Top Wall Street analyst targets GM shares at $0

UPDATE General Motors Corp.'s shares plunged as much as 31 percent to their lowest level in 60 years Monday after analysts said they were pessimistic about the automaker's future — and shareholders' ability to recoup any money — even if the company gets federal aid.

GM and Detroit's other automakers have asked Congress for additional aid. But that money would dilute GM's equity, leaving almost nothing for shareholders who would have to wait in line behind debt holders, the government and a union-managed health-care trust, analyst Brian A. Johnson of Barclays Capital said Monday.

Another analyst called GM's collapse "inevitable" without federal aid. Rod Lache of Deutsche Bank said GM may otherwise run out of cash before the end of the year.

The dire warnings sent GM shares tumbling to $3.02 a share at one point Monday — down $1.34 a share — before closing at $3.36, down 23 percent.

GM might not have enough cash to operate its business by mid-2009, which renewed analyst concerns about GM — and perhaps Ford Motor Co. — filing bankruptcy.

"The only thing that can save the American automakers from this fate is government intervention, and that is by no means a certainty," said analyst Aaron Bragman of IHS Global Insight.

According to Deutsche Bank, GM needs $10 billion in government loans to survive until 2010. But Lache said that any government bailout would sharply drop the value of GM's stock, which he lowered to sell and put a price target of $0 a share.

11/10/08 A key Wall Street analyst slashed his target price for General Motors Corp. shares to zero today, saying the company could run short of cash by December and that even with government aid, shareholders are likely to lose their investment. Even if GM is able to secure immediate U.S. government support, we believe that GM’s predicament has the potential to set in motion a sequence of events that would be bankruptcy-like," said Deutsche Bank analyst Rod Lache, who lowered his rating on GM shares to “sell" from “hold."

Lache said GM’s U.S. cash could fall to $5 billion by December, which would not be enough to pay the supplier bills for U.S. operations that come due in January. He said that government aid would likely crowd out unsecured investors such as shareholders.

GM shares plunged more than 17% in early trading on the New York Stock Exchange.