Dow Industrials gets rid of GM and Citigroup

Dow Jones and Company reported Monday that it would be adding two additional corporations to its industrial average. The two corporations are Travelers in addition to Cisco Systems. Of course, when two go in the average, two have to leave.

Given the news that has occurred with GM over the previous few months, it is a no brainier that GM would be cut from the average. Though, Citigroup was in addition let go.

Travelers was once a subsidiary of Citigroup and will help uphold the representation of financial companies in the average.

Citigroup has had a rather bumpy year with subprime lending, the credit crisis, and eventually the recession taking huge cuts from Citigroup. Citigroup is the second fiscal company to be dropped from the average during this downturn, the first was AIG. AIG was taken off the average in September when the government took an 80% interest in the business and lent it several billion dollars in bailout money.

The Dow industrial average is made up of 30 stocks. These stocks are a gauge of the market and what the general public ordinarily looks at to gauge the health of the markets as well as the economy. It is at present made up of (on top of Travelers and Cisco) 3M (MMM), Alcoa (AA), American Express (AXP), At&t (T), Bank of America (BAC), Boeing (BA), Caterpillar (CAT), Chevron Corporation (CVX), Coca-Cola (KO), DuPont (DD), ExxonMobil (XOM), General Electric (GE), Hewlett-Packard (HPO), The Home Depot (HD), Intel (INTC), IBM (IBM), Johnson & Johnson (JNJ), JPMorgan Chase (JPM), Kraft foods (KFT), McDonalds (MCD), Merk (MRK), Microsoft (MSFT), Pfizer (PFE), Procter & Gamble (PG), United Technologies Corporation (UTX), Verizon Communications (VZ), Wal-Mart (WMT), and Walt Disney (DIS).

The changes will start next Monday.

Citi has been sitting in the Dow industrial average for 12 years, at the time it was listed as Citicorp. It became Citigroup in 1998 when Travelers Group merged with Citicorp. In 2002, Travelers was spun off another time and has been a unattached business ever since. So, it is a bit odd that the parent corporation has fallen off the average and has been out performed by its subsidiary.

In actuality, Travelers is taking AIG’s formerly held place in the average. The core product of both businesses is the same; casualty insurance sales.

GM has to get its actions composed to even be considered before it is put back on the average yet again. It will probably be years for the once burly auto company to see the tops of any list. Of course, I do think that bankruptcy was a movement in the correct direction. If it were left up to its own devices, GM would have been going into liquidation mode a year ago, if the state wouldn’t have stepped in. Worse, if they didn’t file for bankruptcy and couldn’t reorganize, the government would have lost all of our capital in the GM “gamble” and would be heaving money into a limitless abyss.

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