This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

GM Falls to 13-Year Low

Updated from 3:24 p.m. EST

General Motors (GM) stunned the stock market Wednesday with an ominous profit warning, leading to speculation that the auto giant will be forced into a restructuring that could permanently alter the face of one of America's most enduring symbols of industry.

Cutting its 2005 earnings outlook by more than half, the No. 1 automaker expects to lose $1.50 a share in the first quarter and earn just $1 to $2 a share for all of 2005. The company had previously predicted a break-even first quarter and earnings of $4 to $5 a share for 2005.

The warning led Fitch to cut its rating of GM and GMAC's corporate debt to triple-B-negative, its lowest investment grade level.

"Even though they had planned for some weakness early in the year, their business has been significantly weaker than expected," said Morningstar analyst Phil Guziec. "They've got huge operating leverage, so that crushes earnings."

GM's stock closed down $4.71, or 14%, to $29.01, falling through its 52-week low of $33.69 and setting a 13-year closing low. The Dow Jones Industrial Average, meanwhile, lost 113 points Wednesday.

GM has been a virtual spigot of bad news so far this year. Sales faltered in February, as the company announced it was cutting back on production. That followed a previous slash in earnings guidance for the year. Now, with the broader economic recovery gaining strength and foreign auto manufacturers rapidly stealing market share, an even deeper cut in guidance has prompted analysts to ponder significant changes in strategy at GM that could jeopardize its leadership position in the worldwide auto market.

Having once laid claim to more than 50% of the U.S. market, GM now has just about half that, and its shares are still in decline. A boom in demand for sport utility vehicles and trucks in the 1990s silenced widespread predictions from the previous decade that Japanese automakers, like Toyota (TM) and Nissan (NSANY), would overtake their American counterparts. But with oil prices topping $55 a barrel and lighter vehicles coming back into fashion, the specter of a change in leadership has been raised again.

1 of 3

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,356.87 +288.00 1.69%
S&P 500 2,012.89 +40.15 2.04%
NASDAQ 4,644.3120 +96.4780 2.12%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs