S&P cuts GM's debt ratings to junk status

[dbt]

NEW YORK (Reuters) - Standard & Poor's cut General Motors Corp.'s debt ratings to junk status on Thursday in a move that will reduce the automaker's avenues for raising funds as it struggles with global competition and rising healthcare costs. <SNIP>

The cut, which includes GM's finance arm General Motors Acceptance Corp., could cause GM's borrowing costs to rise. Investors have dreaded a GM cut to junk for fear it may cause turmoil in both the high-grade and junk markets. Investment funds ineligible to hold junk bonds could be forced to sell billions of dollars of GM debt.<SNIP>

More, but not a lot, here.

Edit: DUer orwell reports (via Bloomberg) over in GD that S&P has also cut Ford's rating.

[catnhatnh]

1. What a coincidence...

...now their bond rating matches their vehicles...

[Ripley]

3. Not necessarily.

I have an 89 GMC pick-em-up truck (used only for utility purposes now) that has about 120,000+ and runs fine. Needs some body work, but I've never had a problem with it.

The junk bond stuff pisses me off, cause they're buried in my mutual funds, so I can't really drop their stock unless I drop the fund.

Joy.

[gratuitous]

2. That does it!

GM is pulling all their advertising from Standard & Poor! S&P will learn the same hard lesson that the LA Times did when it called GM's 20 mpg crapmobiles a bunch of 20 mpg crapmobiles.

CEO golden parachutes awa-a-a-a-ay! Tough titty for you GM line workers and pensioners.

[orwell]

5. But

It won't do any good. Moody's will follow soon. Facts is facts...

[gratuitous]

7. Should have posted my sarcasm-o-meter

Last month, GM pulled its advertising from the LA Times because its automotive editor called its product line terrible and opined that GM's executives should all resign in disgrace. It was little more than a corporate temper tantrum.

Now, with S&P reading the writing on the corporate bathroom stall, they've downgraded GM's creditworthiness to junk status, and as a gag, I said that GM would throw another tantrum and pull its advertising from Standard & Poor. But S&P doesn't really draw revenue from corporate advertising, so it was sort of a joke.

I think the sad just killed the funny there. Nevermind.

[orwell]

10. My Bad

Sorry. You're right. I should have recognized the sarcasm. I was too quick on the click...

My bad.

[UpInArms]

4. Paying the Piper Time for the US autoindustry - Ford called "junk" too

S&P cuts Ford Motor ratings to junk status

SAN FRANCISCO (MarketWatch) -- Standard & Poor's Ratings Services on Thursday cut its long- and short-term corporate credit ratings on Ford Motor Co. (F) , Ford Motor Credit Co., and all related entities except those of Hertz Corp. to "BB+/B-1" , or junk staus, from "BBB-/A-3." The rating outlook is negative. S&P said the moves reflect its skepticism about whether management's strategies will be sufficient to counteract mounting competitive challenges. The ratings agency said its greatest immediate concern is that Ford faces the prospect that its overall sport utility vehicle business will not be able to generate the profitability it has enjoyed historically. Hertz ratings remain on CreditWatch, S&P said.

[HereSince1628]

6. As GM goes, so goes the nation

Bush has already said the T-bills are junk IOU's that the nation will never have the capacity to redeem.

It's been interesting as a baby-boomer...growing up with big dreams about America and watching as it is cut down to junk status.

As someone else wrote the other day, it really is like watching Willy Coyote ride a bicycle out over the cliff.

Our industrial bicycle has already fallen out of the picture and
in the next few frames the baby-boom will be sustained, apparently defying gravity, by inheritance of their parents wealth(who despite the great depression also enjoyed America at its "peak" and who circumstance will give a different interpretation to the term "greatest generation.") Then the nation will take the plunge.

It's a shame to think that such a great nation will make such an insignificant "pffffff" when it greets the canyon floor.

[AP]

8. Kerkorian will almost definitely not let them issue more stock, which...

...leaves selling off parts of the company as the only option to finance ongoing operations.l

Will the unthinkable happen? Will Chrysler and Ford start buying off pieces of GM? Will suppliers start buying off parts of the operation? Will banks buy up the finance arm?

What's gonna happen?

[AP]

9. If GM were in a red state and so many Japanese manufacturers were in...

...blue states, you'd probably see the feds bail out GM.

