Ford & GM cut to 'junk' status
5/5/05, 12:52 PM
#1
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S&P Cuts GM, Ford Credit Ratings to 'Junk'
May 5, 2:13 PM (ET)
DETROIT (AP) - Standard & Poor's Ratings Services cut its corporate credit ratings to junk status for both General Motors Corp. (GM) and Ford Motor Co. (F), a significant blow that will increase borrowing costs and limit fund-raising options for the nation's two biggest automakers.
Shares of both companies fell 5 percent or more after the Thursday's downgrades, and the news sent the overall market lower.
The decision by one of the nation's 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.
The credit ratings agency said its downgrade of GM's long-term rating below investment-grade status reflects its conclusion that management's current strategies may not be effective in dealing with the automaker's competitive disadvantages.
In a statement, GM said it was disappointed with S&P's decision but that it and its finance arm, GMAC, have adequate cash and liquidity to fund their operations "for the foreseeable future."
"Clearly, GM has many challenges in North America, but the company is moving aggressively to address these challenges," the company said.
It said its greatest immediate concern for Ford is the prospect that its sport utility vehicle business will not be able to generate the profitability it's enjoyed historically. Ford's 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.
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. Both GM and Ford had held credit ratings from S&P that were at the lowest level of the agency's 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.
GM's consolidated debt as of March 31 was $291.8 billion, while Ford's 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.
S&P said the outlook was negative for both of the automakers.
The announcement came only a day after billionaire Kirk Kerkorian jolted GM shares higher by offering to invest nearly $870 million in the automaker. Kerkorian's Tracinda Corp. offered to pay $868 million for a nearly 5 percent stake, which would boost Tracinda's holdings to about 9 percent and make Kerkorian one of GM's largest shareholders.
GM shares fell to a 10-year low in April after the company reported a $1.1 billion loss for the first quarter. Its sales have slumped in recent months, including those of its most profitable sport utility vehicles, as gasoline prices marched higher. And while GM executives complain about huge increases in medical insurance costs, the United Auto Workers union has said it's not interested in reopening contract talks before 2007 to address those expenses.
GM shares dropped $1.69, or 5.2 percent, to $31.11 while Ford shares fell 62 cents, or 6.1 percent, to $9.54 in afternoon trading on the New York Stock Exchange.
May 5, 2:13 PM (ET)
DETROIT (AP) - Standard & Poor's Ratings Services cut its corporate credit ratings to junk status for both General Motors Corp. (GM) and Ford Motor Co. (F), a significant blow that will increase borrowing costs and limit fund-raising options for the nation's two biggest automakers.
Shares of both companies fell 5 percent or more after the Thursday's downgrades, and the news sent the overall market lower.
The decision by one of the nation's 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.
The credit ratings agency said its downgrade of GM's long-term rating below investment-grade status reflects its conclusion that management's current strategies may not be effective in dealing with the automaker's competitive disadvantages.
In a statement, GM said it was disappointed with S&P's decision but that it and its finance arm, GMAC, have adequate cash and liquidity to fund their operations "for the foreseeable future."
"Clearly, GM has many challenges in North America, but the company is moving aggressively to address these challenges," the company said.
It said its greatest immediate concern for Ford is the prospect that its sport utility vehicle business will not be able to generate the profitability it's enjoyed historically. Ford's 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.
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. Both GM and Ford had held credit ratings from S&P that were at the lowest level of the agency's 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.
GM's consolidated debt as of March 31 was $291.8 billion, while Ford's 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.
S&P said the outlook was negative for both of the automakers.
The announcement came only a day after billionaire Kirk Kerkorian jolted GM shares higher by offering to invest nearly $870 million in the automaker. Kerkorian's Tracinda Corp. offered to pay $868 million for a nearly 5 percent stake, which would boost Tracinda's holdings to about 9 percent and make Kerkorian one of GM's largest shareholders.
GM shares fell to a 10-year low in April after the company reported a $1.1 billion loss for the first quarter. Its sales have slumped in recent months, including those of its most profitable sport utility vehicles, as gasoline prices marched higher. And while GM executives complain about huge increases in medical insurance costs, the United Auto Workers union has said it's not interested in reopening contract talks before 2007 to address those expenses.
GM shares dropped $1.69, or 5.2 percent, to $31.11 while Ford shares fell 62 cents, or 6.1 percent, to $9.54 in afternoon trading on the New York Stock Exchange.
