Credit Suisse cuts estimates and target on General Motors (GM) after the auto giant chopped 2H08 truck output by 170,000 units:
At 170,000 trucks less 47k cars/crossovers, we estimate the 2008 earnings hit to be about $2.20/share, bringing our full-year 2008 loss to $6.98 per share from $4.80/share.
The incremental cash burn should be in the range of $1.5 to $2.0 billion. Our 2009 and 2010 estimates already reflect the scheduled closure of 4 truck plants – the same facilities that are facing increased downtime in 2H08; thus, our estimates are unchanged at a loss of $2.21 for 2009 and a profit of $3.06 for 2010.
When we published our inventory piece in early June, we noted that an incremental $2b of 2008 cash burn would be worth about $3.00 per share on the GM stock. That was at $16, the stock is now under $13, so we would say that the capacity action has largely been worked out by the market.
CS feels that despite the drop in price, it’s still too early to buy GM and is mainting a Neutral rating. Target drops from $18 to $14.
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