General Motors drove the Dow Jones industrial average to its lowest level in four months today after warnings that GM itself could be pushed into bankruptcy by the financial problems of auto parts maker Delphi Automotive, which filed for protection from its creditors during the weekend.
GM used to own Delphi. When it sold the business in 1999, GM promised to cover Delphi's pension and health cares costs if the company could not make good on the costly benefits enjoyed by all GM workers.
Honoring that guarantee could cost GM as much as $11 billion. Even if GM does not have to take over Delphi's perquisite costs, it will still have to spend millions helping its offspring through the financial restructuring process.
The threat prompted credit rating agencies to cut GM's bond ratings, which already were at the level of "junk bonds" to an even lower junk rating.
One analyst boosted his estimate of the prospects of GM going into bankruptcy from 10 percent to 30 percent.
The auto giant's stock dropped almost 10 percent, falling $2.81 a share to $25.48 -- its lowest in 15 years.
Twenty of the 30 Dow stocks closed lower as the blue chip index dropped another 54 points to 10,238.76 -- its lowest level since mid-May. The Standard & Poor's 500 stock index also retreated to where it stood in May, falling nearly nine points to 1,187.33. The Nasdaq Stock Market composite index slid 11 points to 2,078.92
Today was Wall Street's fifth loss in six days, digging the markets deeper into the hole. So far this year, the S&P has lost 2 percent; the Nasdaq, 4 percent; and the Dow, 5 percent.
Traders are hoping that when third-quarter earnings reports begin flowing later this week, investors will get enough good news to turn around the slumping stock market.