Dow Jones stays loyal to GM even as stock crumbles

By Robert MacMillan - Analysis

NEW YORK (Reuters) - General Motors Corp's survival is in doubt, sales have shrunk and its stock has sunk to levels not seen since the Second World War. Yet the automaker retains its status as one of the powerhouses in the best-known measurement of U.S. stocks, the Dow Jones Industrial Average.

Its market capitalisation as of Thursday is $1.8 billion (1.2 billion pounds), making it by far the smallest Dow member. Even on a day when the index surged 7 percent, GM GM.N was one of only two of its 30 components to lose ground, dropping 4.2 percent.

The next smallest, Alcoa (AA.N), is worth $8.9 billion. Exxon Mobil (XOM.N), the biggest, weighs in at $383.6 billion.

But after 83 consecutive years on the average, there is no sign that News Corp's NWSa.N Dow Jones & Co, which runs the benchmark, has lost faith in General Motors. Indeed, GM was named to a new Dow Jones world index this week.

Dow Jones tries to keep changes to the member roster to a minimum, said John Prestbo, editor and executive director of Dow Jones Indexes. "We think that it not only makes for a better index, but it increases the trust level that people have for the industrial average," he said.

Dow Jones would push out GM if it went bankrupt, or, like insurer American International Group (AIG.N), most of it ended up being owned by the U.S. government in a bailout, he said.

Relevance to the economy -- and to U.S. society -- is at the heart of what lands a company on the 112-year-old Dow.

Unlike the big U.S. stock markets, there are no minimum stock price or market cap requirements, though the large corporations populating it usually sport robust financials.