As if the US auto industry wasn’t already under fire enough, today we have yet another ratings action. The good news is that this is on the stock rather than the debt ratings. The brilliant analysts at Standard & Poor’s have decided that General Motors (NYSE: GM) needed a stock downgrade. The already cautious hold rating for GM’s stock has now been dowgraded to sell.
S&P is noting that beyond the well-known issues in the US autosector that its near-term outlook for GM has gotten worse. S&P isnow reducing its international demand outlook and noted that GM recentlycut its fourth quarter US truck production targets.
S&P now sees wider losses on reduced sales and margin forecasts$16.54 to $22.96 in 2008 and by $5.00 to a $7.25 per share loss in2009. If you care or trust this, the ratings firm also said that GM’searnings in 2010 will be $1.31 per share after UAW healthcare and other costssavings along with higher
vehicle demand kicks in. S&P’s target was $9.00. Its new target: $4.00.
GM’s shares are down almost 8% today at $10.01 and its 52-week trading range is $8.81 to $43.20. Shares closed at $13.01 on Friday.
The beatings continue, regardless of morale.
Jon C. Ogg
September 17, 2008
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