5/5/05, 02:21 PM
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holderca1, junk is a term used for bonds that are more speculative in nature.
FR200, the credit rating affects the stock price, because as the rating slips, some bonds become due, and some mutual funds cannot hold stock in companies that hold a 'junk' status, and there fore must sell.
FR200, the credit rating affects the stock price, because as the rating slips, some bonds become due, and some mutual funds cannot hold stock in companies that hold a 'junk' status, and there fore must sell.
5/5/05, 03:06 PM
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Hopefully when or should I say if oil prices drop after drilling in Alaska the SUV sales will pick up some more. Until then I'll keep doing my part and only buying Ford.
My wife found a nice Explorer that she wants. XLT, fully loaded. Dark red with silver trim, very sharp!
My wife found a nice Explorer that she wants. XLT, fully loaded. Dark red with silver trim, very sharp!
5/5/05, 03:59 PM
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5/5/05, 04:00 PM
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Originally posted by 1999 Black 35th GT@May 5, 2005, 4:09 PM
Hopefully when or should I say if oil prices drop after drilling in Alaska the SUV sales will pick up some more. Until then I'll keep doing my part and only buying Ford.
My wife found a nice Explorer that she wants. XLT, fully loaded. Dark red with silver trim, very sharp!
Hopefully when or should I say if oil prices drop after drilling in Alaska the SUV sales will pick up some more. Until then I'll keep doing my part and only buying Ford.
My wife found a nice Explorer that she wants. XLT, fully loaded. Dark red with silver trim, very sharp!
5/5/05, 06:47 PM
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Originally posted by Fordracing200@May 5, 2005, 2:09 PM
yah well, i like FORD and i dont care about their credit, its their problem, now stock is another thing
yah well, i like FORD and i dont care about their credit, its their problem, now stock is another thing
I know know most of you here are true Ford fans when it comes to their vehicles but the company as a whole is not doing very well. They slashed their quartely earnings report and erased their annual per share earnings not long ago. The bond rating downgrade should have come as no surprise.
Now I wonder if the stock dividend is in jeopardy as well.
They may sell all the Mustangs they build but it's a relatively small percentage of Ford's overall vehicle sales--and a lot of those go to rental fleets with a very small margin.
Guys and gals, let's face it. Both Ford and GM are in serious trouble right now.
5/5/05, 07:53 PM
#10
Chrysler was downgraded to junk bond status and survived-twice
I think Ford has the foundation set for a comeback in terms of car sales.
Now more than ever, the launch of the Fusion is critical. I personally think the car is gorgeous and will be a winner as long as the fit & finish is good and there are no recalls. At the same time, I am sure Ford is going forward full steam with a refreshening of the 500. I believe that is part of the reason of the slow sales, many of the people who would consider buying one are waiting for the bigger engine and restyled front end.
GM is also in a bad hole, if gas prices keep going up, their gamble in rushing the new trucks/suv's out to market will cause an explosion. Personally, I think GM is going to go through tough times the next few years and then will have a huge showdown with the UAW in 2007.
I think Ford has the foundation set for a comeback in terms of car sales.
Now more than ever, the launch of the Fusion is critical. I personally think the car is gorgeous and will be a winner as long as the fit & finish is good and there are no recalls. At the same time, I am sure Ford is going forward full steam with a refreshening of the 500. I believe that is part of the reason of the slow sales, many of the people who would consider buying one are waiting for the bigger engine and restyled front end.
GM is also in a bad hole, if gas prices keep going up, their gamble in rushing the new trucks/suv's out to market will cause an explosion. Personally, I think GM is going to go through tough times the next few years and then will have a huge showdown with the UAW in 2007.
5/5/05, 08:06 PM
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Good point about Crysler but you may recall that when Lee Iococca went hat in hand to Uncle Sugar he got his palm crossed with some very long green.
I hope you're right about the Fusion. I still think Ford is in for one long uphill climb. I hope they make it.
I hope you're right about the Fusion. I still think Ford is in for one long uphill climb. I hope they make it.
5/6/05, 09:07 AM
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Originally posted by Galaxie@May 5, 2005, 9:56 PM
Chrysler was downgraded to junk bond status and survived-twice
I think Ford has the foundation set for a comeback in terms of car sales.
Now more than ever, the launch of the Fusion is critical. I personally think the car is gorgeous and will be a winner as long as the fit & finish is good and there are no recalls. At the same time, I am sure Ford is going forward full steam with a refreshening of the 500. I believe that is part of the reason of the slow sales, many of the people who would consider buying one are waiting for the bigger engine and restyled front end.
