GM and Ford USA Shares Hit Lowest Level Since 1950

[Sprint347]

Thursday October 9, 11:53 am ET

DETROIT (Reuters) - General Motors Corp shares fell as much as 21.6 percent to their lowest level since 1950 on Thursday amid financial market turmoil and the car maker's report of European sales declines through the first nine months of 2008.

GM, whose shares fell as low as $5.42 on the New York Stock Exchange, blamed the credit crisis and inflation for hurting consumer confidence in Europe, where its sales have declined 1.9 percent in 2008 through September.

GM, the largest U.S.-based automaker, posted a $15.5 billion net loss in the second quarter and announced plans in July to cut costs by about $10 billion. The company has been restructuring in North America to meet increasing demand for more fuel-efficient vehicles.

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.

The stock decline comes as influential industry forecasters J.D. Power and Associates and Global Insight lower auto sector expectations for 2008 and predict a slow recovery.

"While the global automotive industry is clearly experiencing a slowdown in 2008, the global market in 2009 may experience an outright collapse," said Jeff Schuster, J.D. Power's executive director of automotive forecasting, in a statement.

J.D. Power cut its 2008 U.S. light vehicle sales forecast to 13.6 million units and said it expects sales to fall to 13.2 million units in 2009. Global Insight on Wednesday cut its 2008 U.S. auto sales outlook and warned that a recovery toward more normal levels may not occur until 2013.

Citigroup also cut GM and Ford Motor Co to "sell" ratings on Wednesday.

Ford shares fell 20 cents, or 7.5 percent, to $2.46 on Thursday. Ford stock had reached its lowest level in a quarter century on Wednesday, falling as low as $2.10.

GM shares were off $1.01, or 14.6 percent, at $5.90.


Not looking good :/

[Sprint347]

By Alex Taylor III, senior editor
Last Updated: October 9, 2008: 5:31 PM ET

NEW YORK (Fortune) -- Investors cast a shocking vote of no confidence in the future of U.S. automakers Thursday.

After dropping sharply early in the day, GM (GM, Fortune 500) stock closed down 31% to $4.76 a share, while Ford (F, Fortune 500) fell nearly 22% to $2.08. A flurry of bad news was to blame, of which the latest was a declaration by ratings agency Standard & Poor's that it was putting GM and Ford on credit watch negative "because of the rapidly weakening state of most global auto markets" and weak capital market conditions.

The stock selloff effectively puts both companies on death watch, and it's easy to see why. The ratings warnings followed a new report by Global Insight that shows U.S. auto sales hitting recession levels this year - and then sinking lower in 2009.

"We won't get back to where we were in 2006 until 2013," said George Magliano, director of forecasting for North America for Global Insight. The economic forecasting and consulting firm based outside Boston is forecasting sales of 13.8 million units this year and only 13.4 million in 2009, compared with 16.1 million last year.

The impact of oil prices at the beginning of the year was mild compared to the squeeze from the credit crunch. As Nigel Griffiths, Global Insight's managing director of global forecasting, points out, expensive oil merely meant that wealth was being transferred to oil-producing countries like Russia from oil-consuming ones like the United States. Now, the credit crunch is destroying wealth and making it impossible for customers to buy.

"The impact is worse than if the price of oil had been sustained at $200 a barrel," he said.

No help from foreign markets

It turns out that auto finance companies were as guilty as mortgage lenders in providing loans to subprime borrowers - and their generosity is coming back to haunt them. Lenders dramatically cut standards for credit worthiness at the beginning of 2008 and now delinquency rates have been shooting up to levels not seen in 30 years.

"Some 18% of sales volume came from people with bad credit scores," said Magliano. "Now the subprime buyer has been squeezed out."

There is little relief overseas. According to Global Insight, at least half a dozen countries in Western Europe experienced greater house-price appreciation over the last 10 years than did the United States. Ireland led the way with a nearly 250% rise and the United Kingdom was not far behind. With that kind of wealth accumulation unlikely to be repeated, sales experienced a "total collapse" in July and have gone into a "violent downshift."

Nor is Asia likely to provide a safety net. Sales growth in China is slowing markedly and vehicle demand in India is also ebbing. Even the much publicized $3,000 Nano car developed by India's Tata Motors is off to a slow start. Plans for an assembly plant in India have been scuttled by local opposition and Global Insight says Nano "will only see a big build-up in volumes from 2010."

"When will the credit crunch free up enough to allow consumers to finance again?" asked Griffiths. "That is the several-trillion-dollar question. It is the core assumption on which all forecasts will be based and it is unforecastable."

To combat this flood of negative news, GM has adopted the Sarah Palin approach: bypassing the media by communicating directly with customers and investors. GM executives can now be seen in videos posted on its Fast Lane Web site talking about the company.

In the first video, posted Sept. 22, chairman and CEO Rick Wagoner responds to the question "What's GM's future look like?" by saying "GM's future is actually quite bright." After ticking off progress on new models, technology and sales in developing markets," he concluded by saying, "though times are challenging, we're really making sure that we keep planting the seeds for what we think should be a very exciting future for General Motors."

