Fears for future of US giants as crisis spreads

And on Wall Street fears have re-emerged over the future of another titan of the US economy, the investment bank Morgan Stanley.

Fears that the financial crisis is spreading far from Wall Street last night saw shares in GM — which trades in the UK as Vauxhall — slump 33%, a 50-year low in the stock.

The shares closed at $4.76, little more than a tenth of where they were a year ago.

While a slump in sales of GM's cars and trucks is wrecking confidence in the future of the firm, far worse is the company's liquidity crisis and the latest downgrades by the credit-rating agencies of its debt mountain.

Standard & Poor's has placed GM's debt deep into junk-rated territory and some of the carmaker's bonds are trading at not much more than a third of their par value.

Last month GM said it would be going right up to the limit of its $4.5 billion (£2.6 billion) bank credit facilities to pay off a $750 million bond which comes due next week and settle other commitments totalling $1.5 billion.

It comes at a time when the company is reckoned to be burning through $1 billion in cash a month as a result of the US economic crisis which is hobbling it and its two great rivals Ford and Chrysler.

Last months sales by the big three crashed 26%.

In Europe, GM has already ordered a production cut of 40,000 vehicles and a temporary shutdown of its factory in Luton.

On Wall Street, the fear of failure is also stalking Morgan Stanley.

Egan Jones, an independent ratings agency that was the first to predict that Enron and WorldCom would go bust, is now raising questions about the health of the giant bank.

Egan Jones says that Morgan needs $30 billion of fresh equity to "address its funding concerns".

After last night's sell-off, Morgan shares are 50% below the $25 at which Japan's biggest bank Mitsubishi agreed to make a $9 billion investment.

The investment is supposed to go through next Tuesday, but there are fears Mitsubishi may now rethink.

In a filing to the Securities & Exchange Commission yesterday, Morgan admitted if it can't access the debt markets in the near future it may have to seek another capital injection.

Last night Moody's weighed in on the bank. The ratings agency said in a statement it had "placed the long-term debt ratings of Morgan Stanley...on review for downgrade".

Morgan shares fell 26% yesterday.

There are also suggestions the finance arm of General Electric may be in need of an overhaul.

GE has assets across the globe that make it by some measures the world's biggest company.

Its financial arm, GE Capital, has so far avoided the credit crunch and has managed to fund its operations comfortably.

But around a third of its $695 billion of assets are financed through short-term borrowing.

If the crisis worsened, GE may be forced to sell assets on the cheap to fund the banking business.