GM, Ford shares fall after Morgan Stanley cut

By David Bailey

DETROIT (Reuters) - U.S. automotive shares fell on Thursday, including as much as a 9 percent drop in General Motors Corp (GM.N: Quote, Profile, Research), after Morgan Stanley cut its 2008 U.S. industry sales forecast and said 2009 would be little better.

GM stock fell to its lowest level in nearly two years and Ford Motor Co (F.N: Quote, Profile, Research) to a more than 16-year low after Morgan Stanley cut its earnings per share outlook for GM to a loss for the year from a profit, and widened its forecast full-year loss for Ford Motor Co (F.N: Quote, Profile, Research).

"Our industry view is based on expectations of lukewarm retail demand, weak (product) mix, high raw material prices offset by growing strength in international markets and some progress toward attacking structural issues including overcapacity and legacy costs," Morgan Stanley said in a note to clients.

Morgan Stanley cut its 2008 U.S. auto sales forecast to 15.4 million vehicles, from 15.9 million vehicles, and introduced a 2009 forecast of 15.8 million. Most analysts have expected U.S. auto sales of about 15.5 million in 2008.

Also cut were estimates for Lear Corp (LEA.N: Quote, Profile, Research), Magna International Inc (MGa.TO: Quote, Profile, Research), and Superior Industries (SUP.N: Quote, Profile, Research), suppliers to the U.S.-based carmakers.

The U.S. automotive sector is facing high gasoline prices, sagging consumer confidence and tightening credit markets that are pressuring sales. An unexpected drop in a U.S. retail sales report released on Thursday didn't help, one analyst said.

GM also has had to contend with a strike at major supplier American Axle & Manufacturing Holdings Inc (AXL.N: Quote, Profile, Research) and Delphi Corp's DPHIQ.PK struggle to emerge from bankruptcy.

American Axle and the United Auto Workers union resumed talks on Thursday aimed at resolving the work stoppage that started in late February and has triggered parts shortages and plant closures at GM.