UPDATE 1-GM shares fall to 18-year low on Toyota forecast
(Adds analyst comment, background, byline)
By Jui Chakravorty
DETROIT, Dec 20 (Reuters) - Shares of General Motors Corp.
fell to an 18-year low on Tuesday after Toyota Motor
Corp. <7203.T> unveiled production plans for 2006,
increasing fears that GM will be toppled by its Japanese rival
as the world's largest automaker.
Toyota said it plans to make a record 9.06 million cars in
2006, just shy of the 9.15 million cars and trucks that some
analysts expect GM to build next year.
Shares of GM were down 76 cents, or 3.6 percent, at $20.29
on the New York Stock Exchange. The stock fell more than 5
percent to $19.63 earlier in the day -- its lowest point since
1987, after being adjusted for its spin-off of Delphi Corp.
in 1999.
Shares have plunged nearly 50 percent this year.
GM does not provide sales or production forecasts on an
annual basis, but some analysts said the current trend points
to GM's inevitable tumble to second place for the first time in
70 years.
"Toyota will probably be the largest producer in the world
at the end of 2006," said Richard Hilgert, auto analyst at
Fitch Ratings, citing GM's slumping sales of large sport
utility vehicles in the fuel-conscious market.
Burnham Securities analyst David Healy expects GM to
produce 9.15 million vehicles in 2006, and expects Toyota to
surpass GM as the world's largest automaker in 2007.
Toyota's production increase of 10 percent comes at a time
when GM is shrinking capacity by slashing 30,000 jobs and
closing 12 facilities in North America.
The automaker has lost nearly $4 billion this year as it
struggles with high health-care and commodities costs, loss of
U.S. market share to foreign rivals and sinking sales of large
SUVs, its long-time profit generators.
"Investors are reacting to the Toyota figures," Argus
Research analyst Kevin Tynan said. "Although it shouldn't be
any great surprise. ... We've been saying for a while that at
the current pace, Toyota will surpass GM next year."
Tynan said at current gas prices the Japanese automaker
would overtake GM by the end of 2006.
Tynan also said many investors may be cutting losses at the
end of year to offset gains made in 2005.
To make matters worse at GM, a strike at bankrupt Delphi
could shut down plants and force the automaker to burn through
billions of dollars a week, analysts say.
GM is said to be considering offering Delphi workers buyout
packages, which would add to the automaker's obligation of up
to $12 billion to former employees who were sent to Delphi
after the spin-off.
But analysts say they would rather see GM pay for buyouts
instead of facing a strike.
As part of its broader restructuring efforts, GM also
negotiated a deal with its union that would save it $1 billion
a year in health-care costs.
Analysts have said the cost-cutting efforts are not enough
to turn things around at the auto giant until it starts
regaining market share.
GM has also said it plans to sell a controlling stake in
its General Motors Acceptance Corp. finance arm to restore
investment-grade rating to the unit. But analysts have said a
sale is not imminent.
"GMAC is definitely not going to be sold in 2005. So
there's certainly going to be no news headline pop into the
rest of this year. That's another reason investors are
selling."
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