GM and Ford stocks hit road to recovery

— -- Shares in Detroit's two biggest automakers, beaten down by about half their value last week, rebounded Monday after a weekend of hopeful signs the credit squeeze will begin to ease and of talk about industry consolidation.

The GM and Ford bloodletting last week, which far outpaced the overall market decline, went too far, says Alexander Edwards, president of the auto division of consultant Strategic Vision. "They were too beaten up, and clearly undervalued."

Also factoring in the price rebound:

•Credit. U.S. and European moves to shore up banks and free up credit were seen as boosting an industry in which automakers, dealers and their customers all depend on access to loans.

Even so, credit standards for buyers are likely to remain tight. GMAC Financial Services, the finance arm jointly owned by GM and Cerberus, said Monday that it will limit auto loans to buyers with excellent credit: scores of 700 or above.

•Merger talk. Executives remained vague about the nature of discussions between GM and Chrysler. On Monday, Chrysler CEO Bob Nardelli sent a memo to employees in which he confirmed only that the automaker is "looking at a number of potential global partnerships" and that Chrysler has "been approached by third parties" about "future possibilities."

Analysts have expressed doubts about a GM-Chrysler pairing. "There's no natural fit there," says Michael Robinet, vice president of researchers CSM Worldwide.

But a CSM report Monday forecast a shrinking new vehicle market — an 18-year low of 11.8 million vehicle sales in 2009 — which will push makers to cut more capacity.

"Something has to happen, and consolidation is one thing that could do that," Edwards said.

•Cost-cutting. GM announced Monday it would close its 1,200-worker Janesville, Wis., assembly plant on Dec. 23, almost two years earlier than it had planned. It makes big SUVs such as the Chevy Tahoe. Spokesman Chris Lee says the company decided to hasten the plant's closure because SUV sales are down 33% this year.