SAN FRANCISCO (Thomson Financial) - Moody's Investors Service late Tuesday
said it is reviewing the ratings of General Motors Corp. for possible downgrade.
The ratings agency will review the Detroit-based auto maker's "B3" corporate
family rating, "B3" probability of default rating, "Ba3" rating for secured debt
and "Caa1" rating for senior unsecured debt.
GM will face "substantial cash requirements" as it adjusts its pricing and
production structure to take into account the domestic shift away from sport
utility vehicles and trucks, Moody's said. The company will also have to adjust
to ongoing lower auto demands because of the high price of gasoline and lower
consumer confidence.
"Establishing an adequate level of profitability throughout a car portfolio
that has historically been priced at a significant discount relative to
competing models from Asia will be a difficult and long-term undertaking,"
Moody's senior vice president Bruce Clark said in a prepared statement. "GM will
likely face a sizable cash burn until it gets this part of the equation right."
The company recently boosted liquidity by $15 billion. It has $24 billion in
cash and $7 billion in committed credit facilities.
Moody's lowered GM's speculative grade liquidity rating to "SGL-2" from
"SGL-1" because the magnitude and duration of GM's operating cash burn won't
support the highest speculative grade liquidity rating.
Ratings GMAC and ResCap aren't affected by the ratings review.
GM shares closed the regular session up 46 cents at $9.84.
Brigid Gaffikin
bg/gm
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