General Motors Co. (NYSE: GM) posted two pieces of very good news yesterday. It will rejoin the S&P 500, from which it has been absent since its bankruptcy. And it had its best monthly sales in North America since 2008. What was lost in the excitement is that GM’s downward spiral in Europe has become terminal, and the manufacturer has not articulated how it will solve that problem at all.

GM reported that its May U.S. sales totaled 252,894 vehicles, up 3% from a year ago. Its long-troubled Cadillac division, which has lost share for years — primarily to Mercedes, BMW and Lexus — is in a renaissance. But Cadillac’s numbers are still not very important. Despite a 37% improvement in sales, it only sold a total of 13,808 cars.

GM’s real victory was in the truck market, which is more crowded even than luxury cars. The company reported:

GM’s trucks sales were up 15 percent versus a year ago, including a 23 percent increase for large pickups and a 30 percent increase for large SUVs.

The good news pressed GM’s stock price to well above $34, up from a 52-week low of $18.72.

However, lurking just offstage as GM announced its good news is a problem that has plagued the company and will continue to do so for years — its divisions in Europe. Last quarter, before interest in income taxes, Europe posted a loss of $260 million on sales of $5.3 billion. GM continues to be overwhelmed by the recession in the region and the strength of local car companies, led by Volkswagen.

The stock market has forgotten GM’s Europe debacle for now. Perhaps investors believe that new management will solve its problems, or that new models will reverse the slide. The issue is that GM has gone through the exercise of management replacement and new model introduction over and over again. Not a single move has helped its Europe failure.

Investors will be enthusiastic about GM, until its next earnings announcement, and the reminder that it has lost the war in Europe, but will not give up despite that.

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