Fourth-largest bankruptcy in US history. The second among the Detroit Big Three to fall after Chrysler filed for Chapter 11 bankruptcy in Apr 09, General Motors (GM) announced that it would take the same route yesterday as part of the Obama administration's plan to shrink the automaker to a sustainable size and give a 60% ownership stake to the federal government. The company is reported to have US$172.8b in debt and US$82.3b in assets.

Minimal impact to Armstrong. While GM is a customer of Armstrong, our checks reveal that the former only accounts for around 1.5% of Armstrong’s Automotive revenue through GM Shanghai (For the record, Armstrong major customers are Seagate, Western Digital, Daikin, Mitsubishi Electric, Sony, etc). We therefore believe that any negative impact on Armstrong pertaining to GM filing for Chapter 11 would be inconsequential. Moreover, while there is still no official statement as to whether GM Shanghai will be shut down, we believe that the likelihood is very low as we understand that GM’s operations in Shanghai have been profitable. Also, GM Shanghai enjoys the strong backing of China’s biggest domestic automaker Shanghai Automotive Industry Corp which has a 50% stake in this joint venture.

Valuation. Given the limited impact, our earnings forecasts remain unchanged. With a palatable dividend yield of 5%, we maintain NEUTRAL with target price of S$0.18 assuming Armstrong trades down to its 5-yr historical average of 11.0x P/E.