Investors Hammer Auto Stocks

With gas prices up and U.S. auto sales down, investors are hammering auto stocks, especially the Detroit Three brands.

Ford, General Motors and Daimler, which still owns 20 percent of Chrysler, all hit 52-week lows on June 27.

The bad news is expected to continue July 1, when automakers report June sales. According to published reports, J.D. Power and Associates and edmunds.com both expect June sales to drop more than 25 percent from the year-ago month for each of the Detroit Three.

"Our autos coverage universe has declined significantly, but we think there is more to go," said Patrick Archambault, an analyst for Goldman Sachs, in a June 26 note downgrading GM from a "Neutral" rating to "Sell."

The analyst cited three main short-term concerns: lower June sales, lower second-quarter earnings, and the likelihood of big losses on the residual values of off-lease trucks. Resale values of used pickups and SUVs have plunged, along with new-vehicle demand for big, gas-thirsty trucks.

In retrospect, billionaire investor Kirk Kerkorian's recent tender offer for 1 billion shares of Ford stock at $8.50 per share is looking more generous than ever. The shares closed at $6.36 on June 9, the day the offer closed. Since then, Ford shares fell to $4.90 on June 27. That's just over half the 52-week high of $9.64 on July 2, 2007.

Rival GM has fallen 66.4 percent in the last 52 weeks, to $11.21 on June 27. GM's 52-week high was $43.20 last Oct. 12. Daimler shares hit $62.19 on June 27, versus a 52-week high of $111.64 last Oct. 25.