Sad But True # II

[JIM CLC # 15000]

05-05-05
All, figured that there is someone out there that wouldnt believe so this is from my source.
I dont enjoy being the bearer of this type of news.
Good Luck, Jim

 
 
 
 
 
 
 
 

 
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S&P cuts GM, Ford debt ratings to junk status
NEW YORK (Reuters) â€" Standard & Poors cut Ford Motors (F) and General Motors (GM) debt ratings to junk status Thursday in a move that will narrow the automakers avenues for raising money as they struggle with global competition and rising healthcare costs.
Shares of both companies fell 5percent or more after Thursdays downgrades, and the news sent the overall market lower.

The cuts almost surely will cause both companies borrowing costs to rise as they have to offer higher yields to attract investors. The downgrades include the credit financing arms of both automakers.

The decision by one of the nations most respected ratings agencies comes as the two iconic American automakers are losing market share at home to Asian automakers, seeing sales soften for their most profitable models and are facing enormous health care and post-retirement liabilities.

S&P said its downgrade of GM to non-investment-grade status reflects its conclusion that managements current strategies may not be effective in dealing with the automakers competitive disadvantages, which include rising health care costs and billions of dollars in post-retirement liabilities. But it said the company should have no trouble meeting its cash requirements in the near term.

It said its greatest immediate concern for Ford is the prospect that its overall sport-utility vehicle business will not be able to generate the profitability its enjoyed historically. Fords financial performance has been heavily dependent on the earnings of its SUVs but sales of midsize and large SUVs have plummeted of late, S&P said.

S&P said it is comfortable with DaimlerChryslers (DCX) debt ratings for now.

S&P rates DaimlerChryslers corporate credit at BBB, or two steps above junk status. The outlook is stable, and should remain stable unless Mercedes condition deteriorates, or unless economic or industry conditions worsen, S&P analyst Scott Sprinzen said on a conference call.

In a statement shortly after the news from S&P, Don Leclair, Fords executive vice president and chief financial officer, said: We disagree with S&Ps action today. Were disappointed that it discounts our considerable liquidity and our access to diverse funding sources, as well as the recent successes of our new products.

As a company, we clearly see the competitive realities and challenges we face, and are committed to addressing them through the acceleration of our business plans, which will include continued cost-cutting, as well as essential investments in our future. While todays development presents a challenge, it doesnt shake our confidence in our future or our determination to achieve continued success as a global auto maker.

A GM spokesman said the company was disappointed with the downgrades, but that it has ample cash and liquidity to fund its business for the foreseeable future.

Investors have dreaded a GM cut to junk for fear it may cause turmoil in the markets for both high-grade corporate debt and junk.

The rating reductions are significant because some big bondholders such as some pension funds are prohibited from buying bonds that are considered by the major rating houses as speculative, or junk. Funds that are not permitted to hold junk bonds could be forced to sell billions of dollars of Ford and GM debt.

Both GM and Ford had held credit ratings from S&P that were at the lowest level of the agencys investment grade spectrum. As a result of the new ratings, the automakers may have to pay higher rates of interest to attract enough buyers for their bonds.

GMs consolidated debt as of March 31 was $291.8 billion, while Fords outstanding consolidated debt totaled $161.3 billion.

GM said it had $19.8 billion in cash at the end of the first quarter, and GMAC had $18.5 billion in cash and securities.

Standard & Poors cut GMs long-term credit ratings two notches to BB, the second highest junk rating. The outlook on the new rating is negative.

Standard & Poors cut Fords long-term credit ratings one notch to BB-plus, highest junk rating, from BBB-minus. The outlook on the new rating is negative, meaning another cut is possible over the next two years.

The companies are facing difficult times and cuts to junk were expected later this year, but investors were surprised that S&P took action so soon.

The companies have ample cash for at least the next several years. The two other major ratings agencies still rate Ford and GM at investment-grade status, but further cuts for the companies are possible, analysts said.

Potentially weve seen one or two shoes drop now, but it might be a four- or five-legged thing with more shoes to drop, said Jon Brorson, managing director of growth equities at Neuberger Berman in Chicago.

Investors had become more hopeful for dramatic changes at GM on Wednesday after billionaire Kirk Kerkorian, known for being an activist investor, said he was more than doubling his stake in the company to about 9percent.

Kerkorian offered $31 a share for 28 million shares of General Motors.

Kerkorian is still committed to increasing his equity stake in GM despite the debt downgrades, a spokeswoman said Thursday.

Bonds of both General Motors and Ford sold off sharply after Thursdays debt downgrade.
 

[Bruce Reynolds # 18992]

Gday Jim,

The trouble with the world these days, and in the past, has been these people that deal in Paper Money.   Not the hard cash Paper Money but the Stock and Share market.

If they were actually spending Real currency, and not un-real stuff, then they would be more particular in their dealings.

The worst are the Corporate Raiders and some of them are behind bars for the dealings that they have done with other peoples money.

I dont decry people investing in the Stock Exchanges around the world, but the power that some of them have in deciding peoples livelyhoods at the stroke of a pen disgusts me.

