Standard & Poor’s Downgrades Credit Ratings Of GM and Ford – Brief Article
Standard & Poor’s lowered the credit ratings for General Motors Corp. and Ford Motor Co. The corporate credit rating for each company was lowered from “A” to “BBB+.” Both companies were placed on its “credit watch” list on Aug. 17 while S&P assessed their outlooks. DaimlerChrysler AG was placed on credit watch on Sept. 18 and remains there.
“The timing and the degree of today’s downgrade are both surprising and unfortunate given that we are in the midst of what may be among the strongest months in U.S. automotive history,” said a GM spokeswoman.
A Ford spokesman said the company also was disappointed in the credit downgrade. “Despite the difficult economic environment, Ford continues to have considerable financial strength and flexibility to adequately fund our global business needs,” he said.
Scott Sprinzen, S&P manager director of corporate and government ratings, said the downgrades reflect the agency’s “concerns about the long-range profit potential of both GM and Ford, in light of secular deterioration in industry fundamentals.” Sprinzen said both automakers looked likely to face smaller earnings from sales of sport utility vehicles because of increased competition and slowing demand.
DaimlerChrysler is exposed to the same market conditions as GM and Ford, but Sprinzen said “Chrysler’s sales performance has been alarmingly weak over the past two months which raises questions about the ultimate effectiveness of the restructuring actions initiated earlier this year.”
Chrysler Group CEO Dieter Zetsche said last week the company’s restructuring plan announced in February might have to be revised because of changing market conditions and the acceleration of expensive incentives in the aftermath of the Sept. 11 terror attacks.
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