns brands including Chevrolet, Cadillac, Buick and Vauxhall, produced an $865m (£595m) profit for the first quarter, a remarkable turnaround from its loss of almost $6bn for the same period a year ago.

"We're in the process of rebuilding a company here and putting down the foundations is one of the most important things when you're rebuilding," said GM's chief financial officer, Chris Liddell. "One of those foundations is clearly achieving profitability."

GM collapsed into bankruptcy in June 2009 and was kept afloat through an emergency investment of $61bn from the US and Canadian governments, which now own 73% of its stock. The improvement in its fortunes is a result of cost cutting, strong sales of new models in the US and a jump in sales in emerging markets such as China and Brazil.

The number of vehicles sold globally by GM jumped 23% to 1.99m as the company reopened factories that were temporarily idled at the worst point of the global financial crisis. In the US, the company moved from a $3.4bn operating loss to a $1.2bn profit. But GM's European business, which includes Vauxhall factories in Luton and Merseyside, continued to struggle with a loss of $506m, down from last year's $814m deficit.

"In Europe, we lost money," said Liddell. "So Europe is still the area where we need to make the most progress."

GM is not alone in finding the European market tough. The European Automobile Manufacturers' Association (ACEA) revealed that new car sales across the continent dropped by 7.4% in April to 1.13m registrations following the winding down of "cash for clunkers" schemes that had encouraged motorists to scrap older vehicles. The association said: "Government support has ended or begun to fade out and the economic situation remains difficult."

Last year, GM came close to selling its European business, which comprises Britain's Vauxhall plants and Germany's Opel manufacturing business. However, the company backed off at the last minute after deciding that a European presence was essential to sustaining its future as a global player.

Sales of Vauxhall and Opel vehicles slipped slightly from 297,000 to 295,000. GM's market share in Europe dropped from 9% to 8.5%, although this was partly due to the sale of the Swedish marque Saab. GM has indicated that it intends to cut about 500 jobs at its Vauxhall factories in Britain to restore profitability.

If GM continues to improve its financial performance, chairman Ed Whitacre has indicated that the company could attempt a flotation to relist its shares on the public markets late this year.

Craig Fitzgerald, an automotive expert at consultancy firm Plante & Moran in Michigan, said GM had successfully removed complexity from its strategy and production line, while restoring a reputation for good quality vehicles. He said new US models, including the Chevrolet Equinox, the Cadillac SRX and the Buick LaCrosse, were proving to be hits: "Their new vehicles, if not best in class, are near best in class. They're having success in showrooms."
GM's workforce of 205,000 has fallen from 335,000 since the end of 2005. Once the largest carmaker in the world, the company has been overtaken by Toyota and is vying with Ford for the number one spot in the US.

Since suffering the worst downturn in US car sales since the war, GM has axed brands including Pontiac and Saturn. After failing to find a buyer, the company is winding down its gas-guzzling military-style Hummer brand.