Hopefully Granholm is going to survive this.

[NNN0LHI]

11. Ford too - S&P Cuts GM, Ford Credit Ratings to 'Junk'

http://news.moneycentral.msn.com/ticker/article.asp?Feed=AP&Date=20050505&ID=4426616&Symbol=US:F

DETROIT (AP) - Standard & Poor's Ratings Services cut its corporate credit ratings to junk status for both General Motors Corp. and Ford Motor Co., a decision that will increase borrowing costs and limit fund-raising options for the nation's two biggest automakers.

Shares of both companies fell 5 percent or more after the downgrades.

The credit agency said its downgrade of GM to non-investment-grade status reflects its conclusion that management's current strategies may not be effective in dealing with the automaker's competitive disadvantages, which include rising health care costs and billions of dollars in post-retirement liabilities.

It said its greatest immediate concern for Ford is the prospect that its overall sport utility vehicle business will not be able to generate the profitability it's enjoyed historically. Ford's financial performance has been heavily dependent on the earnings of its SUVs but sales of midsize and large SUVs have plummeted of late, S&P said.

[chaumont58]

12. Why Detroit can't do better is a legimate question

Just about all the world's leading car makers have design facilities in the US, and probably in Southern California. I think the Datsun 240Z was designed in Southern California. GM and Ford's designs are just not that appealing, and they can't get past their piss poor reputation for quality. I bring this up because it isn't that Americans can't design appealing cars. Detroit just can't seem to find the ones that can.
A couple of years ago, there was some trouble with a Saturn vehicle. Something about a suspension of the Vue SUV. Basically, GM said, 'fuck the customer, legally we don't have to do a thing.' They continued to sell the vehicles and fixed the problem in the next year's model. Great customer relations. Absolute god damn text book.
I've said this before, but I have seen nothing that puts it out of date. Detroit ceased being car makers years ago and morphed into financiers. There isn't a hell of alot of money to be made by ex-car makers these days, so they are just fucked.
The real loser in this sad tale is the auto worker. Management is probably already financial secure. The poor slob working with his hands gets an ass fuckin', as Al Swearengen would say.

[AP]

13. The new Mustang is beautiful. But I agree -- the rest of their cars

are uninspiring.

If Honda dropped a Hybrid engine into the S2000 body, half of America would buy one. I don't know why Ford can't do something similar.

[chaumont58]

15. The new Mustang looks a whole lot like an old Mustang

The '69 Mustang?

I talked to an owner of a new Thunderbird, a couple of years ago. The so called retro grade. The thing is almost as big as the second gen Thunderbirds, from the mid and early 60s. And they cost 50k.
Think Ford would have been able to sell an absolute copy of the '56 T-Bird? I think so, but what the fuck do I know? I'm not a financier.

[Zodiak]

14. GM is the tip of the iceberg

I just want to add that soooomany industries have gone this way (stop making the product, become financiers).

The music and insurance industry come to mind.

[cliss]

18. Exactly.

Just watch the Dominoes fall at this juncture.

Welcome to the DU, Zodiak!! Keep those posts coming.:smoke:

:toast:

[icehenge]

16. Hybrids

Why don't American auto makers embrace hybrid engines or any other progressive ideas?

The latest "break through" technology in the auto industry is 'On Star' the stupid built in cell phone.
WOW what a remarkable idea, so ORIGINAL. sarcasm: A cell phone built into your car and they've found
another way to bill you!

I've heard responses from someone with a degree in marketing (Not Affiliated with any Auto maker)
that there has to be a demand before the supply and Americans aren't ready for hybrids yet. But I just
don't buy that lame reason for hybrids. I think auto industry needs to create and sell in huge numbers
a affordable hybrid. Let them make their money from the huge number of sales not optional accessories.
If people had the choice between a GAS only engine and some type of hybrid engine and the hybrid was
less expensive, I kinda think they'd choose the hybrid.

IS that a bad assumption?

[icehenge]

19. kick

[Chicago Democrat]

17. Damnit!!!! I have one of those bonds!!! GM due in 2025

GM due in 2025. The price has been going down. How in the hell can S&P have ANY CLUE what the health of the company will be in 20 years?


Im keeping it! now with a junk bond price the interest will be even higher. This just pisses me off!