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GM stock loses 21.6% after analysts say federal aid will dilute shares

NEW YORK — Washington's emergency loan program won't provide much of a lifeline for holders of General Motors Corp. shares, Wall Street analysts said.

The bearish reports, which warned that the measures called for in the loan program would severely dilute existing GM shares, sent GM's stock sharply lower. A negative outlook from Toyota Motor Corp. added to the pessimistic view of automakers Monday.

Buckingham Research auto analyst Joseph Amaturo said the $17.4 billion loan program approved by the White House is likely to diminish the value of GM stock in the long term as the company restructures and the government takes a stake.

Amaturo reiterated his $1 price target on GM. That implies an expected 72 percent drop in value from GM's Monday close of $3.52.

GM and Chrysler LLC have three months to develop plans to restructure into viable companies. The value of GM shares are likely to be diluted as the government takes an equity stake and debt is converted to equity. Those steps, outlined in the loan program, would boost the pool of outstanding shares, Amaturo said.

Credit Suisse auto analyst Chris Ceraso said the restructuring demanded of GM "will require the complete and/or near-complete elimination of existing GM equity."

He cut his rating on GM from "neutral" to "underperform."

The bailout, announced by the White House on Friday, requires GM and Chrysler to achieve "viability" by March 31. The loans may be called back if the government determines the automakers haven't met that goal. Shares of GM plunged 97 cents, or 21.6 percent, to close at $3.52 Monday.

Ford did not lobby for government help, saying it had access to enough cash to survive the industry downturn. Still, its shares lost 36 cents, or 12.2 percent, to end at $2.59.

U.S.-traded shares of foreign auto makers also declined. Shares of Toyota lost $3.50, or 5.4 percent, to $60.88.

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