An us analyst slashed his target price for General Motors Corp. shares to zero today, saying the company could run short of cash by December and that even with government aid, shareholders are likely to lose their investment.
“Even if GM is able to secure immediate U.S. government support, we believe that GM’s predicament has the potential to set in motion a sequence of events that would be bankruptcy-like,” said Deutsche Bank analyst Rod Lache, who lowered his rating on GM shares to “sell” from “hold.”
GM representative Renee Rashid-Merem says:
“We’ve implemented a lot of activities that are more than $20 billion in savings by the end of 2009, and we are going to remain focused on those initiatives internally, and at the same time we have approached the government for potential funding.”
GM shares plunged more than 20% in early trading on the New York Stock Exchange. By 11:30 a.m., GM’s stock was trading at $3.31, down 90 cents from closing price of $4.36 on Friday.
Economic analyst Christopher Ceraso from Credit Suisse advised investors that there is no reason to own GM stock until global vehicles sales increase, which may not occur until late next year.
The bottom line is that at least for the next several quarters, we don’t expect the company to shrink its costs fast enough to stem the cash burn,” Ceraso said. “Neither does GM—hence the plea for government money.”