General Motors has been upgraded by Moody’s Investors Service to an investment grade rating, from Ba1 to Baa3, with a stable outlook.
According to Moody’s announcement, the upgrade reflects its view that GM’s competitive position and credit metrics will continue to improve based on the strength of the company’s new product introductions in the US, its solid position in the increasingly important Chinese auto market and its focus on maintaining a robust liquidity profile.
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“Good things happen when you build great cars and trucks and deliver strong financial results,” said Dan Akerson, GM chairman and CEO.
Bruce Clark, senior vice president with Moody’s said: “GM has been on a steadily improving operational and financial trajectory since it emerged from bankruptcy. We think that the disciplines the company has embraced, combined with the strength of its US product portfolio and a healthy domestic market, will enable it to stay on that path.”
However, Moody’s also noted that a key risk facing GM is the possibility of aggressive pricing by Japanese competitors should they choose to emphasise market share over enhanced profitability following the significant decline in the yen relative to the dollar. Moody’s said: “We currently see no evidence that such a pricing environment will be pursued. An additional risk remains the considerable cyclicality inherent in the auto sector, as evidenced by the severe downturn in the European market where GM is pursuing restructuring initiatives to restore the profitability of its operations.”
Click ‘press release’ below for the full Moody’s note.
