Published August 25, 2005
NEW YORK – Moody's Investors Service Wednesday cut General Motors Corp.'s (GM) and Ford Motor Co.'s (F) debt ratings to junk status, citing continued operating losses, global competition and challenges to restructuring for long-term viability.
Moody's also cut GM's finance arm, General Motors Acceptance Corp. (search) , to junk status. The cuts affect about $170 billion of outstanding debt, Moody's said.
Moody's was the last of the three major rating services to cut the auto giant to junk status. Moody's cut GM's senior unsecured debt rating to "Ba2" from "Baa3," and GMAC's senior unsecured rating to "Ba1" from "Baa2." The outlook is negative on the new ratings.
Moody's also cut Ford's debt ratings, the second cut to junk for the No. 2 automaker. Moody's cut its ratings on Ford's finance arm but left them at investment-grade status. Most of Ford's debt is held at its finance arm, Ford Motor Credit Co (search).
Moody's cut Ford's long-term credit ratings by one notch to "Ba1," the highest junk rating, from "Baa3." It cut the long-term ratings on Ford Motor Credit by one notch to "Baa3," the lowest investment-grade rating, from "Baa2." The rating outlook for both companies is negative, meaning another rating cut is likely over the next 12 to 18 months.
In May, rating agency Standard & Poor's cut Ford and Ford Credit to junk status, citing declining sales of sports utility vehicles and trucks.