Home or
Site Layout or
Site Index or
Quick Jumps or
Search Engine Directory or
The Mart
Auto
News, Analysis and EditorialS&P
Cuts GM's Debt Rating to One Notch above Junk
Bookmarking
Auto on Info pages
Home or
Site Layout or
Site Index or
Quick Jumps or
Search Engine Directory or
The Mart
Auto
News, Analysis and EditorialS&P
Cuts GM's Debt Rating to One Notch above Junk
Links to Amazon.com
Info Sources The Wall Street Journal BusinessWeek The Economist Laptop Computers Fine Jewelry Women's Watches by Dima To view more women's watch items, icons, and search phrases, click here. Auto on Info October 2004
S&P Cuts GM's Debt Rating to One Notch above Junk
On October 15, 2004, the credit rating firm Standard & Poors downgraded the long-term debt of General Motors to triple-B-minus, one notch above junk. S&P attributed the cut to declining market share and poor profitability, including a multi-year string of losses in Europe.
S&P had cut Ford Motor Company's long-term debt rating to one notch above junk earlier this year. Both currently hold a triple-B-minus long-term debt rating, the lowest S&P debt rating ever accorded GM and Ford.
The Wall Street Journal reported that in a conference call on October 16th, Scott Sprinzen, S&P's managing director, stated that "the rating firm seriously debated whether GM and Ford should continue to carry investment grade credit ratings."1 This raises the question as to whether S&P will cut GM's and Ford's credit ratings to speculative grade shortly. However, John Croft, a bond analyst for Eaton Vance Corporation, said that he does not expect such a downgrade within the next six months.
In the short term, a cut to junk would only affect the value of existing corporate bonds held by bondholders. However, as long term debt matures, GM and Ford will be forced onto the market for additional financing that would require higher interest rates for prospective bondholders to be willing to bear the additional risk. This would increase GM's and Ford's interest expense - a potentially very burdensome expense, as the corporate debt of each far exceeds the value of its common stock. This, in turn, might force a reduction or elimination of dividends, not good for the value of common stock.
1 "GM Cuts Forecast Over Health Costs," Wall Street Journal, October 15, 2004, p. A3
Sources of information: "GM Cuts Forecast Over Health Costs," Wall Street Journal, October 15, 2004, p. A3 and "GM Ratings Cut Leads Investors to Assess Risk," Wall Street Journal, October 15, 2004, p. C4
Automotive News Menu Pages Auto Manufacturers: Toyota - Honda - Subaru - Nissan - Ford - Chrysler - General Motors - Volkswagen Topics: Reviews - Recalls - Safety Investigations - Safety Test Results - Automotive Excellence - Automotive Dishonor, Discredit, or Demerit - Lawsuits - Automotive Finances - Car and Truck Sales and Market Shares - Auto on Info
Search Engine Directory This table is provided primarily to give the visitor quick access to those search engines that site manager has found to be more consistently useful for information acquisition. For descriptions, strengths, weaknesses, comments, and other names and formats by which the following search engines are known, go to Search Engine Directory Page. Search Engines Yahoo! Teoma Wisenut DMOZ Gigablast Metasearch Engine
Product Search Engine
Comments: Shopping at Amazon.com via this link helps support this site.
Auto on Info Standings for Selected Search Phrases on Auto News
Site Rank in Results for Search Phrase Car Quality News Site Rank in Results for Search Phrase Auto Quality News Site Rank in Results for Search Phrase Auto News First by Yahoo! Search from 5,230,000 results First by Yahoo! Search from 3,510,000 results Thirty-ninth by Yahoo! Search from 37,600,000 results First by MSN Search from 1,110,112 results First by MSN Search from 716,283 results Fifteenth by MSN Search from 7,682,302 results Fifteenth by Google from 3,730,000 results Tenth by Google from 2,400,000 results Eightieth by Google from 7,450,000 results Standings are as of 14/03/2004.
