Recipient email addresses will not be used in mailing lists or redistributed.
Use semicolon to separate each address, limit to 20 addresses.
characters you see
You have successfully sent the research.
Please note: some research requires a paid subscription in order to access.
Already a customer?
Don't want to see this again?
Accept our to continue to Moodys.com:
AND SCROLL DOWN!
By clicking “I AGREE” [at the end of this document],
you indicate that you understand and intend these terms and conditions to be
the legal equivalent of a signed, written contract and equally binding, and
that you accept such terms and conditions as a condition of viewing any and all
Moody’s information that becomes accessible to you [after clicking “I AGREE”] (the
“Information”). References herein to “Moody’s” include Moody’s
Corporation, Inc. and each of its subsidiaries and affiliates.
Terms of One-Time Website Use
you have entered into an express written contract with Moody’s to the contrary,
you agree that you have no right to use the Information in a commercial or
public setting and no right to copy it, save it, print it, sell it, or publish
or distribute any portion of it in any form.
acknowledge and agree that Moody’s credit ratings: (i) are current opinions of
the future relative creditworthiness of securities and address no other risk; and
(ii) are not statements of current
or historical fact or recommendations to purchase, hold or sell particular
securities. Moody’s credit ratings and
publications are not intended for retail investors, and it would be reckless
and inappropriate for retail investors to use Moody’s credit ratings and
publications when making an investment decision. No
warranty, express or implied, as the accuracy, timeliness, completeness,
merchantability or fitness for any particular purpose of any Moody’s credit
rating is given or made by Moody’s in any form whatsoever.
3. To the extent permitted by law, Moody’s and its directors,
officers, employees, representatives, licensors and suppliers disclaim
liability for: (i) any indirect, special, consequential, or incidental losses
or damages whatsoever arising from or in connection with use of the
Information; and (ii) any direct or compensatory damages caused to any person
or entity, including but not limited to by any negligence (but excluding fraud
or any other type of liability that by law cannot be excluded) on the part of
Moody’s or any of its directors, officers, employees, agents, representatives,
licensors or suppliers, arising from or in connection with use of the
4. You agree to read [and
be bound by] the more detailed disclosures regarding Moody’s ratings and the
limitations of Moody’s liability included in the Information.
5. You agree that any disputes relating to this agreement or your use of
the Information, whether sounding in contract, tort, statute or otherwise,
shall be governed by the laws of the State of New York and shall be subject to
the exclusive jurisdiction of the courts of the State of New York located in
the City and County of New York, Borough of Manhattan.
24 Aug 2005
Approximately $170 Billion of Debt Affected
New York, August 24, 2005 -- Moody's Investors Service lowered the ratings of General Motors
Corporation (GM) senior unsecured debt to Ba2 from Baa3, and its
short-term rating to Not Prime from Prime-3, and assigned
a Ba2 Corporate Family Rating and an SGL-1 speculative grade liquidity
rating. Moody's also lowered the ratings of General Motors
Acceptance Corporation (GMAC) senior unsecured debt to Ba1 from Baa2,
and short-term rating to Not-Prime from Prime-2.
The rating outlook for both companies is negative.
The downgrades reflect continuing operating losses in GM's North
American automotive operations as well as challenges in restructuring
the company to achieve a viable long-term competitive position
as a leading global automaker. In Moody's view, a successful
restructuring must address the company's high fixed cost burden
associated with hourly employee healthcare costs and excess capacity,
repositioning GM's product offerings in order to curtail the need
for large sales incentives, and additional actions needed to address
the competitive weakness of its US supply base, including Delphi
Ratings lowered include:
General Motors Corporation and supported entities: senior unsecured
debt to Ba2 form Baa3; shelf registration of senior unsecured debt
to (P)Ba2 from (P)Baa3, subordinated debt to (P)Ba3 from (P)Ba1,
junior subordinated debt to (P)Ba3 from (P)Ba1, and preferred to
(P)B1 from (P)Ba2; VMIG-3 rating to S.G.;
and, short-term rating to Not-Prime from Prime-3.
