Published: January 03, 2009 07:00 pm      

Brakes gave out in auto sector

NEW YORK (AP) -- For the auto sector -- and many of its stocks -- 2008 was nearly the end of the road.

First came the record-breaking rise of gas prices this summer. Next came the end of leasing. Then, the credit markets froze and consumer confidence plunged. The story reached dramatic heights as the Detroit Three, running out of cash and facing the prospect of bankruptcy, flew off to Congress to beg for a bailout, only to be turned down. Humbled, they made a return trip to Washington -- this time by car -- and the White House grudgingly came through with aid.

Now, gas prices have collapsed, but new car sales remain in free fall as Americans deal with a deep recession and layoffs.

"It's been a year unlike anything most people who follow the industry have seen," said Efraim Levy, auto analyst for Standard & Poor's Equity Research.

GM shares have plunged 84 percent in 2008. That means an investor who bought 100 shares of GM at its 2007 close of $24.89 -- an investment worth $2,489 -- would be left with paper worth just $366 as of Tuesday's close. Ford has fared little better, falling 66 percent.

The Standard & Poor's 500 index shed 39 percent in 2008, while the Dow Jones Total Return index lost 40 percent.

At the U.S. automakers, the losses started to mount. In August, General Motors Corp. posted a $15.5 billion second-quarter loss and followed that up three months later with a loss of $2.5 billion. Ford Motor Co. also said it lost $129 million in the third quarter. Although Chrysler LLC doesn't report earnings, it has issued several warnings about its dire financial shape as well. GM and Chrysler said that without government aid, they might not survive into the new year.

The Bush White House finally approved $17.4 billion in short-term loans for GM and Chrysler in December, stepping in after Congress refused to grant the automakers aid.