GM's Earnings, Sales Eyed
July 18, 2008: 11:54 AM EST
DETROIT -(Dow Jones)- GM's shares are up nearly 60% since hitting a fresh 50-year low on Monday, when concerns were rising about the auto maker's financial health amid a sharp downturn in sales, particularly of highly profitable pickup trucks and sport- utility vehicles.
Sentiment got a boost from the announcement Tuesday of a sweeping plan to cut $10 billion in costs and raise an additional $5 billion through asset sales and financial markets. Declining oil prices also provided a boost, sparking hopes that the steep drop in sales of large vehicles could moderate if fuel prices eased.
Recently the stock was up $1.12, or 8.7%, at $13.96, trading at its highest level in nearly a month. The stock, which is up from a low of $8.81 on Monday, is still down 44% year-to-date.
The latest restructuring moves by GM, which says it will have enough cash to weather the downturn through 2009, allayed investor fears of an impending bankruptcy, especially since GM's plan won't rely heavily on cash from the strained financial markets.
But in announcing the liquidity-boosting plan, the company also said that it expects to report significant losses when second-quarter financial results are announced in the next few weeks. GM hasn't announced a date for the release of its quarterly financial report.
July sales results, set to be released Aug. 1, could bring more bad news for GM and its Detroit-based counterparts, which continue to lose market share to foreign-based rivals.
Meanwhile, the same pressures that have driven GM shares to historic lows remain: a battered U.S. economy, high fuel and commodity prices, and consumers' dramatic shift away from profitable pickups and SUVs. The Big 3 U.S. auto makers rely much more than their foreign counterparts do on sales of large vehicles.
"The key issue for GM is that while the announcement earlier this week will provide confidence, it simply buys them time," said Calyon Securities analyst Mark Warnsman said. "It is not clear to me GM has a distribution network in the U.S. strong enough to convince Americans they should be buying American cars."
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