GM is also in a bad hole, if gas prices keep going up, their gamble in rushing the new trucks/suv's out to market will cause an explosion. Personally, I think GM is going to go through tough times the next few years and then will have a huge showdown with the UAW in 2007.
Chrysler was downgraded to junk bond status and survived-twice
I think Ford has the foundation set for a comeback in terms of car sales.
Now more than ever, the launch of the Fusion is critical. I personally think the car is gorgeous and will be a winner as long as the fit & finish is good and there are no recalls. At the same time, I am sure Ford is going forward full steam with a refreshening of the 500. I believe that is part of the reason of the slow sales, many of the people who would consider buying one are waiting for the bigger engine and restyled front end.
GM is also in a bad hole, if gas prices keep going up, their gamble in rushing the new trucks/suv's out to market will cause an explosion. Personally, I think GM is going to go through tough times the next few years and then will have a huge showdown with the UAW in 2007.
Bingo. Even if the stocks drop I'm still gonna go with the safer vehicle which is the FordDoug,
yes she is a Honda fan but she has told me more and more lately that the imports just aren't keeping up with design and quality in her opinion. We test drove an explorer and the fit and finish is far superior to any other SUV out there in its class. The 4runner was cheap and whoever designed it must have gotten their education at community college (no offense to those who went to CC, I went too) the Pilot was just ughh, and the durango was just as bad.
BTW anyone hear who got 5 stars all around for the crash test.... yep you guessed it the 500!!!
5/6/05, 01:24 PM
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the new dakota sux as bad as the durango. yah, the people who hate the 500, their it is, first try 5 stars without side air bags!!!!! ha ha, i bet Toyotas CEO went to CC 
The problem with the tires one explorers was because people didnt put the recommended tire pressure in the tires. put the amount of pressure in the tires that is written on the tag on the door jam, not what the tire sidewall says, the sidewall is for the tire, not for the vehicle.
The problem with the tires one explorers was because people didnt put the recommended tire pressure in the tires. put the amount of pressure in the tires that is written on the tag on the door jam, not what the tire sidewall says, the sidewall is for the tire, not for the vehicle.
5/6/05, 03:40 PM
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Hey, whats up Andy, long time no talk. Your right about some of the import styling, the Ridgelime is just plain FUGLY, LOL. I wouldn't worry too much right now about the "Junk Bond" rating. If anyone remembers a long time ago, Chrysler was thisclose to going under. Ford and GM came together to get them afloat, thought they won't actually admit to this. I believe this was back in the early 80's. Just remember, the BIG 3 need each other. There is NO WAY either GM or Ford would ever go under. This would never happen. The govenment wouldn't let it happen. I personally have a good amount of Ford stock, and I'm not too worried. I am hanging onto it for the long haul, when I am in my mid 50's 20 years from now. So whatever it is doing now, I am not too concerned. If I was more into flipping stock for quick profit, YES, then I would be worried.
To get them on the right track, the Fusion launch will be one of the most important launches in recent years of a car for Ford. This will IMO, help out alot, as it is a great looking car, has alot of options, its priced right, and the gas mileage of the 4-cylinder will bring in people who rouinely go after the low end Accords, and Camrys. It will get better, it will just take some time. Keep the faith. :flag2:
To get them on the right track, the Fusion launch will be one of the most important launches in recent years of a car for Ford. This will IMO, help out alot, as it is a great looking car, has alot of options, its priced right, and the gas mileage of the 4-cylinder will bring in people who rouinely go after the low end Accords, and Camrys. It will get better, it will just take some time. Keep the faith.
:flag2:
5/6/05, 04:17 PM
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Originally posted by 05fordgt@May 6, 2005, 5:43 PM
Hey, whats up Andy, long time no talk. Your right about some of the import styling, the Ridgelime is just plain FUGLY, LOL. I wouldn't worry too much right now about the "Junk Bond" rating. If anyone remembers a long time ago, Chrysler was thisclose to going under. Ford and GM came together to get them afloat, thought they won't actually admit to this. I believe this was back in the early 80's. Just remember, the BIG 3 need each other. There is NO WAY either GM or Ford would ever go under. This would never happen. The govenment wouldn't let it happen. I personally have a good amount of Ford stock, and I'm not too worried. I am hanging onto it for the long haul, when I am in my mid 50's 20 years from now. So whatever it is doing now, I am not too concerned. If I was more into flipping stock for quick profit, YES, then I would be worried.
