Auto stocks rise sharply following GM cuts

Shares of GM surged $1.64, or 16.7 percent, to close at $11.48. Ford shares gained 84 cents, or 18.1 percent, to $5.49.

"GM is a name where there has been a lot of potential buyers sitting on the sidelines," Calyon Securities analyst Mark Warnsman said in an interview. "It's a tough stock to get in front of, and perhaps yesterday's announcement gave folks hope that perhaps we've hit bottom."

GM announced it was cutting white-collar job costs in the U.S. and Canada by more than 20 percent, shedding thousands more factory jobs by cutting truck production even further, and suspending its $1 per share annual dividend for the first time in 86 years.

The moves come during a desperate time for GM as it struggles with a weak economy, record-high gas prices and an unprecedented shift in demand away from its traditionally popular trucks and sport utility vehicles.

GM shares have lost nearly two-thirds of their value since the start of the year and have declined more than 75 percent from a 52-week high of $43.20 in October.

GM said it hopes the latest cuts save $15 billion through 2009. It said if its latest predictions hold true, it should have enough cash to sustain itself at least through 2010.

Immediately after Tuesday's news, GM shares plunged to $8.81, their lowest level since June 23, 1954, according to the Center for Research in Security Prices at the University of Chicago. The price is adjusted for splits and other changes. But the shares rebounded later in the day and closed at $9.84, up nearly 5 percent.

GM's shares continued that rally Wednesday, driven by momentum from Tuesday's announcements and strong gains across the broader market.

"It's two days of about the same (gain) ... in relation to the market," Warnsman said. Although GM shares rose Tuesday, he said, they were tempered by losses in the broader market. On Wednesday, however, stocks were generally higher, with the Dow Jones industrials and the Standard & Poor's 500 index up about 2 percent.