Standard & Poor’s has cut its General Motors ratings deeper into junk status, citing increased pessimism about the troubled automaker’s ability to revive North American operations.
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The Associated Press (AP) said the rating agency cut GM’s corporate credit rating by two notches to “B” from “BB-minus” and removed the company from CreditWatch, but maintained a negative outlook.
The news agency noted that General Motors’ debt is rated non-investment grade, or junk, by all three major credit rating agencies – the company has been contending with soaring employee and commodity costs, as well as a decline in sales because of higher petrol prices.
AP said that Moody’s Investors Service and Fitch Ratings rate GM’s debt at “B1” and “B-plus” and added that companies whose debt is rated at high-yield status often face higher borrowing costs.
“GM has suffered meaningful market share erosion in the US this year, despite prior concerted efforts to improve the appeal of its product offerings,” S&P analyst Robert Schulz said in a report cited by The Associated Press. “This year has witnessed a stunning collapse of GM’s financial performance compared with 2004 and initial expectations for 2005.”
Ratings for General Motors Acceptance Corp. were not changed but remain on review with “developing” implications, AP said, adding that GM said in October that it is considering selling a controlling stake in the profitable finance arm.
