GM shares hit 26-year low; Buckingham sees higher cash burn, risk to dividend

NEW YORK, Jun 12, 2008 (Thomson Financial via COMTEX) -- GM | Quote | Chart | News | PowerRating -- Shares of General Motors Corp. erased early gains to fall to a 26-year low amid concerns over liquidity and truck inventories.

Buckingham Research Analyst Joseph Amaturo cut his stock price target to $10 from $13, and reiterated his underperform rating, saying production declines are likely to widen loss expectations and accelerate the drain on liquidity.

GM's stock, a component of the Dow industrials, shed 0.6% to $16.02, and has now lost 31% since the end of April. It hit a low of $15.76 earlier in the session, the lowest price seen since August 1982.

Amaturo said he now expects a 2008 loss of $6.53 a share and a 2009 loss of $7.73 a share, wider than his previous forecasts of a 2008 loss of $4.57 a share and a 2009 loss of $6.14 a share.

He also said the automaker's cash and equivalents balance is expected to fall below $20 billion by the end of the second quarter, and raised his 2009 cash burn projection to $17 billion from $14 billion.

"We believe it is becoming evermore likely that GM's current cash dividend could be eliminated or cut as the company likely has to raise capital to remain solvent beyond 2008," Amaturo said in a research note. "We believe management could raise capital as much as $7 billion to $10 billion, which will result in significant dilution for the current equity holder, in our opinion."

Separately, Credit Suisse Analyst Chistopher Ceraso said GM's third-quarter production schedule appears to be "way to aggressive," and could leave trucks about 50% overstocked at the end of September.

Deutsche Bank Analyst Rod Lache expressed concern over the effect of declining residual values, particularly on trucks and SUVs, will have on GMAC's lease portfolio. He said that GMAC may need to write down $990 million in lease assets as a result. Tomi Kilgore tk1

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