May 7 (Bloomberg) -- The Dow Jones Industrial Average may lose its lowest-priced stock with General Motors Corp. facing a bankruptcy or reorganization, said John Prestbo, the editor and executive director of Dow Jones Indexes.

GM costs the least among the 30 companies in the Dow, representing 0.2 percent of the price-weighted measure, according to data compiled by Bloomberg. International Business Machines Corp., priced the highest, has a 9.8 percent weighting.

The Dow fell as much as 54 percent from its 2007 record, driving five companies below $10 in March. GM is poised to lose its position in the gauge that Dow Jones says measures the health of the economy.

“There are two choices for GM: bankruptcy or increased government ownership,” Prestbo said in an interview yesterday. “Definitely the trend is in the direction that would force us to remove it.”

GM proposed last week to issue more than 60 billion shares, with 89 percent going to the Treasury and the automaker’s retiree health-care fund, and 10 percent for unsecured bondholders. GM now has 610.5 million shares outstanding. Following the increase, GM would immediately exchange every 100 shares for one share in a so-called reverse stock split.

The company and New York-based bank Citigroup Inc. still trade for less than $10, giving them the smallest weightings in the Dow. Armonk, New York-based IBM, which closed at $102.59 today, exerts the most sway.

Exxon Mobil, TJX

The Standard & Poor’s 500 Index is weighted by stock-market value. Exxon Mobil Corp., the Irving, Texas-based oil producer that’s worth $336.4 billion, is its biggest company. TJX Cos., the Framingham, Massachusetts-based owner of the T.J. Maxx and Marshalls chains, has about the same weight in the S&P 500 as GM does in the Dow.

GM dropped 3.6 percent today to $1.60, giving it a 93 percent loss in the past year. It has been in the Dow since 1925, the longest tenure after Fairfield, Connecticut-based General Electric Co.

Julie Gibson, a GM spokeswoman, had no immediate comment. The Detroit-based company reported its eighth straight quarterly loss today.

The Dow, created in 1896 by Wall Street Journal co-founder Charles Dow, is intended to “provide a clear, straightforward view of the stock market and, by extension, the U.S. economy,” according to the company’s Web site. Dow Jones & Co. is a unit of New York-based News Corp.

Ford Motor Co. of Dearborn, Michigan, the only self- sufficient U.S. automaker, is a potential GM replacement should Dow Jones decide it wants the industry to remain represented, according to Jeff Rubin, the director of research at Birinyi Associates Inc. in Westport, Connecticut.

The most recent change in the Dow was in September, when Northfield, Illinois-based Kraft Foods Inc., the world’s second- largest foodmaker, replaced American International Group Inc. after the government took over the New York-based insurer.

To contact the reporter on this story: Eric Martin in New York at emartin21@bloomberg.net.

Last Updated: May 7, 2009 16:28 EDT