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WORLD> America
GM shares drop to 58-year low, global risks eyed
(Agencies)
Updated: 2008-10-10 13:48

DETROIT -- General Motors Corp shares plunged to their lowest level since 1950 on Thursday as concerns mounted that an industry decline that started in the United States was spreading and a leading forecaster warned global auto demand could "collapse" in 2009.

In this Aug. 17, 2008 file photo, an unsold 2008 Sierra pickup truck sits under the sign at a GMC Truck dealership in the south Denver suburb of Littleton, Colo. General Motors Corp. shares on Thursday, Oct. 9, 2008, plunged to their lowest level since the opening months of the Korean War. [Agencies]

GM shares fell as much as 33 percent to $4.65, driving its market capitalization to its lowest level since 1929, according to California-based Global Financial Data. The stock closed down 31.11 percent at $4.76 on the New York Stock Exchange.

Shares of Ford Motor Co hit a 26-year low, shedding as much as 24 percent. The stock closed down 21.8 percent at $2.08. Shares of major auto parts makers also declined.

At its low, GM's market capitalization stood at $2.6 billion, compared with a market capitalization of about $4 billion in March 1929 before the stock market crash that preceded the Great Depression.

J.D. Power and Associates, a forecaster used by many in the industry to prepare their own outlooks, warned that no region was immune to financial turmoil, which has been hitting mature automotive markets harder than the emerging areas.

Standard & Poor's said on Thursday it could cut GM and Ford's credit ratings deeper into junk, saying that both automakers had enough liquidity through 2008, "but the accelerating deteriorating industry fundamentals will be a serious challenge to liquidity during 2009."

GM's decline accelerated after the S&P warning, and it was one factor that contributed to a sharp slide in the Dow Jones Industrial Average, of which GM is a component.

Mirko Mikelic, a portfolio manager at Fifth Third Asset Management in Grand Rapids, Michigan, said sinking consumer confidence was probably the biggest reason for the decline in GM and Ford shares.

"Outside of the financial sector, there are issues with big ticket, discretionary consumer purchases like vehicles, so yes, auto stocks are absolutely among the most vulnerable," Mikelic said.

US auto sales have fallen nearly 13 percent through the first nine months of 2008 and forecasters expect the worst year for sales since the early 1990s, and further declines in 2009 as the industry buckles under weak consumer demand.

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