Three weeks later, you have to wonder what he'd be saying today?

[Dave_au]

Well the "falcon past 2013" thread might be a little superceeded if any of these predictions regarding liquidity run true.

Originally Posted by SMH

GM, Ford shares crash on rating cut fear

Originally Posted by SMH

• http://www.smh.com.au/ October 10, 2008 - 8:55AM

General Motors shares tumbled to its lowest in New York trading in 58 years and Ford fell to almost a 26-year low as the US car-sales outlook worsened and Standard & Poor's said it may cut their debt deeper into junk.

Market researcher JD Power & Associates yesteday said car and light-truck sales will fall to 13.6 million this year and 13.2 million in 2009. The total was 16.1 million last year and hasn't been as low as the 2009 projection since 1992.

"Buyers are both voluntarily and involuntarily exiting the US new-vehicle market,'' Jeff Schuster, executive director of automotive forecasting for JD Power, said. "The global market in 2009 may experience an outright collapse.''

US auto sales tumbled 27% in September, the biggest monthly drop since 1991, as the credit crisis reduced access to loans for potential buyers. The industry already had been hurt by gasoline prices that reached a record high in July and by the housing slump that weakened consumer confidence.

GM fell $US2.15, or 31%, to $US4.76 in New York trading. That was the lowest close since March 30, 1950. Ford slid 58 cents, or 22%, to $US2.08, the lowest since October 25, 1982.

S&P, which rates debt of GM and Ford six steps below investment grade at B-, said in statements that both automakers have "adequate liquidity'' for this year while facing a "serious challenge'' during 2009. The ratings company put both on Creditwatch with a negative outlook and said it's also reviewing GMAC LLC, the finance company 49 percent-owned by GM.

Fitch Ratings cut its Ford rating this week because of concern that tighter credit will crimp US auto sales.

Shares of GM and Ford, the largest US automakers, were on the list for the US Securities and Exchange Commission's three- week ban on short selling, which ended last night. In a short sale, traders borrow shares, sell them and hope to make a profit by buying back the stock at a lower price and returning it.

"People aren't sure they're going to be able to get their US distribution and sales in line with their projections,'' said Peter Kenny, a managing director for institutional sales at Knight Equity Markets. "That's what's killing them.''

Kevin Tynan, an analyst at Argus Research, said the auto industry before the financial crisis "was perceived as the most troubled sector. Investors are circling back and saying this is pretty bad.'' He rates shares of GM and Ford ``sell.''

GM and Ford shares this week were cut to "sell'' by Citigroup.

"Declining global credit conditions are complicating what are already fragile US automotive balance sheets,'' Citigroup analysts including Itay Michaeli said. Without a recovery, "US automakers might be forced to consider pursuing either drastic spending cuts and/or broader workout scenarios sooner than previously contemplated,'' they wrote.

GM hasn't posted a full-year profit since 2004, while Ford hasn't done so since 2005. Both automakers have lost sales as high fuel prices caused a consumer shift away from large pickup trucks and sport-utility vehicles. Neither automaker has said when it expects to return to profit.

[Bossxr8]

Are there any companies who's shares haven't copped a pounding in the US. Not likely. They've all copped it.

[Bossxr8]

Hasn't the US Government just approved a big low interest rescue loan to the Big 3 to keep them going? Read something to that effect today.

[Nikked]

what will this do to our car industry, is the lower doller going to work in our favor?

[XR Martin]

Originally Posted by Nikked

what will this do to our car industry, is the lower doller going to work in our favor?

Possibly, but remember engines, transmissions and alot of other parts are all imported now

[King Nothing]

Originally Posted by XR6 Martin

Possibly, but remember engines, transmissions and alot of other parts are all imported now

Yep, the short sightedness of previous governments/companies are about to totally screw us. When times are good, everyone thinks about profit/savings and doesn't give a thought to when things go bad.

Most of our manufacturing is gone, which suited us when the dollar was fairly high and the economy was good. Now that the dollar is down, watch the price of everything imported go up. Dammit it gets me frustrated.

[robjh80]

Originally Posted by Nikked

what will this do to our car industry, is the lower doller going to work in our favor?

If the car industry in the US keeps going down the pan, personally I would expect that GM and Ford would have to cease, or at least trim back manufacturing in many offshore countries, including Australia.

Jobs at GM and Ford plants overseas will not be saved at the expense of jobs at US sites, .... "saving local US jobs and production will be one of the main priorities at GM and Ford right now", particularly less than a month out from voting.

The only thing Australia "currently" has in it's favor over other offshore sites is the low Aussie Dollar which to "some degree" equals lower exporting costs, other than that the future looks extremely grim for local manufacturing.

Only problem for Ford is they don't export the locally produced product, GM of course do to some degree with the Commodore.

On the face of it for Ford, dissapointing local sales for a freshly launched product, no export plan in place, worldwide recession, shares plummeting, high oil prices.... Dare I say it ..... "the end is nigh for the Falcon".

Going to be an interesting 12 months ahead of us.