btm
11th November 2005, 10:24 AM
http://finance.news.com.au/story/0,10166,17210802-462,00.html
GM shares drop to 23yr low
From: Reuters By Jui Chakravorty in Detroit
November 11, 2005
SHARES of General Motors Corp spiraled to a 23-year low overnight as fears about its financial woes and a possible strike at GM's main parts supplier rose to new heights.
A day after giant automaker said it would restate some annual results, Banc of America Securities analyst Ron Tadross warned of an increased risk of bankruptcy and cut his target price on GM to $US16 from $US18.
Citing "increasing evidence that hidden liabilities exceed hidden assets" at GM, Tadross also told clients that he was raising his view of its risk of bankruptcy over the next two years to 40 per cent from 30 per cent.
A GM spokeswoman did not immediately return calls seeking comment on Tadross' research note.
GM late on Wednesday, in a quarterly filing with US regulators, said it would restate 2001 financial results, which were overstated by as much as $US400 million ($548 million) for the year. The company said the accounting error stemmed from the way it booked credits from suppliers.
GM also quadrupled its second-quarter 2005 loss to $US1.07 billion to reflect the diminished value of its investment in Japan's Fuji Heavy Industries, maker of Subaru cars.
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GM shares were down 6.4 percent, or $US1.56, at $US22.99 in afternoon trading on the New York Stock Exchange after hitting an NYSE intraday low of $US22.75 earlier in the session; in composite trading, it changed hands as low as $US22.74, a level not seen since 1982.
The stock has fallen more than 45 per cent this year and its decline could ratchet up pressure on Chairman and Chief Executive Rick Wagoner to launch a more aggressive revival plan for the automaker.
Several analysts say that while the restatements have little fundamental impact, they have hurt the company's credibility. "... the restatements do chip away at management credibility, especially given the challenged operations that serve as backdrop to this announcement," Goldman Sachs analyst Robert Barry said in a research note.
The Detroit-based Old Economy icon has lost nearly $US4 billion this year as it grapples with high health-care and commodities costs, a steady erosion of US market share and sputtering sales of big sport utility vehicles, its longtime cash cows, due to high gasoline prices.
T Rowe Price analyst Brian Ropp said the restatements were "bad timing. It's just one more negative headline and doesn't help at a time when they have other major issues to address."
GM shares drop to 23yr low
From: Reuters By Jui Chakravorty in Detroit
November 11, 2005
SHARES of General Motors Corp spiraled to a 23-year low overnight as fears about its financial woes and a possible strike at GM's main parts supplier rose to new heights.
A day after giant automaker said it would restate some annual results, Banc of America Securities analyst Ron Tadross warned of an increased risk of bankruptcy and cut his target price on GM to $US16 from $US18.
Citing "increasing evidence that hidden liabilities exceed hidden assets" at GM, Tadross also told clients that he was raising his view of its risk of bankruptcy over the next two years to 40 per cent from 30 per cent.
A GM spokeswoman did not immediately return calls seeking comment on Tadross' research note.
GM late on Wednesday, in a quarterly filing with US regulators, said it would restate 2001 financial results, which were overstated by as much as $US400 million ($548 million) for the year. The company said the accounting error stemmed from the way it booked credits from suppliers.
GM also quadrupled its second-quarter 2005 loss to $US1.07 billion to reflect the diminished value of its investment in Japan's Fuji Heavy Industries, maker of Subaru cars.
Advertisement:
GM shares were down 6.4 percent, or $US1.56, at $US22.99 in afternoon trading on the New York Stock Exchange after hitting an NYSE intraday low of $US22.75 earlier in the session; in composite trading, it changed hands as low as $US22.74, a level not seen since 1982.
The stock has fallen more than 45 per cent this year and its decline could ratchet up pressure on Chairman and Chief Executive Rick Wagoner to launch a more aggressive revival plan for the automaker.
Several analysts say that while the restatements have little fundamental impact, they have hurt the company's credibility. "... the restatements do chip away at management credibility, especially given the challenged operations that serve as backdrop to this announcement," Goldman Sachs analyst Robert Barry said in a research note.
The Detroit-based Old Economy icon has lost nearly $US4 billion this year as it grapples with high health-care and commodities costs, a steady erosion of US market share and sputtering sales of big sport utility vehicles, its longtime cash cows, due to high gasoline prices.
T Rowe Price analyst Brian Ropp said the restatements were "bad timing. It's just one more negative headline and doesn't help at a time when they have other major issues to address."