Shares of General Motors Corp. slid to a five-decade low Thursday, even as its chief executive dismissed speculation that the largest U.S. carmaker might soon seek bankruptcy protection.
GM shares fell 64 cents, or 6.2 percent, to $9.69 Thursday, after tumbling as low as $9.32 earlier. The low marked the Detroit-based automaker’s lowest share price since July 2, 1954, when its stock dropped to $9.15, according to the Center for Research in Security Prices at the University of Chicago. The price is adjusted for splits and other changes.
CEO Rick Wagoner said comments in the past week about a potential bankruptcy are “not at all constructive or accurate.”
GM has $24 billion in cash and $7 billion in credit facilities, he said.
“Under any scenario we can imagine … our cash position will remain robust through this year” and the company has options for raising cash beyond that, Wagoner said at a meeting of Dallas business leaders.
The bankruptcy speculation has increased and GM stock has been hammered over the past two months, losing more than half its value. Dealers are worried that the negative chatter will hurt sales, and Wagoner conceded that consumers wouldn’t want to buy cars from a bankrupt company.
“That kind of news isn’t helpful, but as long as we can get the dealers the right information … I think we can address it,” he said.
A Merrill Lynch & Co. analyst said July 2 that GM may need to raise $15 billion and that bankruptcy is “not impossible” should U.S. economic conditions worsen, pushing GM shares lower.
Since the beginning of the year GM shares have fallen more than 60 percent.
Shares of Ford Motor Co. also tumbled Thursday, falling 37 cents, or 7.5 percent, to $4.58, after dropping as low as $4.47 earlier.
Citigroup analyst Itay Michaeli said that both GM and Ford, along with privately held Chrysler LLC, will need significant cash as they face one of the most severe downturns in their industry’s history.
Michaeli said that while a bankruptcy filing at one of the Detroit-based automakers could happen, it’s more likely they would attempt to work out their financial problems outside of court.
“A bankrupt automaker could face market share losses as consumers walk away” from them, “fearing diminishing quality, void warranties, and weaker dealer support,” Michaeli wrote in a note to investors. “Under this scenario the business model could be left with irreparable damage that leads to worse recoveries for claimholders,” he wrote.
Michaeli said out-of-court workouts could include dilutive equity-for-debt recapitalizations, additional labor-related savings or alliances with other automakers.
On Thursday, Wagoner reiterated other executives’ comments that Hummer is the only one of GM’s eight U.S. brands being studied for a possible sale or shutdown.
