GM stock hits new lows, auto stocks suffer
General Motors' stock price set another record low this morning, falling
6.7 percent to $14.75. It helped drag down the Dow Jones Industrial
Average by more than 130 points today.
GM shares closed at $14.88 a share, down 5.9 percent. GM shares have
lost almost half of their value since Feb 1, when they closed at $28.98.
That is roughly $8 billion in lost market capitalization.
The decline in GM's stock price comes on the same day a Deutsche Bank
analyst cut his 2008 U.S. light-vehicle sales forecast and said GM
probably will need an aggressive restructuring plan so it could borrow
money to cover its spending.
Analyst Rod Lache wrote in a research note that he expected U.S.
light-vehicle sales of 14.5 million in 2008, down from his previous
estimate of 14.9 million as dealers and automakers struggle to meet
rapidly shifting customer demand.
Another analyst speculated that GM would be borrowing more money.
"GM is burning cash fast, but it (unlike Ford) still has many
unencumbered assets that can be borrowed against," JP Morgan analyst
Himanshu Patel said in a note for clients.
"The bank debt market is expensive but open, and we believe GM, most
likely before year end and perhaps as early as the third quarter, may
announce a secured bank deal," he said.
Patel estimated GM could borrow up to $10 billion, secured by assets
such as its overseas operations, trademarks for brands and inventories.
Other players in the auto industry also saw their shares fall sharply.
Ford Motor Co. shares fell 6 percent to close at $6.20, a slight
recovery from earlier in the day.
First-quarter earnings news from CarMax Inc. also helped drag down the
sector. CarMax saw its earnings decline by more than half as customers
bought fewer light trucks. CarMax shares closed down 13.3 percent, at
Shares of American Axle & Manufacturing Holdings Inc. hit their lowest
price since 2001, touching $11.76 during the day but rising slightly to
close at $11.81. Dealership groups Lithia Motors Inc. and Sonic
Automotive Inc. each hit52-week lows. Lithia fell to $5.72 but closed
slightly higher. Sonic fell 5.9 percent to $13.86.