Moody’s Investors Service has pushed General Motors’ debt rating deeper into junk, raising concerns that the troubled automaker is not making adequate progress to avert bankruptcy, according to Dow Jones Newswires.
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The report said the credit-ratings agency cut GM’s $30 billion in debt to B2, five notches below investment grade, down from B1 and its outlook for GM is negative, which means another cut could be on the way.
“The downgrade reflects increased uncertainty that the company will be able to achieve all of the steps necessary to establish a competitive wage-, benefit- and supplier-cost structure outside of bankruptcy,” Moody’s reportedly said.
Dow Jones noted that the steps include the successful resolution of the Delphi (DPHIQ) reorganisation, and a “considerably” more competitive labour contract with the United Auto Workers in 2007.
“Achieving the necessary level of relief from the UAW will be a long and challenging process that will face numerous hurdles during the next 18 months,” the credit agency reportedly added.
“Any prolonged strike or work slowdown by the UAW against Delphi would be a significantly negative rating event for GM,” Moody’s said, according to Dow Jones, which noted that Delphi recently said it won’t immediately move to cut retiree-health benefits to speed its exit from bankruptcy, a decision welcomed by the UAW.
According to Moody’s GM also must work through the challenge of finishing the sale of its profitable GMAC finance unit, as well as putting to bed current federal-accounting investigations.
Moody’s told Dow Jones that the success of GM’s new full-size T900 truck and SUV line and hanging on to its slice of the US market are critical for GM.
