GM shares near 33-year low
Investors get out after credit-rating agency casts more negative light on U.S. automakers.
NEW YORK (CNNMoney.com) -- The stock price of General Motors Corp. neared its lowest level in 33 years Monday after a credit-rating agency's report cast a further shadow on the embattled U.S. auto industry.
"Today, capitulation... People are throwing in the towel" after watching the U.S. automobile industry spiral downward for months, said Jeff Embersits, chief information officer at Shareholder Value Management.
Shares of GM (GM, Fortune 500) closed down 6.4% Monday to $12.91 a share. It traded as low as $12.78, just 19 cents above the 33-year low of $12.59 on a split-adjusted basis, set on Jan. 2, 1975, according to BigCharts.
On Friday, Standard & Poor's Ratings Service placed the corporate credit ratings of GM, along with Ford and Chrysler LLC, on its CreditWatch list with negative implications.
"That's basically the same as saying they're in trouble," said Embersits.
A negative CreditWatch means ratings have a one-in-two chance of being downgraded in the next three months.
Sales in trouble: Gasoline prices above $4 a gallon have cut deeply into demand for U.S. automakers' once-profitable trucks and sport utility vehicles. Citibank analyst Itay Michaeli predicts GM sales dropped 28% in June and Ford's fell 27%.
The average price of regular gasoline hit a record high of $4.08 a gallon last week, and remains more than a dollar higher than it was a year ago, according to a survey from motorist advocacy group AAA.
Automakers have been scrambling to avert disaster and shift manufacturing from large vehicles to smaller, fuel-efficient ones.
"I don't understand why it took so long for people to figure out how bad it's going to be," Embersits said.
Corporate cuts: General Motors said last week it reduced its workforce by 18,657 hourly employees through buyouts and early retirement programs. It said it will replace those workers with cheaper entry-level hires as it closes four pickup truck and sport utility vehicle plants.
Ford said it would delay the launch of its full-size F-150 pickup truck and cut third-quarter production by 50,000 vehicles.
As sales decline, General Motors could end up burning as much as $1 billion a month to stay afloat, according to some accounts, sparking talk that it may need to sell off under-performing marquee brands such as Hummer and Saab.