Where Wall Street meets Main Street

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In an ongoing bid to remain solvent, the Big Three carmakers, along with the head of the United Auto Workers union, met with House Speaker Nancy Pelosi (D-San Francisco) today to discuss new ways of squeezing more taxpayer dollars Detroit’s way.

The world’s investors are unimpressed.

Shares of General Motors Corp. and Ford Motor Co. are down once again, in a sign that the markets may be losing faith in the automakers’ chances of getting a slice of the bailout pie. And with both expected to release third-quarter earnings reports Friday reflecting sizable, if not huge, operating losses, Wall Street may be preparing itself for bad news.

In the first half-hour of trading today, GM fell nearly 10%, then before lunch, it dropped another 7%, to $4.61 a share. By that time, Ford was down 10%, to $1.87 per share. A midafternoon surge helped a bit, but when the dust had settled and trading stopped, Ford was down 5%, to $1.98, and GM was off 13.7%, to $4.80, near its 52-week low.

While neither reached recent intraday (and near historic) lows for the companies ($4 for GM and $1.80 for Ford), the action seemed to indicate that, despite all the rumors about a GM-Chrysler merger, the selling of Ford assets, and continuing cost-cutting at the automakers, optimism doesn’t exactly abound on the Street.

Terrible earnings from GM’s 49%-owned lending arm, GMAC, on Wednesday certainly aren’t a boon to shareholder value. The lender posted a $2.52-billion third-quarter loss.

Also not helping: Toyota Motor Corp. Toyota may be Detroit’s arch-rival on Main Street, but on Wall Street, everybody shares in the misery. This morning, Toyota announced shrunken profits for the most recent quarter and reduced its revenue and earnings forecasts for the fiscal year ending in March.

On the quarter, Toyota’s earnings slipped to 139.8 billion yen ($1.4 billion), a 69% decline from a year earlier, and revenue dropped 8%, to 5.98 trillion yen ($60 billion). Toyota forecast earnings of $5.5 billion for the fiscal year, less than half its original projection of $12.6 billion. As a result, Toyota’s shares fell $13.28, to $67.09, a 16.5% decline.

All in all, automaker stocks look terrible, worldwide. Every major publicly traded carmaker was down today, with Honda slipping almost as much as Toyota. And in the medium term, it’s not any prettier. A chart of six major carmakers: Toyota, GM, Ford, Honda Motor Co., Nissan Motor Co. and Daimler AG, shows that the best performing among them -- Toyota -- is down nearly 10% in the last two months. Honda is down over 20%, Nissan and Daimler over 30%, GM over 40% and Ford is in the rear, down over 50%.

Just be glad your 401(k) isn’t loaded down with companies that make car parts. A quick look at six leading suppliers to the industry paint a grim picture. Since Sept. 5, powertrain and turbocharger maker BorgWarner Inc., along with jack-of-all-trades suppliers Magna Intl. and Johnson Controls Inc., are all down around 40% -- and that makes them relative shining lights in the sector. Battery maker Exide Technologies is down nearly 60%, axle-and-driveshaft specialist Dana Corp. around 70%, while Visteon Corp. and Lear Corp. have both lost more than 80% of their value in just two months.

Some suggest that suppliers may have a larger upside than carmakers, because they too will likely have a crack at the $25 billion in government-backed loans coming out soon. Then again, because suppliers catch pneumonia every time carmakers sneeze, to butcher a common refrain, their future may not be so bright.

In a speech on Wednesday to the Original Equipment Suppliers Assn., a parts-maker group, in Detroit, Troy Clarke, president of GM North America, made it clear that the company expected its suppliers to play nice.

‘Suppliers who want to work with GM need to understand our footprint and our areas of growth,’ Clarke said. ‘They need to be staffed appropriately to handle that business, and they need to understand what consumers want and help automakers get ahead of the curve. And they need to be ready to change direction as market forces demand.’

--Ken Bensinger