General Motors Corp., which has lost $2.2 billion since the first of the year, saw the credit ratings on its preferred stock downgraded Friday, and Standard & Poor`s Corp. indicated it may downgrade ratings on bonds and other debt issued by GM.
S&P put GM`s long-term debt and commercial paper on its Creditwatch list with negative implications, which means they could be downgraded later.
Also Friday, S&P affirmed Ford Motor Co.`s credit ratings, but said the rating outlook is negative for its long-term debt and preferred stock.
Lower credit ratings can make it more expensive to borrow or raise money in the open market.
”I`m not surprised the automotive industry is being watched,” said Michael Bowyer, auto analyst for Chicago-based research company Duff & Phelps Inc. ”Most of GM`s debt was placed on the watch list, and I wouldn`t be surprised to see it downgraded.”
Bowyer said he didn`t believe there was much GM could do to correct the problems cited by S&P, adding he didn`t think the automaker would become profitable again until 1993.
On the other hand, he said Ford was in better shape. ”Ford could turn a small profit next year,” he said.
GM, in a statement, blamed the recession for its problems.
”We feel the action taken by Standard & Poor`s is largely a reflection of the persistent recession that has gripped the nation and impacted the entire domestic auto industry,” the statement said.
Standard & Poor`s said GM`s financial results this year have ”been far worse than was assumed by S&P in February, when its ratings were
downgraded…. GM`s progress in improving its operating efficiency has been disappointing, raising the specter that wrenching new cost-cutting initiatives will be necessary.”
In contrast, S&P said Ford was benefiting from the ”relatively lean cost profile of its North American automotive operations, which should enable a return to profitability within the next two years, even if the economic recovery is only gradual.”
