Automotive News | June 26, 2008 - 9:30 am EST

DETROIT (Reuters) — Goldman Sachs downgraded General Motors to "sell" from "neutral," and added the stock to its "Americas Sell List," saying the main risks for the automaker included likely equity dilution, dividend cut and cash burn.

GM shares, which have lost 47 percent of their value since the start of the year, closed at $11.43 per share Thursday, down $1.38. It’s GM’s lowest share price in more than 40 years.

Analyst Patrick Archambault, who also cut his ratings on Lear and Tenneco, said he expects GM shares to continue to underperform as market fundamentals deteriorate which exacerbates liquidity concerns.

He cut his 6-month price target on GM stock by $8 to $11.

"We think GM’s automotive cash flow burn this year and next is likely to lead it to look to raise capital, which we believe could lead to significant shareholder dilution and/or a cut to the company’s dividend," Archambault said.

The Dow Jones industrial average lost 358 points Thursday and dragged down most automotive stocks.

Suppliers also downgraded

Archambault downgraded seating and electronics supplier Lear Corp. to "sell" from "neutral," citing its large exposure to Detroit 3 trucks, referring to GM, Ford Motor Co. and Chrysler LLC and rising raw material costs.

The analyst slashed his 6-month price target on Lear stock by $12 to $16. Lear shares closed at $15.15 Thursday, down $2.97.

Archambault also cut his rating on Tenneco Inc. "neutral" from "buy," and price target to $18 from $29. He removed the stock from the "Americas Buy List."

Tenneco’s shares are expected to remain under pressure as the company is likely to post weak second-quarter results, he said. However, the analyst believes this would be a better buying opportunity as he sees the company as a core long-term holding with strong earnings and growth prospects. Tenneco shares closed at $14.60, down $1.66.

He also cut his price target on "neutral"-rated Ford Motor Co. to $5 from $8. Ford shares closed Thursday at $5.07, off .7 cents.

Goldman cuts General Motors, shares hit new lows

Suppliers Lear and Tenneco also downgraded