GM Shares Drop to 58-Year Low, Global Risks Eyed

By Reuters -  |  Posted 2008-10-09 Email Print this article Print
 
 
 
 
 
 
 

GM's market cap stands at about $3.3 billion, compared with a market cap of about $4 billion in March 1929 before the stock market crash that preceded the Great Depression.

DETROIT (Reuters) - General Motors Corp shares fell to their lowest level since 1950 on Thursday as concerns mounted that an industry decline that started in the United States was spreading and a leading forecaster warned global auto demand could "collapse" in 2009.

GM shares fell as much as 22 percent to $5.42 -- driving its market capitalization to its lowest level since 1929, according to California-based Global Financial Data.

Shares of Ford Motor Co, which hit a quarter century low on Wednesday, shed as much as 13.5 percent and major auto parts makers declined as well.

GM's market cap stands at about $3.3 billion, compared with a market cap of about $4 billion in March 1929 before the stock market crash that preceded the Great Depression.

J.D. Power and Associates, a forecaster used by many in the industry to prepare their own outlooks, warned that no region was immune to financial turmoil, which has been hitting mature automotive markets harder than the emerging areas.

U.S. auto sales have fallen nearly 13 percent through the first nine months of 2008 and forecasters expect the worst year for sales since the early 1990s, and further declines in 2009 as the industry buckles under weak consumer demand.

The reports added pressure on U.S.-based GM, Ford and Chrysler, which are deep into restructuring plans and looking for ways to conserve cash until sales rebound.

Rival automakers in the U.S. market, led by Toyota Motor Corp, have deeper pockets to withstand the sales downturn, analysts say.

Toyota made an unprecedented interest-free loan offer on 11 vehicle models after posting a 32 percent drop in sales in September. The program may be extended, North American sales chief Jim Lentz told Reuters on Thursday.

Of GM, Fitch Ratings managing director Mark Oline said: "There are heightened concerns that the economic conditions and the credit crisis will take a deepening cut out of volumes."

GM has announced plans to try to increase liquidity by $15 billion through cost cuts, asset sales and new borrowing.

GM spokeswoman Renee Rashid-Merem said the automaker remains focused on its liquidity plan and declined to comment on its stock price movements.

An investment banker who declined to be identified attributed the share decline to elimination of short-selling restrictions on the shares that had put the equity value out of balance with bond and credit-default swaps values.

"It all has to rebalance now," the banker said.



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