GM, Ford Shares Skyrocket as Bailout Hopes Brighten

Shares of General Motors and Ford Motor jumped on Wednesday after Deutsche Bank said chances have improved for the struggling U.S. automakers to receive a government bailout.

"There is growing concern about the risks to the U.S. economy that would be derived from inaction," Deutsche Bank analyst Rod Lache said in a research note.

"The proximity of these bailout hearings to the Citigroup bailout may have also tipped the scales somewhat," Lache said, referring to the massive government rescue of the bank announced Sunday.

Shares of GM , which hit a 70-year low of $1.70 last week, surged 35 percent to $4.81 on the New York Stock Exchange. Ford shares jumped 29.5 percent to finish at $2.15.

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Lawmakers, who last week rejected pleas from GM, Ford and privately held Chrysler for $25 billion in federal loans and asked the companies to submit detailed turnaround plans, are rescheduled to convene out of session in the week of Dec. 8 to review the plans and consider aid.

Lache said the U.S. automakers would likely present "relatively aggressive" plans to Congress, addressing challenges to both operating costs and revenues.

"We believe winning over skeptics will require U.S. automakers to submit plans that demonstrate an ability to achieve cash flow breakeven at relatively low demand and conservative market share levels," Lache said.

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He added GM could cut its annual fixed costs for North American operations to the low $20 billion range from the current $31 billion, but that would involve "significant execution and timing risks."

Even if GM is able to restructure outside of bankruptcy, existing shareholders will likely be diluted to near $0 value for the stock, Lache said.

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