GM stock falls amid investors’ worries

Shaky economy, American Axle strike contributes to market decline.

Sharon Terlep / The Detroit News

General Motors Corp. shares tumbled again on Monday, dragged down by a plethora of worries on Wall Street — from growing stress over the economy to the lingering strike at parts supplier American Axle.

GM shares closed at a two-year low after at one point in the day dropping to $17.47, their lowest level in a trading session since the early 1980s. They closed at $17.83, down $1.39, or 7.2 percent for the day.

Standard & Poor’s Ratings Services on Monday put GM under review for a possible downgrade, citing the three week strike at American Axle & Manufacturing Holdings Inc. as a key factor. A rating cut would raise GM’s costs to borrow money.

The dip came during a volatile day of trading on Wall Street, as investors absorbed the news that JP Morgan Chase & Co. bought struggling investment bank Bear Stearns for just $2 a share.

The entire auto sector has been getting hammered in recent weeks amid growing concern that a weak economy will keep consumers out of showrooms in 2008.

But GM fared worse than many other auto companies that are dealing with the same pressures.

Ford Motor Co. shares hit a new 52-week low on Monday, but, compared with GM’s slide, fell a more modest 3.4 percent. Ford shares closed at $5.11, down 18 cents.

"There’s a lot of bad news out there right now and GM has their fingers in a lot of dikes right now," said analyst Brad Rubin at investment firm BNP-Paribas. "It’s turning out to be a horrific quarter."

The ongoing strike by the United Auto Workers union against Detroit-based American Axle, a major supplier of axles to GM, has forced the automaker to shut down all or part of 29 North American factories, affecting more than 40,000 employees.

Negotiations between the two sides were ongoing as of Monday evening. Without the parts, GM is unable to build its highly profitable large trucks and SUVs.

"We believe the strike has gone on long enough to possibly begin to affect the financial resources of GM and those suppliers most exposed to the automaker," Standard & Poor’s credit analyst Robert Schulz wrote in a report Monday.

Standard & Poor’s also placed American Axle and suppliers Lear Corp. and Tenneco Inc. on credit watch due to the strike.

GM also is contending with troubles at Troy-based Delphi Corp., which may need more cash from GM, its former parent, to emerge from bankruptcy later this year. Also weighing on the automaker is financial turmoil at GMAC, the financial services company, of which GM still owns half.

GMAC lost $2.3 billion last year as more U.S. borrowers struggled to repay home and vehicle loans. GMAC’s mortgage unit, Residential Capital LLC, alone lost $4.3 billion as high-risk borrowers defaulted on mortgages, a trend that’s shaking the lending industry.

GM shares are lingering near lows not seen since the beginning of 2006 in the aftermath of the automaker’s $10 billion annual loss the year before.

Shares in the automaker were trading for as much as $40 a share as recently as October, following the UAW’s ratification of a new, money-saving labor pact with the automaker.