To get them on the right track, the Fusion launch will be one of the most important launches in recent years of a car for Ford. This will IMO, help out alot, as it is a great looking car, has alot of options, its priced right, and the gas mileage of the 4-cylinder will bring in people who rouinely go after the low end Accords, and Camrys. It will get better, it will just take some time. Keep the faith. :flag2:
Hey, whats up Andy, long time no talk. Your right about some of the import styling, the Ridgelime is just plain FUGLY, LOL. I wouldn't worry too much right now about the "Junk Bond" rating. If anyone remembers a long time ago, Chrysler was thisclose to going under. Ford and GM came together to get them afloat, thought they won't actually admit to this. I believe this was back in the early 80's. Just remember, the BIG 3 need each other. There is NO WAY either GM or Ford would ever go under. This would never happen. The govenment wouldn't let it happen. I personally have a good amount of Ford stock, and I'm not too worried. I am hanging onto it for the long haul, when I am in my mid 50's 20 years from now. So whatever it is doing now, I am not too concerned. If I was more into flipping stock for quick profit, YES, then I would be worried.
To get them on the right track, the Fusion launch will be one of the most important launches in recent years of a car for Ford. This will IMO, help out alot, as it is a great looking car, has alot of options, its priced right, and the gas mileage of the 4-cylinder will bring in people who rouinely go after the low end Accords, and Camrys. It will get better, it will just take some time. Keep the faith.
:flag2:Hey Jeff, How's it going?
Now guys I just want to say that this gentleman right here knows exactly what he is talking about. As much as I dislike GM I completely agree that they do need each other. This is just a temporary lapse. No one stays in first place forever. Which means a certain asian company that I tend to dislike will probably also suffer a lapse one of these days too. Also I'm guessing that it takes a while for people to start catching on to the new models when they are so accustomed to the cars they've been driving for years.
Also I noticed over the last few years that Consumer Reports and many other magazines have been rating the Fords better and better each year!
Thanks for the input Jeff, its good to see information from the inside!
Oh and by the way, we may be calling upon your services in the next year. The wifey wants an Explorer or Escape real bad!
5/6/05, 05:40 PM
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Hey Andy, I will be more than happy to help you and your wife find an Escape or Explorer that you both like. Just give me a call when the time is right for you guy. Talk to you soon. . And buy the way, the Ford GT may be coming out of the showroom on Wednesday to go to a local car show. Still up in the air, but I think it will be a go. The cool thing, I get to sit with it for the few hours where the show is at. 
. And buy the way, the Ford GT may be coming out of the showroom on Wednesday to go to a local car show. Still up in the air, but I think it will be a go. The cool thing, I get to sit with it for the few hours where the show is at.
5/6/05, 06:05 PM
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Originally posted by 05fordgt@May 6, 2005, 7:43 PM
Hey Andy, I will be more than happy to help you and your wife find an Escape or Explorer that you both like. Just give me a call when the time is right for you guy. Talk to you soon. . And buy the way, the Ford GT may be coming out of the showroom on Wednesday to go to a local car show. Still up in the air, but I think it will be a go. The cool thing, I get to sit with it for the few hours where the show is at.
Hey Andy, I will be more than happy to help you and your wife find an Escape or Explorer that you both like. Just give me a call when the time is right for you guy. Talk to you soon.
. And buy the way, the Ford GT may be coming out of the showroom on Wednesday to go to a local car show. Still up in the air, but I think it will be a go. The cool thing, I get to sit with it for the few hours where the show is at. Oh you are so lucky, though you're going to have to clean all of the drool off
We will sure give you a call when its time. Keep in touch!
5/6/05, 07:24 PM
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Big 3 won't go down because they can't go down. They are way to powerfull to go down just because they are losing right now.
But they also won't ever make profit like Imports do. Big 3 are losing to Imports on home court; I don't even wanna think how "good" Big 3 would do in Asia or even Europe (just to make things clear, European Ford is not as same as American Ford).
But they also won't ever make profit like Imports do. Big 3 are losing to Imports on home court; I don't even wanna think how "good" Big 3 would do in Asia or even Europe (just to make things clear, European Ford is not as same as American Ford).
