GM drops to 53-year low, Goldman urges "sell"

By Kevin Krolicki

DETROIT (Reuters) - Shares of General Motors Corp hit their lowest level since 1955 and dragged down the auto sector on Thursday after Goldman Sachs cut the struggling U.S. industry's largest manufacturer to a "sell" rating and warned it would have to raise capital.

The panicky slide in GM (GM.N: Quote, Profile, Research, Stock Buzz) shares capped a period of growing concern about liquidity risks to U.S. automakers and suppliers from a domestic auto market reeling from record gas prices and the impact of a housing slump and tighter credit.

The Goldman Sachs warning, including the unusual "sell" call on the U.S. auto industry's largest player after a period of sharp stock price declines just ahead of the close of the second quarter, prompted selling across the sector.

GM Chief Executive Rick Wagoner said the embattled automaker had enough liquidity to carry it through the year and had financial flexibility beyond that.

"We've got a very good, solid funding base under any scenario we see, solid through the end of this year," Wagoner told reporters after an economic event hosted by U.S. presidential candidate Barack Obama. "We have a lot of options to fund beyond that."

Chrysler LLC, for its part, denied rumors it was facing a cash crunch or that it had been driven to filing for Chapter 11 bankruptcy. Those rumors had driven down loan prices for the privately held automaker, according to Reuters LPC.

"The rumor is without merit," Chrysler spokesman Dave Elshoff said. "There is no basis for the rumor."

Debt and equity markets were affected by growing concern for the deepening risks for the auto sector. The cost to insure the debt of GM and Ford Motor Co (F.N: Quote, Profile, Research, Stock Buzz) hit records.