General Motors Corp. received another dose of bad news Wednesday when Deutsche Bank advised shareholders to sell the stock because of continued uncertainty over the company's financial future.
The world's largest automaker on Tuesday outlined a plan to cut white-collar pension and health-care expenses, slash its dividend and trim executive salaries as part of its latest bid to avert bankruptcy. However, the cuts did not get a strong endorsement from Wall Street analysts.
Rod Lache, an analyst with Deutsche Bank, issued a rare "Sell" rating and lowered his price target on GM shares to $17 from $22.
"We continue to be disappointed by the limited cash savings targeted by current restructuring efforts," Lache said in a report. "Our concerns go beyond the ongoing market share erosion, uncertainty over the GMAC sale, and uncertainty over (parts supplier) Delphi."
GM said the cut in its dividend alone will reduce GM's yearly cash payout by about $565 million. Cash savings from the health-care changes will grow to about $200 million within five years.
However, analysts continue to be concerned about the progress of GM's attempt to sell a majority stake in financing arm General Motors Acceptance Corp. There is also continued uncertainty on the restructuring of former parts division Delphi Corp., which filed for bankruptcy protection in the fall.
Lache said the latest round of cuts is seen as a way for GM to come back and ask union workers for more concessions. He said there appears to "be an ever increasing probability of confrontation with the United Auto Workers." UAW President Ron Gettelfinger said the cuts won't lead to future concessions.
In a related development, the Detroit Free Press said union workers at GM and Ford Motor Co. will not be getting profit-sharing checks for the first time in four years.
In its 2005 earnings, Ford did not meet the targets necessary for profit-sharing, company spokeswoman Marcey Evans told the newspaper. GM also did not do well enough to issue any profit-sharing checks, spokesman Jerry Dubrowski said.
Ford made $2 billion in profits last year, a decline of more than 40 percent from 2004. GM lost $8.6 billion in 2005.
Union employees at DaimlerChrysler AG's Chrysler Group are expected to receive profit-sharing checks, though company officials will not comment until full-year earnings are reported next week.
Last year, profit-sharing checks at Ford and GM averaged $600 and $195, respectively. Chrysler Group workers got an average of $1,500.
That was down from the 1990s, when the bonuses reached $5,000 or more some years.
