Goldman Sachs downgraded General Motors Corp (GM.N) to "sell" from "neutral," and added the stock to its "Americas Sell List," saying the main risks for the automaker included likely equity dilution, dividend cut and cash burn.
GM shares, which have lost 47 percent of their value since the start of the year, were down nearly 8 percent at $11.81 before the bell on Thursday.
Analyst Patrick Archambault, who also cut his ratings on Lear and Tenneco, said he expects GM shares to continue to underperform as market fundamentals deteriorate which exacerbates liquidity concerns.
He cut his 6-month price target on GM stock by $8 to $11.
"We think GM's automotive cash flow burn this year and next is likely to lead it to look to raise capital, which we believe could lead to significant shareholder dilution and/or a cut to the company's dividend," Archambault said.
He downgraded auto parts maker Lear Corp (LEA.N) to "sell" from "neutral," citing its large exposure to Big Three trucks, referring to General Motors Corp (GM.N), Ford Motor Co (F.N) and Chrysler LLC CBS.UL, and rising raw material costs.
The analyst slashed his 6-month price target on Lear stock by $12 to $16. Lear shares closed at $18.12 Wednesday on the New York Stock Exchange.
Archambault also cut his rating on Tenneco Inc (TEN.N) to "neutral" from "buy," and price target to $18 from $29. He removed the stock from the "Americas Buy List."
Tenneco's shares are expected to remain under pressure as the company is likely to post weak second-quarter results, he said. However, the analyst believes this would be a better buying opportunity as he sees the company as a core long-term holding with strong earnings and growth prospects.
He also cut his price target on "neutral"-rated Ford Motor Co (F.N) to $5 from $8. Ford shares were down almost 4 percent at $5.04 in early trade.
(Reporting by Eric Yep and Dilipp S. Nag in Bangalore; Editing by Himani Sarkar)
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