S & P reduce Ford & GM to "Junk" rating
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Bighersh Alter-Ego
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From: 33.02N / 96.66W
S & P reduce Ford & GM to "Junk" rating
http://news.yahoo.com/s/ap/automakers_debt_ratings
By JOHN PORRETTO, AP Auto Writer
14 minutes ago
DETROIT - Standard & Poor's Ratings Services cut its corporate credit ratings to junk status for both General Motors Corp. and Ford Motor Co., a significant blow 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 Thursday's downgrades, and the news sent the overall market lower.
The decision by one of the nation's most respected ratings agencies comes as the two iconic American automakers are losing market share at home to Asian automakers, seeing sales soften for their most profitable models and are facing enormous health care and post-retirement liabilities.
The credit ratings agency said its downgrade of GM's long-term rating below investment-grade status reflects its conclusion that management's current strategies may not be effective in dealing with the automaker's competitive disadvantages.
In a statement, GM said it was disappointed with S&P's decision but that it and its finance arm, GMAC, have adequate cash and liquidity to fund their operations "for the foreseeable future."
"Clearly, GM has many challenges in North America, but the company is moving aggressively to address these challenges," the company said.
S&P said its greatest immediate concern for Ford is the prospect that its 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.
"We disagree with S&P's action today," said Don Leclair, Ford's executive vice president and chief financial officer. "We're disappointed that it discounts our considerable liquidity and our access to diverse funding sources, as well as the recent successes of our new products."
The rating reductions are significant because some big bondholders such as some pension funds are prohibited from buying bonds that are considered by the major rating houses as speculative, or junk. Both GM and Ford had held credit ratings from S&P that were at the lowest level of the agency's investment grade spectrum. As a result of the new ratings, the automakers may have to pay higher rates of interest to attract enough buyers for their bonds.
GM's consolidated debt as of March 31 was $291.8 billion, while Ford's outstanding consolidated debt totaled $161.3 billion.
GM said it had $19.8 billion in cash at the end of the first quarter, and GMAC had $18.5 billion in cash and securities.
Even as it cut their debt ratings, S&P said the outlook was negative for both of the automakers.
The announcement came only a day after billionaire Kirk Kerkorian jolted GM shares higher by offering to invest nearly $870 million in the automaker. Kerkorian's Tracinda Corp. offered to pay $868 million for a nearly 5 percent stake, which would boost Tracinda's holdings to about 9 percent and make Kerkorian one of GM's largest shareholders.
GM shares fell to a 10-year low in April after the company reported a $1.1 billion loss for the first quarter. Its sales have slumped in recent months, including those of its most profitable sport utility vehicles, as gasoline prices marched higher. And while GM executives complain about huge increases in medical insurance costs, the United Auto Workers union has said it's not interested in reopening contract talks before 2007 to address those expenses.
GM shares dropped $1.69, or 5.2 percent, to $31.11 while Ford shares fell 52 cents, or 5.1 percent, to $9.64 in afternoon trading on the New York Stock Exchange.
By JOHN PORRETTO, AP Auto Writer
14 minutes ago
DETROIT - Standard & Poor's Ratings Services cut its corporate credit ratings to junk status for both General Motors Corp. and Ford Motor Co., a significant blow 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 Thursday's downgrades, and the news sent the overall market lower.
The decision by one of the nation's most respected ratings agencies comes as the two iconic American automakers are losing market share at home to Asian automakers, seeing sales soften for their most profitable models and are facing enormous health care and post-retirement liabilities.
The credit ratings agency said its downgrade of GM's long-term rating below investment-grade status reflects its conclusion that management's current strategies may not be effective in dealing with the automaker's competitive disadvantages.
In a statement, GM said it was disappointed with S&P's decision but that it and its finance arm, GMAC, have adequate cash and liquidity to fund their operations "for the foreseeable future."
"Clearly, GM has many challenges in North America, but the company is moving aggressively to address these challenges," the company said.
S&P said its greatest immediate concern for Ford is the prospect that its 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.