Yes, I know it is Big Business, but it should also be Fair Business as well.

Oh, yes, I also dont like these Money Market Speculators that ruin the value of hard currency as well.   Buying parts fron USA has cost me a fortune in the past, and most probably will well into the future.

Bruce,
The Tassie Devil(le),
60 CDV

[Dave Smith]

GM is too big to be going out of business any time soon.  They are just suffering the consiquences of putting all their eggs in the big SUV barrel.   Ironically they gave the market what they wanted, tons of full sized pickups and SUVs.   But as we know the public is fickle and will always run to the imports when Opec squeezes us hard.   Eventually prices will drop again and big vehicles will sell again.  The scary part is how many buyers will not return to a domestic car purchase after the dust settles.

While I wish my daily driver was a new Cadillac, I have a 2002 Mercury Sable as a company car.   It is very nice, fully loaded, comfortable and stylish.  I recommend it to people often as a good new car value.  But of course MoFo (Mother Ford) discontinued the car this month.  Figures.   I will probably always buy American because I am patriotic and want to see my neighbors stay empoyed too.   But as the lesser imports get nicer looking it is getting harder not to look twice on the freeway.

Dave Smith
Hartford, CT
1975 Eldorado convertible,
1980 Lebaron 5th Ave limited,
2002 Mercury Sable LS premium.

[Bruce Reynolds # 18992]

Dave,

The trouble with most cars these days is you have to look twice, or three times at them to make out what brand they are.

G.M will survive, if only because the US Military need vehicles to transport their troops.

Bruce,
The Tassie Devil(le),
60 CDV

[Dave Smith]

Bruce:

    I agree.  So many new cars have that worn bar of soap look.    But several years ago Dodge finally realized that if they were going to get sales up on the Trucks, they would need to actually start styling them to appeal to the masses.   GM responded by adding inovations like the suicide center opening rear quarter doors.     It is just a matter of time before car companies realize that the public will go nuts over unique styling once again.     How often do we hear that our only choice for an interior color is Tan or Gray?    

    Cadillac is on the right track I think with their edgy styling.  Now if they would just bring back some flashy interior colors that compliment the exterior, we will really be happy.   Ive been saying this for 10 years now, but unique rear end styling will be back.   Can you just imaqine the new models with a sharp bladed tailfin similar to the 1957 models?     Sure some people would snicker and roll their eyes.  But Id bet it would be a big seller because people want some excitement back in their purchase.    

   David

[Bruce Reynolds # 18992]

Dave,

Cant have fins these days because think how many cyclists would get impaled as they pedaled by.   And, most of them are Greenies and you can guess who complains the most.

There were a few deaths caused by the huge fins way back when.   At least the Cadillac ones went straight up, not like the Buicks, Chryslers, Dodges, and Chevs that lookled like they were reaching out to trap the unwary as they passed.

The trouble with the interior colours now is that the stylists chose to tell us what the in colour is going to be.   And, we all know that most buyers will take what they can get.

At least Chrysler came up with the PT Cruiser and started the Retro-style in a big way.

Bruce,
The Tassie Devil(le),
60 CDV with damn sharp fins, that really hurt.

[Dave Smith]

Bruce;

   The 57 Cadillac fins (sans Eldorados) have inward slanting fins, thus much safer for cyclists.  

   Ah yes, the PT cruiser.  It sols like hot cakes. Why? because it was not only cute, but reasonably priced.   When Chevy announced its SSR retro pickup truck and Ford brought back the retro T-Bird, they made the fatal mistake of pricing them at the high end of the spectrum.     Didnt they learn anything from Henry Ford ?   Sellem cheap and make the profit in volume. The Chevy HHR will not doubt also be a failure.  

    The new XLR roadster has nice bladed rear fenders.   The STS flagship is kinda bland for my taste.  It should be the first to get the new Fins.  

David

[Don Boshara #594]

What this has to do with Technical/Authenticity escapes me. Shouldnt this be General Discussion?

[Dave Smith]

Good point. Perhaps a moderator can move this thread over to the General Discussion page.

David

[JIM CLC # 15000]

05-06-05
Dave & Don,
Sorry about the computer "screw-up.
The post left my computer in the "general Discussion Forum".
Hope it did not screw-up your day too much.
Good Luck, Jim

[David #19063]

Hey Bruce,

Yes, I complain that cars today look similar.

However, if you think about the cars of the 50s, at a glance the average non-car person could not tell the difference between my 56 Chrysler Windsor and a 56 Chevy.  They would say they look the same too.

And they probably would be right as well.

David
PS.  Personally, I think my any Windsor/New Yorker looks far better than the Chevy counterpart, however, they Chevys are worth 3-4 times as much.

[Michael Stamps 19507]

I disagree at least with my 60.  I would say 80percent of the people tell me "Nice Caddy."  15percent say "Nice car (ride)." and 5percent say "What year/make is that?"

Stampie

[Bruce Reynolds # 18992]

But David,

We are growing up with these new cars, the same as when we were growing up with the older cars, but we still cant make the new ones out.

Bruce,
The Tassie Devil(le),
60 CDV