General Motors Acceptance Corporation and supported entities: senior
unsecured debt to Ba1 from Baa2; senior unsecured shelf to (P)Ba1
from (P)Baa2; and short-term rating to Not-Prime from
General Motors Corporation: corporate family rating, Ba2;
and speculative grade liquidity rating, SGL-1.
Moody's estimates that GM's total automotive operating cash flow for 2005
will be in the area of a negative $3 billon. A portion of
this negative cash flow relates to a reduction in trade payables in connection
with the company's decision to reduce excess inventories as well
as unabsorbed fixed charges as production was ramped down. This
type of reduction should not recur during 2006.
GM is attempting to address the challenges it is facing through the implementation
of a North American recovery plan. This plan includes reducing
employment by more than 25,000 during the 2005 to 2008 period,
and reinvigoration of product offerings requiring increased reinvestment.
The most critical element of the recovery plan is GM's effort to
negotiate significant reductions in healthcare costs with the United Auto
Workers union (UAW) as GM's large retiree base places the company
at a significant competitive cost disadvantage relative to other auto
GM is also contending with the financial and operating difficulties of
key components suppliers, including Delphi Corporation. Risks
to GM include cash contributions and other economic considerations necessary
to enable Delphi to achieve a financial restructuring. Also GM
might face operational disruption as a result of a Delphi bankruptcy filing
as well as the prospect of having to provide pension and healthcare benefits
to certain Delphi employees and retirees under the terms of the agreement
reached at the time of the Delphi spin-off.
The SGL-1 speculative grade liquidity rating reflects Moody's
expectation that GM's $20 billion cash and short-term
VEBA position (June 30, 2005) will provide adequate coverage of
cash requirements during the next twelve months. These include
the possibility of the negative cash flow the company will likely experience
during the remainder of 2005 and early 2006, and approximately $1
billion in maturities of long-term and short-term debt.
The negative outlook reflects the potential for the rating to be further
lowered should GM fail to successfully implement its North American recovery
plan -- including achieving healthcare cost relief with the UAW and
reducing headcount. GM's liquidity provides an important
cushion as the company attempts to restructure its operations.
Any material erosion in GM's liquidity position would make its rating
more vulnerable to the pressures that continue to confront its automotive
The Ba2 rating anticipates that GM will: 1) maintain US market share
of approximately 25%; 2) achieve strong market acceptance
and sustain healthy price realization for new products including the T900
light truck and SUV series; 3) earn automotive pretax profit in excess
of $500 million for 2006; 4) generate at least breakeven automotive
operating cash flow before pension, VEBA, GMAC dividends;
and 5) maintain gross liquidity (cash and short-term VEBA balances)
at or above $20 billion. GMAC, through its continued
support for the wholesale and retail financing requirements of GM and
through the dividend payment to its parent ($1.5 billion
during 2004), is also an important support element in Moody's
assessment of GM. The Ba2 rating for GM anticipates that during
2006 GM's metrics, including GMAC's dividend and using
Moody's standard adjustments, will approximate the following:
EBITA margin exceeding 2%; interest coverage of 1.5
times, and free cash flow to debt in the mid-single digits
Factors that could stabilize GM's rating outlook include a return
to sustained profitability and free cash flow generation, particularly
in its North American operations. This requires successful implementation
of its North American recovery plan, including achieving meaningful
healthcare cost relief from the UAW. Moreover, the company
will need to stem any further erosion of its competitive market position
through product enhancements that sustain market share without the need
for significant sales incentives.
Factors that could contribute to pressure on the Ba2 rating include:
1) US market share falling below 25%; 2) reduced levels of
dividends from GMAC; 3) failing to maintain balance sheet liquidity
of about $20 billion; and 4) material negative variance from
the credit metrics cited above.
