US Economy: General Motors Shares Plunge to 62-year Low

The gloomy predicament facing General Motors got worse today as its shares plunged to a 62-year low following a Wall Street analyst's report which concluded that the company's stock was worthless.

America's largest car maker, which is struggling to cope with a financing freeze and a collapse in demand for vehicles, has been aggressively lobbying the US government for billions of dollars in aid to avert bankruptcy.

Rod Lache, a motor industry analyst at Deutsche Bank, today advised his clients to sell GM's stock and set a share price target of "zero". GM's shares duly slumped by $1 to close at $3.36, after falling at one point to $3.02 - their lowest level since 1946.

"Even if GM succeeds in averting a bankruptcy, we believe that the company's future path is likely to be bankruptcy-like," said Lache.

Deutsche warned that GM may not even have enough money to see it past the end of December. It said the motor manufacturer's US cash could drop to $5bn and that this could be "overwhelmed by payables coming due in early January".

The US president-elect, Barack Obama, has indicated that he favors aid to Detroit's struggling motor industry to avert huge job losses and economic damage. The Michigan-based Center for Automotive Research has estimated that as many as 2m jobs in the supply chain could be jeopardized if GM or rival Ford collapse.

But any bail-out is likely to come with strings which could undermine the value of shareholders' equity. Analysts at Barclays Capital said: "While further government assistance would decrease the likelihood of a GM bankruptcy, we believe any government assistance would likely significantly dilute GM's equity."

GM pointed to further difficulties today by admitting in a regulatory filing that the mortgage operations of its GMAC finance arm may not survive.

After reporting a $2.5bn quarterly loss last week, GM's chief executive, Rick Wagoner, made it clear that he viewed a filing for protection against creditors as a potentially disastrous option: "You can't sell cars to people under those circumstances."