New York, 04-23-98 -- Moody's Investors Service raised the senior debt ratings of General Motors Corporation (GM) and General Motors Acceptance Corporation (GMAC) to A2 from A3 and GM's short term debt rating to Prime-1 from Prime-2. MOODY'S UPGRADES LONG TERM DEBT RATINGS OF GENERAL MOTORS CORPORATION, GENERAL MOTORS ACCEPTANCE CORPORATION, AND RELATED AFFILIATES TO A2; GENERAL MOTORS CORPORATION SHORT TERM RATINGS UPGRADED TO PRIME-1
The upgrades reflect the company's improved balance sheet liquidity and the structural improvements to the company's cost and product competitiveness in its North American Operations (NAO) despite the increasingly competitive environment and the potential for an end to the current period of unusually stable auto demand in the North American auto market. Also important to our rating action is Moody's expectation that GM will make partial prefundings of its other post retirement benefit obligations (OPEB) over the intermediate term and that its U.S. pension deficit, measured in accordance with GAAP, will be essentially eliminated in the near term. While Moody's notes that increasing its market share will continue to be a near term challenge, GM is no longer capital constrained in its product development program. Therefore, Moody's expects a strong pace of new product introductions with a greater emphasis on higher-margin vehicles over the intermediate term which should lead to a sustained stabilization in its U.S. market share.
Moody's upgrade of GMAC reflects the close link of its ratings with its parent. Although GMAC faces the risks of managing growth in non-auto finance businesses, its core auto finance business is closely linked with GM. Moody's expects GMAC will cautiously expand its product line and geographic presence in insurance and mortgage operations. GMAC's short term rating, which was upgraded to Prime-1 on May 5, 1995, remains unchanged. In addition, the Prime-2 short term and A3 long term bank loan ratings of Hughes Electronics Corporation and the Baa2 long term debt rating for PanAmSat International remain unchanged.
Ratings upgraded include:
General Motors Corporation – to A2 from A3 on its debentures, notes, senior notes, Swiss bonds, medium term notes, discount debentures, 1991 pass through certificates, guaranteed industrial revenue bonds, guaranteed pollution control bonds, guaranteed step-up eurobonds and variable rate demand revenue bonds; to (P)A2 from (P)A3 on its shelf registration for senior debt; to A2 from A3 on its Counterparty Rating; to A3 from Baa1 on its Junior Subordinated Deferred Interest Debentures; to "a3" from "baa1" on its preferred stock and Guaranteed Trust Originated Preferred Securities and (P) "a3" from (P) "baa1" on its shelf registration for preferred stock.
General Motors Corporation – to Prime-1 from Prime-2 for commercial paper; to VMIG-1 from VMIG-2 for industrial revenue bonds, pollution control bonds, and variable rate demand revenue bonds.
General Motors Acceptance Corporation – to A2 from A3 on its bonds, notes, debentures, eurobonds, medium term notes, and euro medium term notes; to (P) A2 from (P) A3 its shelf registration for senior unsecured debt; and to A2 from A3 its counterparty rating.
GM has improved its balance sheet strength. From 1995 through 1997, the combination of higher short-term liquid funds and lower debt resulted in a greatly improved net liquidity position. While higher stock buybacks will contribute to a reduction in GM's cash position in 1998, Moody's rating action recognizes that GM is committed to maintain a $13 billion target for its short term liquidity. Maintenance of balance sheet strength is particularly important to support the company's operations during the next market downturn.
Along with an improved balance sheet, GM continues to reduce costs, improve processes and increase efficiency in its North American Operations. Delphi, GM's parts and components operations which is now operated separately from NAO
, has written off or sold a number of underperforming segments and realized significant improvements in its competitive cost structure. While near term results from Delphi have been hurt by the impact of the slowdown in auto demand in Asia and from the slowdown in GM sales in the U.S., Moody's believes that the company will continue to be a positive contributor to GM's earnings. New product introductions have also contributed to higher returns at NAO. While still weighted towards the more competitive passenger car segment, GM has been aggressively updating NAO's product line-up in both cars and light trucks. While NAO is likely to face an adverse impact during a cyclical downturn in the U.S., Moody's believes that the company's overall financial flexibility would be sufficient to sustain debt protection measurements commensurate with its new rating category.
Improvement in NAO is also important given the recent decline in profitability at GM's International Operations (IO). In the early 1990s, GM's IO earnings were an important offset to the losses it recorded in NAO. While management is taking a number of steps to address profitability at IO, with both new products and cost reduction efforts, the increasingly competitive environment in Latin America and Europe, where IO produces most of its profits, will challenge IO to achieve the kind of returns it earned historically. A continued slowdown in Asia will also dampen near term earnings of GM's international operations.
GM has also reduced its employee benefit liabilities over the past few years. With additional pension contributions scheduled for 1998, GM's U.S. pension assets are likely to essentially equal its projected liabilities calculated according to the Statement of Financial Accounting Standards No. 87. More importantly, the company has improved its financial position sufficiently to begin partially prefunding its OPEB liabilities. GM's high level of OPEB liabilities continues to be a competitive disadvantage for the company. While this program will take a number of years to complete and could be delayed in a downturn, Moody's anticipates that GM will make progress in reducing this liability to a more manageable size. Along with the plan to prefund a portion of these liabilities, the company continues to actively search for ways to reduce retiree healthcare costs which are a significant component of this liability. The initiation of this long-term plan to partially prefund postretirement costs is an important part of Moody's improved outlook and decision to upgrade GM's rating at this time.
General Motors Corporation, headquartered in Detroit, Michigan, is the world's largest automobile producer. General Motors Acceptance Corporation, also headquartered in Detroit, Michigan, is wholly owned by General Motors Corporation. GMAC provides retail and consumer auto financing and wholesale dealer financing to both GM and other dealerships throughout the world. It is also engages in residential and commercial mortgages and insurance.
© 2020 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/OR ITS CREDIT RATINGS AFFILIATES ARE MOODY'S CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY'S (COLLECTIVELY, "PUBLICATIONS") MAY INCLUDE SUCH CURRENT OPINIONS. MOODY'S INVESTORS SERVICE 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 INVESTORS SERVICE CREDIT RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS, NON-CREDIT ASSESSMENTS ("ASSESSMENTS"), AND OTHER 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. AND/OR ITS AFFILIATES. MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. MOODY'S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY'S ISSUES ITS CREDIT RATINGS, ASSESSMENTS AND OTHER OPINIONS AND PUBLISHES ITS 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,
ASSESSMENTS, OTHER OPINIONS, AND 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, ASSESSMENTS, OTHER OPINIONS OR 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.
MOODY'S CREDIT RATINGS,
ASSESSMENTS, OTHER OPINIONS AND 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 its 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, ASSESSMENT, 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 credit rating, agreed to pay to Moody's Investors Service, Inc. for credit ratings opinions and services rendered by it fees ranging from $1,000 to approximately $2,700,000. MCO and Moody's investors Service also maintain policies and procedures to address the independence of Moody's Investors Service credit ratings and credit rating processes. Information regarding certain affiliations that may exist between directors of MCO and rated entities, and between entities who hold credit ratings from Moody's Investors Service 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 credit rating, agreed to pay to MJKK or MSFJ (as applicable) for credit 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.