GM bankruptcy would be a shake-up to the Dow
Published 8:47 pm Wednesday, May 27, 2009
NEW YORK — A bankruptcy filing by General Motors Corp. would not only send one of America’s most storied automakers into further upheaval, it would also force a shake-up in the Dow Jones industrial average.
Once a company files for bankruptcy protection, it is disqualified from being one of the 30 Dow components, said John Prestbo, editor and executive director of Dow Jones Indexes.
As for a replacement, that decision rests with the managing editor of The Wall Street Journal, Robert Thomson.
While editors are always reviewing the components that comprise the Dow, Prestbo said “I think it would be fair to say we’re aware of GM’s situation and taking steps accordingly.”
GM, which was added to the Dow Jones industrials in 1925, has been hammered as the economy worsened and new car sales plummeted. Shares of GM have lost 55 percent of their value since the beginning of the year and 97 percent since they reached a multiyear high in October 2007.
GM’s replacement wouldn’t have to be another automaker or even another manufacturing or industrial company. There are no hard rules as to which companies make up the index. The main goal is to try and duplicate in the Dow the weights of all market sectors excluding utilities and transportation companies, which have their own indexes.
GM is also a component of the S&P 500, so a company chosen to replace it in that index could see a blip up in trading when funds that track the S&P 500 buy its shares.
