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Quick Hits: GM Running On No Cylinders


Brief scrutiny of today's headlines.


If the shares of General Motors (GM) take a hit Friday, it will be the seventh session in a row the stock has fallen.

GM is down and it may be time to ask: Can the company get up?

The company's stock lost about one third of its value Thursday and hit its lowest level since 1950.

Standard & Poor's said GM's credit could sink further into junk status. This would make it harder and more expensive to borrow money.

In July, GM announced plans to cut costs by $10 billion and to raise $5 billion through asset sales and borrowing through 2009. At the end of June, the company had $21 billion in cash and $5 billion available in credit. But GM has been spending about $1 billion a month and analysts say the company needs an estimated $11 billion to $14 billion on hand to keep the lights on.

Immediate sales prospects are dismal in the credit crunch. US auto sales are down 13% through September from a year ago. J.D. Power and Associates cut its sales projections and now expects new cars sales in the US to total 13.6 million this year and 13.2 million in 2009. A total of 16.1 million vehicles were sold in 2007. There has been some chatter about a bailout for automakers.

Sales of GM's Opel and Vauxhall brands fell about 6% in Europe in the first nine months of 2008, another indication of a worldwide slowdown. Sales are also lagging in China.

Ford's (F) stock also took a hit Thursday and fell to its lowest price since 1983. The company is unlikely to accelerate to profitability.

Tightening credit drove US auto sales below 1 million in September, the lowest figure since February 1993. Automakers load cars with standard features in an effort to boost profits.

Toyota (TM) offers 0% financing on 11 models in an effort to increase sales.

Toyota, Honda and Nissan have forecast lower profits this year as the cost of materials rise and sales slow.

Muscle cars? Forget about it. Right about now, automakers would settle for increased sales of compacts, especially hybrids.

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No positions in stocks mentioned.
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