Reuters GM bankruptcy fears drag down auto stocks

FRANKFURT/SHANGHAI (Reuters) - General Motors stock fell sharply in Frankfurt on Tuesday on renewed bankruptcy fears, weighing on autos stocks across the region, as peer Chrysler pinned its hopes on a tie-up with Fiat.

Abu Dhabi's government-linked investment fund Aabar, a leading GM investor, on Friday ruled out buying more shares in Daimler or a stake in GM's Opel unit.

This was followed on Sunday by a report in the New York Times that the U.S. Treasury Department was directing GM to lay the groundwork for a bankruptcy filing should it fail to agree debt-for-equity deals with stakeholders by the deadline set by the Obama administration two weeks ago.

The news sent GM stock down 17 percent in early Frankfurt trade after a 16 percent fall in U.S. trade on Monday.

By 1111 GMT (7:11 a.m. EDT), the stock had recovered slightly to trade down 10.39 percent, against a 2.34 percent gain in the wider DJ Stoxx European Autos index.

Asian stocks also suffered on fears of a GM bankruptcy. Japan's Nikkei average fell 0.9 percent as worries spurred investors to lock in profits on auto shares. more...