Moody's is maintaining a one rating notch differential between the
GMAC and GM long-term ratings. In Moody's view,
loss severity for GMAC's creditors would be meaningfully lower than
for GM's creditors were the two companies to default on their debt
obligations. We believe any potential for increasing the notching
distinction relates to widening the difference in probability of default
between the two firms. Changing ownership and governance structures
could lead to greater notching, though given the significant GM-related
concentrations, the potential is probably limited to one additional
Moody's downgrade of GMAC's ratings reflects issues at the
GM level that could affect GMAC's condition and performance.
For example, Moody's believes that the potential for sustained
demand weakness and high sales incentives for GM's autos could ultimately
lead to softer residual values, thereby negatively impacting GMAC's
credit loss and lease residual realization statistics. Also,
though not presently a concern, the quality of dealer finance receivables
could be compromised should sales deteriorate to lower levels, pressuring
the financial condition of the dealer base. However, in light
of the mutual benefits GM and GMAC derive from their association,
measured in repeat sales and origination volumes and profit distributions,
we believe GM is committed to preserving GMAC's strong franchise
value. We therefore do not expect the company to vary from its
historical commitment to quality underwriting and risk management practices.
A key intermediate term rating issue for GMAC is its liquidity management.
GMAC has demonstrated a forward-thinking approach to managing funding
and liquidity challenges, but this task has become more difficult
as access to the unsecured markets has declined, leaving fewer financing
alternatives for GMAC's less-liquid assets. Funding
constraints may define the scale and scope of GMAC's operations
should alternative funding sources not become more readily available.
Given these issues, maintaining flexibility via an adequate capital
cushion is of high importance in Moody's view; deviation from
the current trend of moderating leverage would reflect negatively on GMAC's
intrinsic credit profile.
Results in GMAC's core auto finance operations are under pressure
due to a shrinking asset base and higher borrowing costs. But strong
cash flow from portfolio runoff and sizeable cash balances should mitigate
near term liquidity pressures, affording the company some time to
address funding challenges. GMAC's mortgage and insurance
units have performed admirably, though dwindling refinance volumes
associated with stabilizing mortgage rates could result in a reversal
of earnings momentum. Cost management will be a key to sustaining
profitability metrics as the company deals with the consequences of moderating
earning asset levels and higher cost of funds.
General Motors Corporation, headquartered in Detroit, Michigan,
is the world's largest producer of cars and light trucks. GMAC,
a wholly-owned subsidiary of GM, provides retail and wholesale
financing in support of GM's automotive operations and is one of the worlds
largest non-bank financial institutions.
Michael J. Mulvaney
Corporate Finance Group
Moody's Investors Service
MOODY'S LOWERS GM'S RATINGS
J. Bruce Clark
Senior Vice President
Corporate Finance Group
Moody's Investors Service
No Related Data.
© 2019 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.
CREDIT RATINGS ISSUED BY MOODY'S INVESTORS SERVICE, INC. AND ITS RATINGS AFFILIATES (“MIS”) ARE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MOODY’S PUBLICATIONS MAY INCLUDE MOODY’S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE MOODY’S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY’S RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS AND MOODY’S OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. CREDIT RATINGS AND MOODY’S PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. NEITHER CREDIT RATINGS NOR MOODY’S PUBLICATIONS COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS AND PUBLISHES MOODY’S PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.
MOODY’S CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT INTENDED FOR USE BY RETAIL INVESTORS AND IT WOULD BE RECKLESS AND INAPPROPRIATE FOR RETAIL INVESTORS TO USE MOODY’S CREDIT RATINGS OR MOODY’S PUBLICATIONS WHEN MAKING AN INVESTMENT DECISION. IF IN DOUBT YOU SHOULD CONTACT YOUR FINANCIAL OR OTHER PROFESSIONAL ADVISER.
