Moody's Cuts GM Rating, Warns on Ford

[ckramer]

Moody's Investors Service on Tuesday cut General Motors Corp.'s debt rating to a step above junk status, citing the company's profit warning last month, and cautioned that it may cut ratings of rival Ford Motor Co.

GM said last month that it will post its weakest first-quarter earnings since 1992, and profit this year could fall as much as 80 percent below its previous forecast. GM is also grappling with soaring healthcare costs and falling market share.

Investors are watching GM's and Ford's debt ratings very carefully. GM, the world's largest auto maker, is one of the biggest corporate bond issuers in the U.S. If GM's bonds are cut to junk, its borrowing costs may skyrocket.

Moody's said the outlook on GM's debt ratings is negative. The automaker now has the same rating and outlook from all three agencies, although Moody's still rates GM's finance subsidiary, General Motors Acceptance Corp. at two steps above junk. GMAC issues most of GM's roughly $300 million of debt.

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[physioex]

1. I never liked GM...

Like Ford, they rely too much on their SUVs to make a profit. With gasoline prices on the way up and SUV sales down, there is no way to make a profit. Too bad, they should had more forethought....Now the poor blue collar workers will be out of a job while the Execs embezzle the money.....

[dbt]

2. I seem to hear a rumbling sound.

Rather distant at the moment, but I swear it's getting louder.

[cliss]

3. I hear it.

I'm looking toward the horizon, and I see low-lying, ominous black clouds. They are pitch-black. The first raindrops are falling.

It's amazing to me that General Motors would be in such bad shape, considering that we're still living "High off the Hog", meaning (relatively) cheap gas prices, people still buying SUV's and other gas-guzzling vehicles, all kinds of tax benefits (like getting a tax credit for SUV's). Just imagine what would happen if things got a little tight! They'd be catatonic at the first sign of trouble.