GM Shares Lowest Since 1943
Shares of General Motors sank to their lowest price since April 1943 today, as time runs out for the troubled U.S. auto giant.
GM shares were partially pushed down by the broader market decline this morning -- the Dow is trading down about 275 points. But other pressures -- plummeting vehicle sales, a shocking cash-burn rate and continued high costs -- combined to push shares of GM under $3 today, a 13-percent loss on the day.
Let us be clear about this: We are seeing a pivot point for the backbone of what was once American industrial might. GM may survive as a standalone company. Or it may not. Up until maybe even this year, that was an unthinkable thought.
GM will realize massive cost-savings when union concessions kick in at the beginning of 2010. If GM makes it to 2010.
Doing the math GM provided earlier this week: If the automaker doesn't get a lifeline of some sort and even if it cuts its cash-burn rate in half, it has about five months until its cash reserves dip below the level it needs to stay in business.
GM was one of the original 30 stocks when the Dow began trading in 1928. During the 1960s, GM produced one-half -- that's an astounding 50 percent -- of every vehicle on the American roads.
Few things are more firmly entrenched on the 20th century American psyche than Chevys and Caddies, V-8s and 'vettes.
But this is the 21st century, and GM -- and Detroit -- have been experiencing steep market-share decline. Now, even though they are joined in these tough times by world-beater Toyota and other automakers, Detroit's fundamentals are much weaker than Japan's. This was no time for a economic crisis for American automakers.
President-elect Barack Obama pressed President Bush yesterday to ramp up aid to the struggling Detroit automakers. Today, The Post's Lori Montgomery and Mike Shear report that, "Bush, speaking privately to Obama during their first Oval Office meeting, repeated his administration's stand that he might support quick action on those bills if Democratic leaders drop their opposition to a Colombia trade agreement that Bush supports, according to people familiar with the discussions."
However, the White House today denied what it characterized as a "quid pro quo" involving free trade with Colombia and further support for the auto industry. At the same time, the White House did not say The Post's story was inaccurate.
Safe to say, however, further help for Detroit is top of mind among many lawmakers in Washington.
Bush approved $25 billion in direct loans to Detroit automakers last month but, because of red tape, the money may not arrive for months and automakers are starting to sweat. They need money right now, they're telling Washington, and are asking for an additional $25 billion, stat.
Today, the White House said it would be receptive to any measures Congress would take to speed up the flow of dollars to Detroit.
Think things are bad at GM? They're no better at Ford and Chrysler.
Shares of Ford punched through the $2 floor and are trading down today nearly 10 percent. Ford got a temporary reprieve when GM chief executive Rick Wagoner said earlier this week that merger talks between GM and "another company" (that being Chrysler) have been put on hold while GM figures out how to stay afloat.
A GM-Chrysler tie-up could spell doom for Ford, especially in the wake of the massive sell-off of Ford shares last month by nonagenarian billionaire investor Kirk Kerkorian, who knows a stock heading south when he sells one.
But a merger with GM was one of the best hopes for Chrysler, which is privately owned by Cerberus Capital private-equity firm. Chrysler reported a 35-percent drop in vehicle sales in October.
GM actually received some encouraging news today from JPMorgan analysts, who wrote that, despite GM's troubles, the company is "likely" to survive (pause for a moment to imagine that thought). Which means distressed GM bonds are a "buy," JPMorgan said.
"We believe GM has several sources of liquidity it can access to bridge the company to 2010 when it realizes considerable cost cuts," analysts Eric Selle and Atiba Edwards said in a report.
The sources include: An overfunded pension plan, possible asset sales, capital market transactions, equity injections, cost cutting and government loans, the JPMorgan analysts said.
Whatever source is tapped, whatever fix is chosen for GM and Detroit, automakers are hoping it comes quickly.
-- Frank Ahrens
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