Following the announcement that General Motors managed to narrow its third quarter losses, Standard & Poor’s Ratings Services kept the manufacturer on CreditWatch with negative implications, where it has been placed since March this year.
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Third-quarter earnings at the US manufacturer improved sharply over those of 2005, with an automotive net loss of $116m, before special items equalling $54m, compared to a loss of $1.6bn in the comparable period last year.
But the ratings service maintained its ‘B’ long-term and ‘B-3’ short-term corporate credit ratings on GM.
“The earnings improvement was driven by expense savings, but did not translate into greatly improved cash flow,” said Standard & Poor’s credit analyst Robert Schulz.
In North America, cost savings of about $1.8bn, most of which were non-cash, sharply improved GM’s third-quarter net loss to $400m in Q3, from a $1.7bn loss in 2005, excluding $7m of special items in 2006, S&P noted.
S&P added that GM’s ratings are likely to remain on CreditWatch until the market analyst group is able to “ascertain the financial effect on GM of its exposure to bankrupt former unit Delphi Corp, and until the sale of a 51% stake in GMAC LLC to an investor consortium is at or near completion.”
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