Merrill Analyst Says Buy GM at $40 and Sell It At $11

A Merrill Lynch analyst put out some groundbreaking research on GM this morning claiming that bankruptcy was an option for the auto company.  He reversed his prior buy recommendation (issued in February 2007 when the stock was at $40) and cut the stock to an "underperform" now that it is trading below $11.  I'm not quite sure what caused the analyst to change his formerly bullish opinion.  Perhaps it was based on one of the following reasons?

• GM's debt is trading and has been trading at distressed levels for some time.
• GM's credit default swaps are already pricing in a 75% probability that the automaker will default on its debt within the next 5 years.
• Car sales have been in a steep decline and the auto industry just reported a roughly 20% decline in sales for the month of June.
• GMAC, the financing arm still 49% owned by GM, had to completely restructure its financing because its mortgage lending arm ResCap came dangerously close to declaring bankruptcy.
• GM's stock is down 56% year to date.
• The analyst needed to change his recommendation ASAP so he could tell everyone that he warned them of GM's bankruptcy, thus justifying his existence.

Since he didn't issue an apology with his downgrade to make up for being so incredibly ridiculously behind in following the GM headlines, I'm assuming he's not the least bit sorry for losing so much money for investors.  What I find even more absurd is that the stock actually sold off an additional 8% on the downgrade.  Who are the investors that use Merrill Lynch as their sole source of news?  How can anybody still be surprised by a report that claims that GM could go bankrupt?  Did someone actually receive this research report and then call every one of his brokers and scream "Sell all my GM!  All of it!  My analyst told me it might go bankrupt!"  It is price action like this that makes me a serious doubter of the "efficient market" hypothesis.  How on earth can all the negative news be priced into stocks when somebody actually thinks an analyst's opinion matters?