General Motors Corp. tumbled to its lowest in New York trading in 58 years Thursday, and Ford Motor Co. fell to almost a 26-year low as the U.S. auto-sales outlook worsened and Standard & Poor's said it may cut their debt deeper into junk.
Market researcher J.D. Power & Associates estimated Thursday that car and light-truck sales will fall to 13.6 million this year and 13.2 million in 2009. The total was 16.1 million last year and hasn't been as low as the 2009 projection since 1992.
“Buyers are both voluntarily and involuntarily exiting the U.S. new-vehicle market,” Jeff Schuster, executive director of automotive forecasting for Westlake Village, Calif.-based J.D. Power, said in a statement. “The global market in 2009 may experience an outright collapse.”
U.S. auto sales tumbled 27 percent in September, the biggest monthly drop since 1991, as the credit crisis reduced access to loans for potential buyers. The industry already had been hurt by gasoline prices that reached a record high in July and by the housing slump that weakened consumer confidence.
Detroit-based GM fell $2.15, or 31 percent, to $4.76 in New York Stock Exchange composite trading at 4:15 p.m. That was the lowest close since March 30, 1950, according to Global Financial Data in Los Angeles. Ford slid 58 cents, or 22 percent, to $2.08, the lowest since Oct. 25, 1982, according to Bloomberg data.
S&P, which rates debt of GM and Ford six steps below investment grade at B-, said in statements that both automakers have “adequate liquidity” for this year while facing a “serious challenge” during 2009. The ratings company put both on Creditwatch with a negative outlook and said it's also reviewing GMAC LLC, the finance company 49 percent-owned by GM.
Fitch Ratings cut its Ford rating this week because of concern that tighter credit will crimp U.S. auto sales.
“People aren't sure they're going to be able to get their U.S. distribution and sales in line with their projections,” said Peter Kenny, a managing director for institutional sales at Knight Equity Markets in Jersey City, N.J. “That's what's killing them.”
Kevin Tynan, an analyst at New York-based Argus Research Corp., said the auto industry before the financial crisis “was perceived as the most troubled sector. Investors are circling back and saying this is pretty bad.” He rates shares of GM and Ford “sell.”
GM and Ford shares this week were cut to “sell” by Citigroup Inc.
“Declining global credit conditions are complicating what are already fragile U.S. automotive balance sheets,” Citigroup analysts including Itay Michaeli wrote in a note dated Oct. 7. Without a recovery, “U.S. automakers might be forced to consider pursuing either drastic spending cuts and/or broader workout scenarios sooner than previously contemplated,” they wrote.
GM hasn't posted a full-year profit since 2004, while Ford hasn't done so since 2005. Both automakers have lost sales as high fuel prices caused a consumer shift away from large pickup trucks and sport-utility vehicles. Neither automaker has said when it expects to return to profit.