GM Hit By Ratings Warning, European Sales Drop
General Motors' shares hit their lowest level in almost 60 years as the U.S. automaker said its year-to-date sales in Europe slid almost 2 percent and a ratings agency said it may cut the auto maker's long term credit rating.
GM stock traded at an intraday low Thursday of $5.04, marking a decline of 27 percent from yesterday's close. GM hadn't traded below $5.50 since December 1950.
The shares slid as much as 30 percent.
S&P said Thursday afternoon that it was putting GM on its "creditwatch," with negative implications. The ratings agency said the move reflected the rapid weakening of most of the world's auto markets. It added that capital conditions in the sector would remain challenging for the "foreseeable future."
The agency also put the 49 percent GM-owned finance affiliate, GMAC, on creditwatch as well.
GM said earlier Thursday that car sales in Europe fell 1.9 percent to 1.6 million vehicles in the first nine months of the year, dropping its market share by 0.2 percentage point to 9.3 percent in that market.
It blamed the credit crisis and inflation for seriously hurting consumer confidence.
"We are facing an unprecedented set of economic challenges due to the global economic crisis," GM Europe President Carl-Peter Forster said in a statement.
GM, a component of the Dow Jones Industrial Average, said Tuesday it was cutting production in Europe, as fears of an economic downturn hurt sales on the Continent as a whole, despite ongoing gains by the company in Eastern Europe.
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.
One 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 told Reuters.
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.
Citigroup also cut GM and Ford Motor to "sell" ratings on Wednesday.
Shares of GM's Detroit rival Ford, which plans European production cuts as well, also slid Thursday. The stock was down more than 20 percent and hit an intraday low of $2.05 a share.
- Reuters contributed to this report.