What will replace GM if it leaves the Dow?

[1931Chevy]

NEW YORK, May 29 (Reuters) - General Motors Corp is widely expected to be removed from the prestigous Dow Jones industrial average, as it heads toward almost certain bankruptcy. The automaker's removal would make it the first company to be removed from the Dow due to bankruptcy in 27 years.

It would leave a hole in the 30-stock Dow .DJI that will be swiftly filled.

But which company will be added to the 103-year-old average if GM (GM.N) is jettisoned?

Bankruptcy looms for GM with a government-imposed June 1 deadline as it attempts to restructure under the direction of U.S. President Barack Obama's administration.

It would be the biggest bankruptcy for a U.S. industrial company and the third-largest in U.S. history after investment bank Lehman Brothers and telecommunications company Worldcom.

If GM does go bankrupt, the company would be removed from the average, John Prestbo, executive director of Dow Jones Indexes and the chairman of the DJI oversight committee has said.

Analysts do not agree on the size and sector of the company that would replace GM in the Dow. There are several avenues the index could take, ranging from well-known tech names like Apple or Cisco, to GM's rival, Ford.

"The question will be, do you go with another manufacturing company, given the U.S. is less sensitive to that than it was many years ago, or do you go with the direction of the future, which is services?" asked Michael Sheldon, chief market strategist at RDM Financial in Westport, Connecticut.

There is also the possibility that the index's oversight committee could take the opportunity to shake up the ranks and replace more companies than just GM.

Analysts have speculated that Citigroup (C.N) and Alcoa (AA.N) could also be dropped as their market capitalizations dwindle in the midst of the economic downturn.

In September, insurer American International Group (AIG.N) was replaced by food maker Kraft (KFT.N) as AIG was bailed out by the U.S. government in the wake of Lehman Brothers' collapse. It was the first time the committee elected to remove only one Dow component since 1982, the year American Express (AXP.N) replaced Manville Corp.

Manville was also the last company to be removed from the index as a result of bankruptcy. The company made asbestos products and was sued by ill workers and families. It exited the Dow on Aug. 30, 1982.

The following are possible entries into the Dow industrials as discussed with market analysts:

AETNA INC (AET.N)


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[Bejeweled]

Ticker symbol IOU.

[Black04GTO]

According to an article I read yesterday...Apple

[Uzzy]

Me! Start saving your duckets, Uzzy's IPO is coming!

[mgescuro]

I heard Apple. But for all intents and purposes, they really are a small player in the overall market. I doubt they'd seriously even be considered. Maybe if Apple were 2-3x its size, then perhaps it would be feasible.

Cisco might be an interesting addition.
Ford would be obvious, but they're not exactly healthy either.
Wells Fargo might be a possibility as well.

I would have said Genentech, but they were just acquired by Roche.