Investors reacted to Tuesday’s upbeat 2006 forecasts from Honda and Toyota by driving GM’s share price down 5 percent, to an 18-year low.

The bullish forecasts from the Japanese automakers stand in stark contrast to GM’s slumping sales and its plans to reduce manufacturing capacity.

Reuters reports analysts as expecting Toyota to overtake GM as the world’s largest automaker by the end of 2006, a position GM has held for 70 years.

While the knee-jerk reaction of investors to Toyota’s forecast is no suprise, more worrisome is GM’s financial situation going forward. With sales of its most profitable vehicles (trucks and large SUVs) in a major slump, and with its increasing involvement in the Delphi fiasco certain to cost GM (more) money to keep Delphi’s doors open, 2006 is shaping up to be a costly year. Meanwhile, even its efforts to sell a majority share of its GMAC financial unit (a major profit center for GM) seem to have stalled, with analysts not expecting any action on that front until next year.


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