GM stock hits 26-year low after report
GM stock hits 26-year low after report
Ford shares also down
Automotive News | May 27, 2008 - 12:08 pm EST
General Motors’ stock price hit a 26-year low this morning after Citigroup Inc. downgraded the company’s outlook from “buy” to “hold.”
GM shares bottomed out at $16.87 and then closed the day at $17.42 — down 1.02 percent — on the New York Stock Exchange.
In a research note released Monday, May 26, Citigroup analysts said “intensifying industry headwinds” and a large cash burn will hurt GM, despite restructuring and vehicle improvements.
The note said the American auto industry as a whole faces “perfect storm conditions” that include “the relentless surge in energy/commodities,” the global credit crunch and intensifying changes in consumer demand for smaller, more fuel-efficient vehicles.
Automakers including GM and Ford Motor Co. have lowered expectations for U.S. auto sales this year to near 15 million units in recent weeks, but they have also held out hopes for a recovery next year.
U.S. light vehicle sales for 2007 were near 16.15 million units and most industry analysts had expected only a slight decline this year.
But investor concerns over the U.S. auto market have been heightened since Ford warned last week that it no longer expected to turn a profit next year.
The No. 2 U.S. automaker said early May sales of trucks on an industrywide basis had dropped sharply, raising concern about the strength of demand for the rest of the year and beyond.
Major automakers are scheduled to report May sales next Tuesday.
Meanwhile, Ford shares at one point today fell over 3.5 percent to their lowest level since April 11. The stock has fallen for seven straight sessions and dropped almost 15 percent since Ford warned on Thursday that it no longer expected to return to profitability in 2009. Ford stock closed the day at $6.80, down 7 cents, or 1.02 percent.
Bond analyst Shelly Lombard with the commentary service Gimme Credit said Ford’s warning underscored the risks for its own bonds and for supplier Visteon Corp., which would be hit by Ford’s production cuts.
Even American Axle & Manufacturing Holdings Inc., which just clinched a cost-saving deal with its major union, remains vulnerable to the downturn in truck and SUV sales, she said in a note for clients.
"Ford confirmed what most of us already suspected: the North American auto market is in deep trouble. We don’t expect overall demand to rebound until 2009," Lombard said.
Reuters contributed to this report
