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General Motors shares drop to lowest price since 1982

The Baltimore Sun

Shares of General Motors Corp. fell yesterday to their lowest value since 1982 after Citigroup Inc. cut its rating on the world's largest automaker to "hold" from "buy," noting that he company faces "cash-burn risks" as the costs of raw materials rise.

"Auto fundamentals are poised to deteriorate beyond 2008," Citigroup analysts wrote in a note.

GM's decline extended a slide that has reached 30 percent this year. The shares dropped 18 cents, or 1 percent, to $17.42 in trading on the New York Stock Exchange, the lowest price since October 1982.

GM remains an "appealing long-term restructuring story," though any stock gains might be limited by a "drag on earnings" from lender GMAC LLC and auto-parts supplier Delphi Corp., Citigroup said.

Delphi is working to find financial backing to emerge from bankruptcy and GMAC, 49 percent owned by GM, said it may not post a profit until next year.

GM's shares are trading at less than a quarter of their value since the day before G. Richard Wagoner Jr. became chief executive officer June 1, 2000, and fell for a fifth straight day.

Further weighing on GM's profit is U.S. buyers' shift from large sport utility vehicles and pickups to smaller SUVs and cars, Citigroup analyst Itay Michaeli said.

A midsize crossover SUV such as the GMC Acadia generates about $4,700 in profit compared with $6,800 for the full-size Chevrolet Tahoe, according to Citigroup.

GM's large-SUV sales fell 29 percent this year, and pickup sales are down 19 percent, according to Autodata. Large pickups and SUVs might be only 17 percent of North American auto output by 2010, compared with 21 percent in 2007, Citigroup said.

The automaker's bid to return to profit after three straight annual losses was dealt a blow by the walkout at American Axle and Manufacturing Holdings Inc. and strikes at GM assembly plants that will cut 2008 pretax earnings by almost $2.8 billion.

The American Axle strike slashed output of large GM pickups and sport utility vehicles by 330,000 units. United Auto Workers walkouts at GM factories in Kansas and Michigan cost $200 million in pretax earnings and 33,000 units of lost production of hot-selling Chevrolet Malibu sedans and Buick Enclave SUVs.

Industrywide U.S. auto sales might drop to 14.7 million units this year, the lowest since 1993, according to Ford Motor Co. GM's sales in its largest market fell 12 percent to 1.06 million units through April 30, compared with a 7.7 percent decline industrywide.

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