GM Shares Drop to 58-Year Low, Global Risks Eyed - GLOBAL AUTO OUTLOOK IN QUESTION
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GLOBAL AUTO OUTLOOK IN QUESTION
Oline said GM's main difficulty is in the deteriorating domestic
U.S. market, but there is concern that a global downturn in demand
could hit GM's international operations as well, particularly in
Western Europe, Russia and China.
"A further cut in volumes calls into question the adequacy of their
liquidity and raises concerns about trade credits throughout the supply
chain," he said.
GM, the largest U.S.-based automaker, posted a $15.5 billion net
loss in the second quarter and plans to increase production of more
fuel-efficient cars in North America to adjust to dropping demand for
pickups and SUVs.
Striking the right production balance between cars and trucks is
hard. Credit Suisse believes GM and Ford may have to dial back on
passenger car production in the coming months.
GM could be expected to update its liquidity plans when it posts
third-quarter results. It has not said when it will report its earnings.
Analysts and auto executives cut U.S. light vehicle sales forecasts
for 2008 and 2009 as high gas prices buffeted sales of large vehicles
earlier in the year and the credit crunch further weighed on consumer
confidence in recent weeks.
More recently, there have been signs of slowing in mature European
markets and more moderate growth expectations for emerging markets
where automakers had aimed resources.
GM, which posted a 1.9 percent sales decline in Europe through the
first nine months of 2008, and Ford have relied, to some extent, on
growth outside North America to support them as they restructure at
home.
Influential industry forecasters J.D. Power and Global Insight have
lowered expectations for 2008 U.S. light vehicle sales and predict a
slow recovery. They also questioned sector growth in key regions
overseas.
"While the global automotive industry is clearly experiencing a
slowdown in 2008, the global market in 2009 may experience an outright
collapse," said Jeff Schuster, J.D. Power's executive director of
automotive forecasting.
In the U.S., J.D. Power expects 2009 industry sales of 13.2 million
while Global Insight expects 13.4 million. U.S. auto sales were roughly
16.15 million units in 2007.
GM shares were off $1.36, or 19.7 percent, at $5.55 on the NYSE,
while Ford shares were off 34 cents, or 12.8 percent, at $2.32. Ford
stock had reached its lowest level in a quarter century on Wednesday,
falling as low as $2.10.
(Additional reporting by Soyoung Kim in Detroit and Jui Chakravorty Das and Euan Rocha in New York; Editing by Brian Moss)
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