(Includes additional detail, including how much of Citi the government will own, in paragraphs 4, 7-10; updates stock prices.)
DOW JONES NEWSWIRES
General Motors Corp. (GM) and Citigroup Inc. (C) will be
replaced in the Dow Jones Industrial Average by Cisco Systems Inc.
(CSCO) and Travelers Cos. (TRV), respectively.
GM filed for bankruptcy Monday as part of a government-aided
restructuring effort. Bankruptcy is an automatic disqualifier for
membership in the benchmark stock index.
Citigroup is being removed as "the bank is in the midst of a
substantial restructuring which will see the government with a
large and ongoing stake," said Dow Jones Editor in Chief Robert
Thomson. "We genuinely hope that once the bank has refashioned
itself that we will again be able to consider it for inclusion.
Citigroup is a renowned institution, not only in this country, but
around the world."
After completion of another round of government aid, the
goverment will hold slightly more than one-third of Citi.
Travelers' replacement of Citi in the DJIA comes seven years
after the company was spun off from Citi.
The component changes will be effective June 8.
The swap comes nine months after Kraft Foods Inc. (KFT) replaced
the ailing American International Group Inc. (AIG) as the latter
company agreed to take an $85 billion aid package that has since
doubled in size. Historically, it can be years between component
changes.
There had been speculation of who would replace GM, a DJIA
member since 1923, as the company's bankruptcy likelihood mounted
in recent months. Because of the stock's plunge to below $1, GM
makes up just 0.1% of the overall DJIA weighting. Citi's figure is
0.35%.
Among the talked-about possible replacements for GM was now
larger rival Toyota Motor Corp. (TM), which would have been the
index's first non-U.S.-based company. The editors who select the
DJIA's members have generally picked companies from similar sectors
to replace those that are leaving the index. But the editors
strayed from that practice in swapping Kraft for AIG.
Market veterans had also lamented a lack of technology companies
in the index, with Cisco or Apple Inc. (AAPL) seen as logical
choices to fill that void.
Citi shares were recently up a penny at $3.73, trailing a
broader market rally. Cisco and Travelers rose 3.3% to $19.11 and
2.8% to $41.81, respectively, while GM slumped 16% to 63 cents amid
its bankruptcy filing.
-By Kevin Kingsbury, Dow Jones Newswires; 201-938-2136;
kevin.kingsbury@dowjones.com
(Geoffrey Rogow contributed to this story.)