) to hold from buy.
Analyst Saul Rubin says his downgrade was based on pension concerns. Rubin notes the company's balance sheet weakness is resulting from U.S. pension liabilities, which he says is becoming impossible to ignore. Rubin says GM's pension fund poses two risks: mandatory funding requirements, and a hit to earnings, which he says is to be expected.
With the S&P 500 Index down 20% year to date, Rubin says it seems likely that GM will need a large, equity-linked issue at some point in the coming years. He says while GM's business is on track, the company's pension risk leaves him making adjustments to his assessment of GM's near term and long term earnings power.
Rubin is keeping his $5.90 2002 EPS estimate, and cutting his $6.50 2003 estimate to $4.60, as well as trimming his $70 target to $50.