5/7/05, 07:50 AM
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Originally posted by 1999 Black 35th GT+May 6, 2005, 5:20 PM--><div class='quotetop'>QUOTE(1999 Black 35th GT @ May 6, 2005, 5:20 PM)</div><div class='quotemain'>
Hey Jeff, How's it going? Now guys I just want to say that this gentleman right here knows exactly what he is talking about. As much as I dislike GM I completely agree that they do need each other. This is just a temporary lapse. No one stays in first place forever. Which means a certain asian company that I tend to dislike will probably also suffer a lapse one of these days too.
Also I'm guessing that it takes a while for people to start catching on to the new models when they are so accustomed to the cars they've been driving for years.
Also I noticed over the last few years that Consumer Reports and many other magazines have been rating the Fords better and better each year!
Thanks for the input Jeff, its good to see information from the inside!
Oh and by the way, we may be calling upon your services in the next year. The wifey wants an Explorer or Escape real bad!
[/b]
Originally posted by 05fordgt@May 6, 2005, 5:43 PM
Hey, whats up Andy, long time no talk. Your right about some of the import styling, the Ridgelime is just plain FUGLY, LOL. I wouldn't worry too much right now about the "Junk Bond" rating. If anyone remembers a long time ago, Chrysler was thisclose to going under. Ford and GM came together to get them afloat, thought they won't actually admit to this. I believe this was back in the early 80's. Just remember, the BIG 3 need each other. There is NO WAY either GM or Ford would ever go under. This would never happen. The govenment wouldn't let it happen. I personally have a good amount of Ford stock, and I'm not too worried. I am hanging onto it for the long haul, when I am in my mid 50's 20 years from now. So whatever it is doing now, I am not too concerned. If I was more into flipping stock for quick profit, YES, then I would be worried.
To get them on the right track, the Fusion launch will be one of the most important launches in recent years of a car for Ford. This will IMO, help out alot, as it is a great looking car, has alot of options, its priced right, and the gas mileage of the 4-cylinder will bring in people who rouinely go after the low end Accords, and Camrys. It will get better, it will just take some time. Keep the faith. :flag2:
Hey, whats up Andy, long time no talk. Your right about some of the import styling, the Ridgelime is just plain FUGLY, LOL. I wouldn't worry too much right now about the "Junk Bond" rating. If anyone remembers a long time ago, Chrysler was thisclose to going under. Ford and GM came together to get them afloat, thought they won't actually admit to this. I believe this was back in the early 80's. Just remember, the BIG 3 need each other. There is NO WAY either GM or Ford would ever go under. This would never happen. The govenment wouldn't let it happen. I personally have a good amount of Ford stock, and I'm not too worried. I am hanging onto it for the long haul, when I am in my mid 50's 20 years from now. So whatever it is doing now, I am not too concerned. If I was more into flipping stock for quick profit, YES, then I would be worried.
To get them on the right track, the Fusion launch will be one of the most important launches in recent years of a car for Ford. This will IMO, help out alot, as it is a great looking car, has alot of options, its priced right, and the gas mileage of the 4-cylinder will bring in people who rouinely go after the low end Accords, and Camrys. It will get better, it will just take some time. Keep the faith.
:flag2:Hey Jeff, How's it going?
Now guys I just want to say that this gentleman right here knows exactly what he is talking about. As much as I dislike GM I completely agree that they do need each other. This is just a temporary lapse. No one stays in first place forever. Which means a certain asian company that I tend to dislike will probably also suffer a lapse one of these days too. Also I'm guessing that it takes a while for people to start catching on to the new models when they are so accustomed to the cars they've been driving for years.
Also I noticed over the last few years that Consumer Reports and many other magazines have been rating the Fords better and better each year!
Thanks for the input Jeff, its good to see information from the inside!
Oh and by the way, we may be calling upon your services in the next year. The wifey wants an Explorer or Escape real bad!
[/b]
My dad rode in a new escape and said they ride like shi*, and he drives a half ton truck everyday, hes not very picky about that stuff normally, so i would lean towards the explorer if I were you.
<!--QuoteBegin-Red Star@May 6, 2005, 8:27 PM
Big 3 won't go down because they can't go down. They are way to powerfull to go down just because they are losing right now.
But they also won't ever make profit like Imports do. Big 3 are losing to Imports on home court; I don't even wanna think how "good" Big 3 would do in Asia or even Europe (just to make things clear, European Ford is not as same as American Ford).
[/quote]
Imports cant match dodge and ford's qaulity, they arent taking over anyways, how many toyota trucks do u see on the road compared to f-series?