Ford, GM No Better Than Junk

    May 6, 2005
    WebProNews Staff

Standard and Poor’s cuts the credit rating of two Detroit automakers to junk status, sending share prices down.

The American auto industry takes another hit, as two of the Big Three automakers find their debt rated as “junk” by ratings agency Standard & Poor’s.

For the two companies, the rating means an increased difficulty in borrowing capital and precious few options for doing so.

The woes faced by American carmakers seem to accumulate without end.

Rising gas prices have lowered demands for Detroit’s priciest vehicles like SUVs. Toyota has eroded market share with cars perceived as higher in quality. And both GM and Ford face huge medical and retirement costs for former employees.

GM saw its domestic sales drop by 5% from January to April, while Ford was down 4.2%.

Moody’s Investor Services and Fitch Ratings, two other debt-rating agencies, have not followed S&P’s recommendation, and still rate the two companies as “investment grade.”

Both automakers issued statements disagreeing with S&P’s assessment, citing adequate cash and liquidity of assets to sustain operations without borrowing for the near term.

“Clearly, GM has many challenges in North America, but the company is moving aggressively to address these challenges,” the company said.

David Utter is a staff writer for WebProNews covering technology and business. Email him here.