DETROIT (Reuters) - Shares of General Motors Corp <GM.N> slumped to a 27-year low, while smaller rival Ford Motor Co <F.N> hit a new six-week low on Tuesday as analysts warned the U.S. auto market could remain weak well into 2009.
By Soyoung Kim
DETROIT (Reuters) - Shares of General Motors Corp <GM.N> slumped to a 27-year low, while smaller rival Ford Motor Co <F.N> hit a new six-week low on Tuesday as analysts warned the U.S. auto market could remain weak well into 2009.
Citigroup cut GM shares to "hold" from "buy" and lowered its outlook for industrywide sales in the United States, the world's largest vehicle market, for both 2008 and 2009. The bank also cut its target price for GM shares to $21 from $32 and lowered Ford's stock price target to $7 from $8.50.
Citigroup analyst Itay Michaeli said the surge in gas prices, credit constraints and the costly shift by consumers away from higher-margin trucks, a segment that Detroit automakers have dominated, made it a "new world" for the carmakers and their suppliers.
!ADVERTISEMENT!"Auto fundamentals are poised to deteriorate beyond 2008," Michaeli said in a note to clients.
Michaeli cut his forecast for 2008 U.S. light vehicle sales to 14.95 million units from 15.4 million, and estimated 2009 vehicle sales of 15.4 million units, down from a previous projection of 15.7 million units.
Automakers, including GM and Ford, have lowered expectations for U.S. auto sales this year to near 15 million units, but they have also held out hopes for a recovery next year.
U.S. light vehicle sales for 2007 were near 16.15 million units, and most industry analysts expected only a slight decline this year.
But investor concerns over the U.S. auto market have been heightened since Ford warned last week that it no longer expected to turn a profit next year.
The No. 2 U.S. automaker said early May sales of trucks had dropped sharply, raising worries about the strength of demand for the rest of the year and beyond.
Major automakers are scheduled to report May sales next Tuesday.
Michaeli said May sales are tracking at 14.7 million units on an annualized basis, with pickup truck sales down 35 percent from a year earlier. First-quarter U.S. auto sales were at 15.2 million units on the annualized basis, as tracked by analysts and investors.
GM shares hit a low of $16.87 on the New York Stock Exchange on Tuesday, their lowest level since 1981. The stock, which closed down 1 percent to $17.42, has now lost about one-third of its value since the start of the year.
Meanwhile, Ford shares fell more than 2.5 percent to $6.59 on the NYSE to their lowest level since April 11. The stock, which closed down 1 percent to $6.80, has fallen for seven straight sessions and has dropped almost 15 percent since Ford warned last Thursday that it no longer expected to return to profitability in 2009.
Shares in American Axle & Manufacturing Holdings Inc <AXL.N> bucked the downtrend for the sector, closed up 3.2 percent to $19.03 on the NYSE on expectations of cost savings from a just-clinched four-year contract with its major union.
Michaeli raised his target price for American Axle to $24 from $21, and suggested investors switch into its shares from
GM.
Detroit-based American Axle is scheduled to detail the financial impact of its new four-year contract with the United Auto workers on Wednesday.
Analyst Shelly Lombard with bond research firm Gimme Credit said Ford's warning underscored the risks for its own bonds and for those of supplier Visteon Corp <VC.N>, which would be hit by Ford's production cuts.
"Ford confirmed what most of us already suspected. The North American auto market is in deep trouble. We don't expect overall demand to rebound until 2009," Lombard said.
(Additional reporting by Kevin Krolicki; editing by Jeffrey Benkoe)
