Last week GM reported that it lost $2.5 billion in the third quarter of 2008, while spending $6.9 billion. Today General Motors stock has plunged more than 31 percent to their lowest level in more than 55 years after two analysts downgraded GM’s stock claiming that it will be worth very little of nothing if GM does receive a government bailout.
Deutsche Bank analyst Rod Lache reduced GM to sell and put a price target of $0 a share.
“Without government assistance, we believe that GM’s collapse would be inevitable, and that it would precipitate systemic risk that would be difficult to overcome for automakers, suppliers, retailers, and sectors of the U.S. economy,” Lache wrote. “As part of GM’s restructuring, we are also convinced that a large number of stakeholders who are senior to GM’s equity will have to settle for pennies on the dollar.”
According to Lache GM needs $10 billion in loans in order to survive until 2010.
Barclay Capital auto analyst, Brian Johnson, put a price target of $1 a share on GM.
“We estimate that GM will end 2008 with just $13.3 bil of gross cash, and expect GM to fall below its $11-14 bil minimum cash needs in 1Q09,” Johnson wrote. “Of the four broad options for government assistance for GM, we believe that political pressure to protect taxpayers may lead to a solution similar to the 1979 Chrysler bailout, which was accompanied by concessions from debt holders, labor, suppliers and management.”
Full Story: The Detroit News
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