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Rating Action:

MOODY'S REVIEWS RATINGS OF GM, GMAC AND RESCAP FOR POSSIBLE DOWNGRADE

16 Mar 2006

Approximately $180 Billion of Debt Affected

New York, March 16, 2006 -- Moody's Investors Service placed the B2 long-term rating of General Motors Corporation (GM) on review for possible downgrade and lowered the company's Speculative Grade Liquidity to SGL-2 from SGL-1. Moody's also changed the review status of General Motors Acceptance Corporation's (GMAC) Ba1 long-term rating to "review for possible downgrade" from "review with direction uncertain" and confirmed GMAC's Not Prime short-term rating. In addition, Moody's changed the review status of ResCap's senior unsecured Baa3 and short-term Prime-3 ratings to "review for possible downgrade" from "review with direction uncertain." These rating actions follow GM's announcement that it will delay filing its annual report on Form 10-K with the SEC due to an accounting issue regarding the classification of cash flows at ResCap, the residential mortgage subsidiary of GMAC.

The GM rating actions reflect Moody's concern that the delayed filing, in combination with the ensuing time necessary to resolve the outstanding accounting matters, poses the risk of a potential event of default under the terms of the indentures covering GM's $32 billion in bonds as well as its $5.6 billion undrawn credit facility. Additionally, further delay in meeting the company's filing requirements could impede prospects for GM's proposed sale of a majority interest in GMAC.

The GMAC and ResCap rating actions reflect the rating agency's view that the delay in filing financial statements, and the factors contributing to the delay, highlight substantial control issues in both firms. Though neither GMAC nor ResCap are required to file their financial statements with the SEC until March 31, Moody's is also concerned that there is a potential for further filing delays beyond the March 31 deadline and any short-term filing extensions, which could present a challenge to the two company's efforts to raise debt in the capital markets. Failure to file in a timely manner could also constitute a default under bond indentures and bank agreements of each company, though these agreements customarily include cure periods that provide for additional time to resolve such issues.

GM continues to be engaged in efforts to sell a controlling stake in GMAC but Moody's believes that negative developments such as the filing delay could slow the progress of the sale process. In addition, Moody's believes that the characteristics of potential buyers of the GMAC stake and the transaction's structure are increasingly less likely to contribute to a rating outcome that is higher than GMAC's or ResCap's current ratings. Given this view, together with the issues highlighted above, even if GMAC and ResCap successfully file their financial statements within their deadlines, Moody's does not expect to change the current rating review status at that time.

GM's failure to timely file its financial statements poses a potentially serious risk to its liquidity. Indentures governing the company's $32 billion in rated debt require the submission of audited financial statements to the indenture trustee within 15 days of the deadline for filing with the SEC. Should GM be unable to meet this requirement, it could receive a notice of default. Under the indentures' cure period provisions, GM would then have 90 days to remedy the default or receive waivers, otherwise it could face an acceleration of these obligations (possibly as early as the end of June). These delayed-filing-related risks were identified and more fully discussed in Moody's November 2005 Financial Reporting Assessment entitled "Potential Credit Implications to General Motors of Recently Announced SEC Investigations and Accounting Restatements".

Moody's also believes that a delay in the timely filing of financial statements could also hamper the planned sale of a majority interest in GMAC. The sale proceeds are needed to supplement GM's $20 billion cash and VEBA balances at a time when the company faces significant cash requirements to fund operating losses and a number of large strategic undertakings. These undertakings include: providing financial assistance in connection with the Delphi reorganization; accelerating GM's announced restructuring and employment reduction initiatives; and, payments that might be necessary to achieve adequate work rule and benefit concessions from the UAW as part of the 2007 contract renegotiation.

Moody's review will focus on the company's ability to file its financial statements in the near term in order to avert potential disruption to its financial flexibility. The review will also focus on the quality of GM's 2005 earnings including an assessment of the impact of restatements and disclosures relating to unusual charges as well as the extent and nature, if any, of material weaknesses and control deficiencies.

In addition to the above areas of review, GM's ability to sustain its B2 rating is dependent on the company's progress in several specific areas including: completing the sale of a majority interest in GMAC; avoiding a UAW strike at Delphi Corporation; assisting in a successful reorganization of Delphi; establishing solid market acceptance of its T900 trucks and SUVs; and, establishing a more competitive benefit and work rule framework following the renegotiation of its UAW contract in September 2007.

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 world's largest non-bank financial institutions. Residential Capital Corporation, a real estate finance company based in Minneapolis, Minnesota, is a wholly owned subsidiary of General Motors Acceptance Corporation.

New York
Mark L. Wasden
Vice President - Senior Analyst
Financial Institutions Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
J. Bruce Clark
Senior Vice President
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

MOODY'S REVIEWS RATINGS OF GM, GMAC AND RESCAP FOR POSSIBLE DOWNGRADE
No Related Data.
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