General Motors has some problems, but for once, its U.S. operations aren’t among them.

GM (GM) disappointed investors with fourth-quarter earnings that were 34% lower than Wall Street expectations — an unwelcome start for new CEO Mary Barra, presiding over her first quarterly earnings release. For all of 2013, GM earned $3.8 billion, which was its fourth consecutive year of profits, but still 2% lower than net income in 2012. The earnings miss pushed GM stock a bit lower, to about $35, after a sharper initial dive.

The good news for GM, however, is that its North American operations are strong. Operating profit in its home market was $7.5 billion, the largest ever. New models such as the Cadillac ATS and CTS and the Chevrolet Impala and Silverado pickup drew buyers from other brands in 2013 and raised the company’s competitive profile. Cadillac and Chevy both landed in the top 10 in Consumers Reports’ latest reputational survey of automotive brands, a big win for a company still trying to rub off the tarnish of a 2009 government bailout. As a measure of how far GM has come, consider that, in 2008, GM lost $14.1 billion on its North American operations alone, calling into question the viability of the entire company.

Trouble in Europe

GM’s biggest problems are in Europe, where many automakers have trouble steering straight. GM lost $844 million in Europe in 2013, which was better than the $1.9 billion loss in 2012 but still leaves the automaker far short of its goal of returning to profitability there. High production costs combined with a double-dip recession have made Europe one of the world’s most difficult markets for automakers. Ford (F), for instance, lost $1.6 billion in Europe in 2013. Fiat, the Italian-based parent of Chrysler, would have lost about $320 million if not for profits Chrysler earned in North America.

As part of its European turnaround plan, GM pulled its Chevrolet brand from the continent last year, with costs associated with that cutting into fourth-quarter earnings. Beyond that, GM is closing facilities and pursuing other cost-cutting measures in Europe. Other international operations struggled as well, with emerging market turmoil hurting GM’s numbers in places such as Venezuela and Brazil. China remains a strong market for GM, but overall, GM says restructuring charges could shave another $1.1 billion or so from the bottom line in 2014.

Still, strength at home puts GM in a far better position than it’s been in for years, since the United States remains the world’s most profitable market for automakers. The risk for GM is that it will overdose on a good thing. With the U.S. auto industry enjoying a robust recovery from the recession lows of 2009, several automakers are planning to crank up production in order to gain U.S. market share. Add it all together, and planned capacity exceeds the likely demand for cars during the next few years. When that happened in the early 2000s, GM and its domestic competitors got stuck with way too many cars, forcing them to offer deep discounts — which trashes profitability along with a brand’s image.