ALL INFORMATION CONTAINED HEREIN IS PROTECTED BY LAW, INCLUDING BUT NOT LIMITED TO, COPYRIGHT LAW, AND NONE OF SUCH INFORMATION MAY BE COPIED OR OTHERWISE REPRODUCED, REPACKAGED, FURTHER TRANSMITTED, TRANSFERRED, DISSEMINATED, REDISTRIBUTED OR RESOLD, OR STORED FOR SUBSEQUENT USE FOR ANY SUCH PURPOSE, IN WHOLE OR IN PART, IN ANY FORM OR MANNER OR BY ANY MEANS WHATSOEVER, BY ANY PERSON WITHOUT MOODY’S PRIOR WRITTEN CONSENT.
CREDIT RATINGS AND MOODY’S PUBLICATIONS ARE NOT INTENDED FOR USE BY ANY PERSON AS A BENCHMARK AS THAT TERM IS DEFINED FOR REGULATORY PURPOSES AND MUST NOT BE USED IN ANY WAY THAT COULD RESULT IN THEM BEING CONSIDERED A BENCHMARK.
All information contained herein is obtained by MOODY’S from sources believed by it to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors, however, all information contained herein is provided “AS IS” without warranty of any kind. MOODY'S adopts all necessary measures so that the information it uses in assigning a credit rating is of sufficient quality and from sources MOODY'S considers to be reliable including, when appropriate, independent third-party sources. However, MOODY’S is not an auditor and cannot in every instance independently verify or validate information received in the rating process or in preparing the Moody’s publications.
To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability to any person or entity for any indirect, special, consequential, or incidental losses or damages whatsoever arising from or in connection with the information contained herein or the use of or inability to use any such information, even if MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers is advised in advance of the possibility of such losses or damages, including but not limited to: (a) any loss of present or prospective profits or (b) any loss or damage arising where the relevant financial instrument is not the subject of a particular credit rating assigned by MOODY’S.
To the extent permitted by law, MOODY’S and its directors, officers, employees, agents, representatives, licensors and suppliers disclaim liability for any direct or compensatory losses or damages caused to any person or entity, including but not limited to by any negligence (but excluding fraud, willful misconduct or any other type of liability that, for the avoidance of doubt, by law cannot be excluded) on the part of, or any contingency within or beyond the control of, MOODY’S or any of its directors, officers, employees, agents, representatives, licensors or suppliers, arising from or in connection with the information contained herein or the use of or inability to use any such information.
NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE ACCURACY, TIMELINESS, COMPLETENESS, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OF ANY CREDIT RATING OR OTHER OPINION OR INFORMATION IS GIVEN OR MADE BY MOODY’S IN ANY FORM OR MANNER WHATSOEVER.
Moody’s Investors Service, Inc., a wholly-owned credit rating agency subsidiary of Moody’s Corporation (“MCO”), hereby discloses that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by Moody’s Investors Service, Inc. have, prior to assignment of any rating, agreed to pay to Moody’s Investors Service, Inc. for ratings opinions and services rendered by it fees ranging from $1,000 to approximately $2,700,000. MCO and MIS also maintain policies and procedures to address the independence of MIS’s ratings and rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold ratings from MIS and have also publicly reported to the SEC an ownership interest in MCO of more than 5%, is posted annually at www.moodys.com
under the heading “Investor Relations — Corporate Governance — Director and Shareholder Affiliation Policy.”
Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY’S affiliate, Moody’s Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody’s Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to “wholesale clients” within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY’S that you are, or are accessing the document as a representative of, a “wholesale client” and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to “retail clients” within the meaning of section 761G of the Corporations Act 2001. MOODY’S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors.
Additional terms for Japan only: Moody's Japan K.K. (“MJKK”) is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody’s Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody’s SF Japan K.K. (“MSFJ”) is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization (“NRSRO”). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.
MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any rating, agreed to pay to MJKK or MSFJ (as applicable) for ratings opinions and services rendered by it fees ranging from JPY125,000 to approximately JPY250,000,000.
MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.