Moving closer to a GM-less Dow

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Now that a trip to Bankruptcy Court has become a near-certainty for General Motors, the automaker’s removal from the Dow Jones industrial average also appears all but inevitable.

As we reported, the folks at Dow Jones Indexes, which manages the Dow, said as much earlier this month. And John Prestbo, executive director of Dow Jones Indexes, said today that ‘certainly the march of events suggests that change might be imminent’ in the 30-stock index.

Prestbo added that bankruptcy and/or nationalization -- the U.S. government could eventually own as much as 70% of GM -- are pretty automatic tickets out of the Dow.

Which leads to the question: What company would replace GM in the Dow, arguably the most widely followed — if not the most comprehensive — gauge of the U.S. stock market?

Business news outlet CNBC is running a poll on its website today with eight companies to choose from: financial companies Wells Fargo and Goldman Sachs; online retailer Amazon.com; tech giants Apple, Google and Cisco Systems; oil company ConocoPhillips; and pharmaceutical firm Abbott Labs. As of noon PDT, Apple was comfortably in the lead with 21% of the vote; Abbott was second with 15% and ConocoPhillips was last with 10%.

Much of the debate over GM’s successor has centered on whether it should be replaced by a company in the same sector. GM is a consumer-discretionary stock (in other words, the company makes a product that tends to sell poorly during tough economic times, as the yearlong collapse in auto sales demonstrates).

As a retailer, Amazon.com could be a logical choice if the Dow’s keepers decide to stick with the same category. But changes in the index are often made without regard to sector weightings.

For example, in 1999, old-economy blue chips Chevron, Goodyear and Union Carbide were replaced by Intel, Microsoft and SBC Communications (now AT&T) to give the index a more “new economy” feel (right before new-economy stocks started heading over a cliff, it should be noted). Last fall, food giant Kraft Foods took the place of fallen insurer American International Group, and in early 2008, Bank of America and Chevron replaced cigarette maker Altria and manufacturer Honeywell.

How about Ford Motor (which wasn’t included in the CNBC poll)? What could be the only member of the once-Big Three to avoid bankruptcy has shown signs of staging a turnaround under CEO Alan Mulally. But with the stock still trading at less than $6 a share — and with the future of Ford and the rest of the global auto industry still very much in flux — it would be a risky move. And because the Dow is price-weighted, a low-dollar stock would exert comparatively little influence.

Prestbo noted that the Dow also tends to avoid stocks with relatively high prices, which could count against Google, with its $400-plus share price.

Japanese automaker Toyota, whose American depositary receipts trade on the New York Stock Exchange (ticker symbol: TM), could be an intriguing choice as well, but Prestbo ruled that out. ‘We have never had a foreign company [in the Dow] and we would not consider adding one now,’ he said.

GM, by the way, first became a member of the Dow in 1915 but was dropped a year and a half later when the market gauge was completely revamped. It returned in 1925 and has been a member ever since.

-- Martin Zimmerman