"We disagree with S&P's action today," said Don Leclair, Ford's executive vice president and chief financial officer. "We're disappointed that it discounts our considerable liquidity and our access to diverse funding sources, as well as the recent successes of our new products."
The rating reductions are significant because some big bondholders such as some pension funds are prohibited from buying bonds that are considered by the major rating houses as speculative, or junk. Both GM and Ford had held credit ratings from S&P that were at the lowest level of the agency's investment grade spectrum. As a result of the new ratings, the automakers may have to pay higher rates of interest to attract enough buyers for their bonds.
GM's consolidated debt as of March 31 was $291.8 billion, while Ford's outstanding consolidated debt totaled $161.3 billion.
GM said it had $19.8 billion in cash at the end of the first quarter, and GMAC had $18.5 billion in cash and securities.
Even as it cut their debt ratings, S&P said the outlook was negative for both of the automakers.
The announcement came only a day after billionaire Kirk Kerkorian jolted GM shares higher by offering to invest nearly $870 million in the automaker. Kerkorian's Tracinda Corp. offered to pay $868 million for a nearly 5 percent stake, which would boost Tracinda's holdings to about 9 percent and make Kerkorian one of GM's largest shareholders.
GM shares fell to a 10-year low in April after the company reported a $1.1 billion loss for the first quarter. Its sales have slumped in recent months, including those of its most profitable sport utility vehicles, as gasoline prices marched higher. And while GM executives complain about huge increases in medical insurance costs, the United Auto Workers union has said it's not interested in reopening contract talks before 2007 to address those expenses.
GM shares dropped $1.69, or 5.2 percent, to $31.11 while Ford shares fell 52 cents, or 5.1 percent, to $9.64 in afternoon trading on the New York Stock Exchange.
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Joined: Jan 2003
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From: Pikesville, MD
Yea for investors it could really hurt with that ban on junk bonds. They'll have to sell them to get them out of the portfolio and take a beating.....could be very bad for alot of people who didn't realize they're 401ks had Ford and GM bonds.
Senior Member
Joined: May 2000
Posts: 873
Likes: 1
From: Somewhere in the EU
I was going to post this news bit but CIA beat me to it.
The fact that Ford and GM's only real profitable vehicles were the SUV . . . what with gas at 3 dollars a gallon (at least here it is) they can't give these things away.
As exemplified by this shot of an Expedition at Galpin Ford, the dealership with the highest selling volume in the USA (located in the slum of Panaroma City, in the San Fernando Valley)
Now that these puppies ain't selling, Ford and GM's debt problems are going to grow even more. (Sorry, but the Mustang alone ain't gonna save them).
If you are in the market for a truck or SUV right now, wait a few weeks to a month or two and they'll pay you to take it off their hands.
The fact that Ford and GM's only real profitable vehicles were the SUV . . . what with gas at 3 dollars a gallon (at least here it is) they can't give these things away.
As exemplified by this shot of an Expedition at Galpin Ford, the dealership with the highest selling volume in the USA (located in the slum of Panaroma City, in the San Fernando Valley)
Now that these puppies ain't selling, Ford and GM's debt problems are going to grow even more. (Sorry, but the Mustang alone ain't gonna save them).
If you are in the market for a truck or SUV right now, wait a few weeks to a month or two and they'll pay you to take it off their hands.
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Joined: Oct 2002
Posts: 340
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1. Ford F-Series pickup 260,775
2. Chevy Silverado-C/K pickup 214,396
3. Toyota Camry 138,939
4. Dodge Ram pickup 125,043
5. Toyota Corolla 115,994
6. Honda Accord 112,606
7. Honda Civic 90,812
8. Chevrolet Impala 87,770
9. Ford Explorer 86,386
10. Nissan Altima 84,337
11. Dodge Caravan 81,696
12. Ford Taurus 72,377
13. GMC Sierra pickup 67,955
14. Jeep Grand Cherokee 65,550
15. Chevrolet TrailBlazer 65,291
16. Ford Focus 64,916
17. Chevrolet Malibu 62,604
18. Ford Mustang 61,820
19. Chrysler Town & Country 61,156
20. Ford Escape 59,179
caranddriver
Those are the top selling vehicles for 2005 to date.
