Once a company files for bankruptcy protection, it is disqualified from being one of the 30 Dow components, said John Prestbo, editor and executive director of Dow Jones Indexes.
As for a replacement, that decision rests with the managing editor of The Wall Street Journal, Robert Thomson. Prestbo said he and other senior editors at the Journal consult with Thomson on any potential changes to the Dow, but Thomson has the final say.
While editors are always reviewing the components that comprise the Dow, Prestbo said "I think it would be fair to say we're aware of GM's situation and taking steps accordingly."
GM, which was added to the Dow Jones industrials in 1925, has been hammered as the economy worsened and new car sales plummeted. Shares of GM have lost 55 percent of their value since the beginning of the year and 97 percent since they reached a multiyear high in October 2007. The Dow, meanwhile, is down 5.4 percent this year, and 41.4 since reaching its record high of 14,164.53, also in October 2007.
GM's replacement wouldn't have to be another automaker or even another manufacturing or industrial company. There are no hard rules as to which companies make up the index. The main goal is to try and duplicate in the Dow the weights of all market sectors excluding utilities and transportation companies, Prestbo said. The Dow has separate indexes to track utilities and transportation firms, which is why they are not included in the industrial average.