General Motors Corp stock plummeted more than 22 per cent to a 76-year low on Tuesday, a day after GM's top executives dumped their shares as the automaker headed toward a bankruptcy or a restructuring that would wipe out existing shareholders.
Former GM vice chairman and product chief Bob Lutz along with five others said they sold almost $315,000 in stock and liquidated their direct holdings in the ailing automaker. The other executives who liquidated stock include Lutz's successor, Thomas Stephens, North America president Troy Clarke, manufacturing chine Gary Cowger, head of European operations Carl-Peter Forster and GM's chief information officer Ralph Szygenda
The company's shares were hammered down 22 per cent or 31 cents, at $1.13 on the New York Stock Exchange on Tuesday. Earlier the stock had sunk to as low as $1.09, a price not seen since the Great Depression in 1933.
The stock sale highlights the pressure on GM which has less than three weeks left to strike deals with major union and bondholders to avoid bankruptcy.
GM could end up either facing a bankruptcy filing by a government-imposed deadline of 1June, or an out-of-court restructuring that would flood the market with new shares to pay off creditors.
According to the company its stock could be worthless in a bankruptcy or worth less than 2 cents a share if it proceeded with plans to issue shares to creditors led by the US Treasury Department.
Analysts point out that it was a lose-lose situation and though the company is holding out some hope for recovery for GM shareholder there was no real positive outlook.
A GM spokeswoman admitted there were some pretty stark choices for investors. If the company were to strike a deal it would issue billions of new shares to banks, unions and government in order to cancel debt with would dilute the current stock and if it failed to strike an agreement, shareholders would rank as unsecured creditors in bankruptcy courts and could end up getting nothing.
Meanwhile the US treasury has been keeping GM afloat with a $15.4 billion in emergency loans.
For many of GM white-collar staff, the company's troubles have seem their career's worth of savings in company stock simply evaporate before their eyes. For instance the stock the six executives off-loaded could have fetched $8.6 million between them had they sold their shares in October 2007.
Detroit's public figures have rallied round the car industry. The musician Eminem has announced that he will fly 200 laid-off car workers from Michigan to Los Angeles for the recording of a live performance on Friday.
Dave Bing, Detroit's newly elected mayor has refused to move into an official riverside residence, Manoogian Mansion to express solidarity with citizens hit by the developments in the auto industry. The luxury residence comes with a $150, 000 a year maintenance price tag.
According to analysts the market sentiment was expecting a bankruptcy to be declared in the weeks ahead.
GM chief executive, Fritz Henderson, said this week that bankruptcy looked more probable than previously thought. In regulatory filings after Monday NYSE trading, the company disclosed that the executives sold their shares.