SUVS are still selling just not what they were compared to last year.
I read a quote from the UAW regarding this. They said they weren't interested in opening up for contract negotiations with GM till 2007. Dumbass UAW is going to put themselves out of work.
2. Chevy Silverado-C/K pickup 214,396
3. Toyota Camry 138,939
4. Dodge Ram pickup 125,043
5. Toyota Corolla 115,994
6. Honda Accord 112,606
7. Honda Civic 90,812
8. Chevrolet Impala 87,770
9. Ford Explorer 86,386
10. Nissan Altima 84,337
11. Dodge Caravan 81,696
12. Ford Taurus 72,377
13. GMC Sierra pickup 67,955
14. Jeep Grand Cherokee 65,550
15. Chevrolet TrailBlazer 65,291
16. Ford Focus 64,916
17. Chevrolet Malibu 62,604
18. Ford Mustang 61,820
19. Chrysler Town & Country 61,156
20. Ford Escape 59,179
caranddriver
Those are the top selling vehicles for 2005 to date.
SUVS are still selling just not what they were compared to last year.
I read a quote from the UAW regarding this. They said they weren't interested in opening up for contract negotiations with GM till 2007. Dumbass UAW is going to put themselves out of work.
Senior Member
Joined: May 2000
Posts: 873
Likes: 1
From: Somewhere in the EU
Originally posted by spray004
1. Ford F-Series pickup 260,775
2. Chevy Silverado-C/K pickup 214,396
3. Toyota Camry 138,939
4. Dodge Ram pickup 125,043
5. Toyota Corolla 115,994
6. Honda Accord 112,606
7. Honda Civic 90,812
8. Chevrolet Impala 87,770
9. Ford Explorer 86,386
10. Nissan Altima 84,337
11. Dodge Caravan 81,696
12. Ford Taurus 72,377
13. GMC Sierra pickup 67,955
14. Jeep Grand Cherokee 65,550
15. Chevrolet TrailBlazer 65,291
16. Ford Focus 64,916
17. Chevrolet Malibu 62,604
18. Ford Mustang 61,820
19. Chrysler Town & Country 61,156
20. Ford Escape 59,179
caranddriver
Those are the top selling vehicles for 2005 to date.
SUVS are still selling just not what they were compared to last year.
I read a quote from the UAW regarding this. They said they weren't interested in opening up for contract negotiations with GM till 2007. Dumbass UAW is going to put themselves out of work.
1. Ford F-Series pickup 260,775
2. Chevy Silverado-C/K pickup 214,396
3. Toyota Camry 138,939
4. Dodge Ram pickup 125,043
5. Toyota Corolla 115,994
6. Honda Accord 112,606
7. Honda Civic 90,812
8. Chevrolet Impala 87,770
9. Ford Explorer 86,386
10. Nissan Altima 84,337
11. Dodge Caravan 81,696
12. Ford Taurus 72,377
13. GMC Sierra pickup 67,955
14. Jeep Grand Cherokee 65,550
15. Chevrolet TrailBlazer 65,291
16. Ford Focus 64,916
17. Chevrolet Malibu 62,604
18. Ford Mustang 61,820
19. Chrysler Town & Country 61,156
20. Ford Escape 59,179
caranddriver
Those are the top selling vehicles for 2005 to date.
SUVS are still selling just not what they were compared to last year.
I read a quote from the UAW regarding this. They said they weren't interested in opening up for contract negotiations with GM till 2007. Dumbass UAW is going to put themselves out of work.
Yes, they are still selling, but sales are dropping fast. Pickups will always sell because they are so important to business...SUV's however are not. (You'll note only one SUV in the top 10 there and their sales will continue to drop precipitously.