Struggling automaker's stock sinks after Banc of America analyst warns of increased bankruptcy risk.
November 10, 2005: 2:28 PM EST
DETROIT (Reuters) - Shares of General Motors Corp. tumbled 6 percent Thursday, hitting a 23-year low, after Banc of America Securities warned of an increased risk of bankruptcy at the financially struggling auto giant.
The stock's decline -- which could add to pressure on Chairman and CEO Rick Wagoner to launch a more aggressive revival plan for the automaker -- also came after it said late on Wednesday that it had overstated financial results for 2001 by as much as $400 million.
GM said the accounting error stemmed from the way it booked credits from suppliers. The accounting for credits from suppliers was one of the reasons GM was recently targeted for investigation by the Securities and Exchange Commission, the company said.
Citing "increasing evidence that hidden liabilities exceed hidden assets" at GM, Banc of America Securities analyst Ron Tadross said he was raising its risk of bankruptcy over the next two years to 40 percent, up from his earlier estimate of a 30 percent bankruptcy risk that he made after former GM parts unit Delphi filed for bankruptcy court protection Oct. 8.
"Existing liquidity may only be enough to get through a bankruptcy reorganization," Tadross said.
Tadross also said that he believed a bankruptcy filing at the world's largest automaker at some point in the future is "inevitable."
GM spokesman Jerry Dubrowski dismissed Tadross' estimate of the company's bankruptcy risk.
"We have no plans to file bankruptcy as we have said often," he told CNN/Money.
In a note to clients, Tadross said he was cutting his target price on GM to $16 from $18.
"We often marveled at the continuous price discussions between the Big 3 and their suppliers, and GM now has said they will restate earnings for such," said Tadross in his note to clients. "It could get worse; especially considering the stress in the supply base and widespread nature of revising contracted prices."
GM (down $1.45 to $23.18, Research) shares were down as much as 7.7 percent in trading on the New York Stock Exchange Thursday after falling to a 13-year low on Wednesday. Shares were off about 6 percent in mid-afternoon trading.
The Detroit-based Old Economy icon has lost about $3 billion this year as it grapples with high health-care and commodities costs, a steady erosion of U.S. market share, and sputtering sales of big sport utility vehicles, its longtime cash cows, due to high gasoline prices.
November 10, 2005: 2:28 PM EST
DETROIT (Reuters) - Shares of General Motors Corp. tumbled 6 percent Thursday, hitting a 23-year low, after Banc of America Securities warned of an increased risk of bankruptcy at the financially struggling auto giant.
The stock's decline -- which could add to pressure on Chairman and CEO Rick Wagoner to launch a more aggressive revival plan for the automaker -- also came after it said late on Wednesday that it had overstated financial results for 2001 by as much as $400 million.
GM said the accounting error stemmed from the way it booked credits from suppliers. The accounting for credits from suppliers was one of the reasons GM was recently targeted for investigation by the Securities and Exchange Commission, the company said.
Citing "increasing evidence that hidden liabilities exceed hidden assets" at GM, Banc of America Securities analyst Ron Tadross said he was raising its risk of bankruptcy over the next two years to 40 percent, up from his earlier estimate of a 30 percent bankruptcy risk that he made after former GM parts unit Delphi filed for bankruptcy court protection Oct. 8.
"Existing liquidity may only be enough to get through a bankruptcy reorganization," Tadross said.
Tadross also said that he believed a bankruptcy filing at the world's largest automaker at some point in the future is "inevitable."
GM spokesman Jerry Dubrowski dismissed Tadross' estimate of the company's bankruptcy risk.
"We have no plans to file bankruptcy as we have said often," he told CNN/Money.
In a note to clients, Tadross said he was cutting his target price on GM to $16 from $18.
"We often marveled at the continuous price discussions between the Big 3 and their suppliers, and GM now has said they will restate earnings for such," said Tadross in his note to clients. "It could get worse; especially considering the stress in the supply base and widespread nature of revising contracted prices."
GM (down $1.45 to $23.18, Research) shares were down as much as 7.7 percent in trading on the New York Stock Exchange Thursday after falling to a 13-year low on Wednesday. Shares were off about 6 percent in mid-afternoon trading.
The Detroit-based Old Economy icon has lost about $3 billion this year as it grapples with high health-care and commodities costs, a steady erosion of U.S. market share, and sputtering sales of big sport utility vehicles, its longtime cash cows, due to high gasoline prices.
