-- General Motors gm and Ford Motor f shares raced downhill past the overall market Thursday, amid fear an extended car sales decline will severely tax cash reserves.
GM shares touched their lowest price since 1950, and Ford stock cratered to 1982 levels. Automakers dropped 25.5%, vs. 7.3% for the Dow Jones industrial average. Ford and GM have lost about half their value in the past five trading days.
Also Thursday, credit rating service Standard & Poor's placed both companies on credit watch with negative implications.
The dramatic declines came a day after two consulting services, J.D. Power and Associates and Global Insight, cut new vehicle sales estimates for this year — and projected even lower sales next year, in the low 13 million range. Sales in 2007 were 16.1 million.
"It's a steep panic," said Kevin Tynan, automotive analyst for Argus Research. "Investors (are) pricing in that bankruptcy is becoming extremely more likely."
Some believe such fears could spread to other industries.
"Until the central banks, including our Treasury and Fed, get the credit markets moving, automobile companies may be just the tip of the iceberg," said Richard Weiss, chief investment officer for City National Bank in Los Angeles. "Any economically sensitive business with high fixed costs is headed for disaster unless the credit markets are rejuvenated."
GM shares fell 31% Thursday, closing at $4.76. The world's largest automaker is now valued by the market at $2.7 billion, about what it was in 1929, according to Global Financial Data. At its peak in 2000, GM was valued at $52 billion.
"I don't know if they'll keep GM in the Dow Jones index," said Bryan Taylor, an economic historian with Global Financial Data. "When stocks hit below $10 billion in capitalization, that's when they tend to remove them."
Ford shares lost 22% to close at $2.08. Its market valuation is $4.7 billion, vs. $159 billion in 1999.
"The risk is that Ford's cash burn will increase," said Shelly Lombard, analyst for Gimme Credit.
Both companies say they have cash to last until better times. GM's Renee Rashid-Merem pointed to a liquidity plan announced in July that will raise $10 billion more by the end of 2009. Ford's Bill Collins said it is sticking to its plan to succeed, and "external measures will take care of themselves."