GM, Ford stock extend slide on dimming outlook

By Soyoung Kim

DETROIT (Reuters) - Shares of General Motors Corp (GM.N) slumped to a 27-year low, while smaller rival Ford Motor Co (F.N) hit a new six-week low on Tuesday as analysts warned the U.S. auto market could remain weak well into 2009.

Citigroup cut GM shares to "hold" from "buy" and lowered its outlook for industrywide sales in the United States, the world's largest vehicle market, for both 2008 and 2009. The bank also cut its target price for GM shares to $21 from $32 and lowered Ford's stock price target to $7 from $8.50.

Citigroup analyst Itay Michaeli said the surge in gas prices, credit constraints and the costly shift by consumers away from higher-margin trucks, a segment that Detroit automakers have dominated, made it a "new world" for the carmakers and their suppliers.

"Auto fundamentals are poised to deteriorate beyond 2008," Michaeli said in a note to clients.

Michaeli cut his forecast for 2008 U.S. light vehicle sales to 14.95 million units from 15.4 million, and estimated 2009 vehicle sales of 15.4 million units, down from a previous projection of 15.7 million units.

Automakers, including GM and Ford, have lowered expectations for U.S. auto sales this year to near 15 million units, but they have also held out hopes for a recovery next year.

U.S. light vehicle sales for 2007 were near 16.15 million units, and most industry analysts expected only a slight decline this year.

But investor concerns over the U.S. auto market have been heightened since Ford warned last week that it no longer expected to turn a profit next year.