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GM could be takeover target

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DETROIT - General Motors Corp. is unraveling - fast.

Its stock price plunged to a 13-year low on Thursday after the latest in a string of financial problems dismayed shareholders once again. The stock rose 97 cents on Friday to close at $24.48 on the New York Stock Exchange.

Wall Street experts say the unthinkable is more likely than ever: The world's largest automaker could be bought by a corporate raider like Las Vegas billionaire Kirk Kerkorian, forced to file for bankruptcy or both.

Getting GM out of bankruptcy could require the same drastic cost-cutting that is wracking Delphi Corp., its largest parts supplier, right now.

Lower wages, less generous benefits and fewer jobs would not only be devastating for the automaker's 142,000 U.S. employees. It would hurt everyone who makes parts for GM cars and trucks, sells furniture and homes to GM workers or treats their children for the flu.

But the facts are unavoidable: You can now buy every single share of GM stock for about $13.5 billion, or about $3.5 billion less than last spring.

Experts say a buyer like Kerkorian could sell GMAC (the division that loans money for everything from cars and homes to Manhattan skyscrapers) for about $12 billion, take GM's $19 billion in cash and stock, put the automaking business into bankruptcy and walk away with an astounding profit.

In the world of high finance, $13 billion is not a large amount. Remember that Kerkorian was willing to pay $22.8 billion for Chrysler Corp. when he launched his unsuccessful takeover attempt of that carmaker in 1995.

There is a growing sense that GM chairman and chief executive officer Rick Wagoner, as well as the company, is running out of time.

Might GM declare bankruptcy, like Delphi Corp.?

"We think it is inevitable," Bank of America said of a GM bankruptcy in a note to investors on Thursday. Bank of America raised its odds that GM would declare bankruptcy over the next two years to 40 percent.

GM executives say bankruptcy is not an option. But the decision by automotive supplier Delphi to declare bankruptcy on Oct. 8 makes it a very real possibility.

With $469 billion in assets, including the value of everything from cash to buildings, cars and brand names, a GM bankruptcy would be by far the largest ever.

GM can recover from its problems by building gotta- have cars and trucks, most experts agree.

GM's new full-size sport- utility vehicles and pickup trucks will go on sale next year. Falling gas prices could help sales of the trucks, which are a critical part of GM's efforts to return to profitability next year.

Wagoner said GM will announce by year end a plan to close more U.S. plants and cut 25,000 hourly jobs by the end of 2008 in an effort to cut billions of dollars in costs. Some industry experts say GM should eliminate one or two of its eight brands such as Pontiac or Buick.

GM also is trying to sell off a majority of its financial services company GMAC, which could raise about $15 billion and help it through its rough period.

Meanwhile, billionaire investor Kirk Kerkorian has spent about $1.6 billion to buy 56 million, or 10 percent, of GM's shares this year, and he may buy more. The Las Vegas casino mogul paid about $30 for each GM share, and the price is getting cheaper.

In August, Kerkorian said he may want one or more seats on GM's board of directors, the first time he's indicated he wants a voice in the automaker's business.

Another scenario has Wagoner and senior executives losing their jobs.

GM management could be held accountable for the accounting errors revealed on Wednesday, Bank of America said. The errors will require the company to restate its 2001 earnings. The accounting problems are just the latest misstep by Wagoner - the chairman since May 2003 and chief executive since June 2000 - and his team.

GM has lost $3.8 billion, or $6.74 per share, through the first nine months this year. GM's strategy of linking up with foreign automakers has been marked by some big failures. GM paid $2 billion to Italy's Fiat in February so it wouldn't have to buy its struggling automotive division. Last month, GM sold off its 20 percent stake in Fuji Heavy Industries, the parent of automaker Subaru, for a loss of about $788 million.

The agreement with the UAW to make retirees pay more for health care may not put a dent in GM's long-term problems. GM faces a list of difficulties, such as eroding auto sales, too many plants to build them and getting hot products to market, all at the same time it deals with federal investigations into accounting methods.


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