NEW YORK (Reuters) – Standard & Poor’s on Thursday cut ratings on all three major U.S. automakers deeper into junk status, citing expected losses due to higher gas prices and a weakening U.S. economy.
S&P cut its ratings for General Motors Corp (GM.N: Quote, Profile, Research, Stock Buzz), Ford Motor Co (F.N: Quote, Profile, Research, Stock Buzz) and Chrysler Automotive LLC to “B-minus,” or six levels below investment grade, from “B.” It also cut to “B-minus” from “B” the finance arms of Ford, Chrysler and GMAC, which is 49 percent owned by GM.
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For Ford, S&P cited mounting cash losses due to lower U.S. sales and a shift in demand from large pickup trucks and sport utility vehicles amid higher gas prices and the weak economy.
Automakers are struggling to survive by moving vehicle designs to fuel-efficient cars from once-profitable SUV lines.
Liquidity for all three automakers is adequate for now but will fall significantly in the second half of this year and in 2009, S&P said.
S&P estimated Ford will burn as much as $12 billion to $13 billion from its global automotive operations this year. GM could use as much as $16 billion under “fairly conservative assumptions,” S&P said.
GM this month announced a restructuring plan to cut costs by $10 billion and sell up to $4 billion in assets in a bid to shore up cash.
Addressing speculation the automakers may file for Chapter 11 bankruptcy protection, S&P said few of their problems, such as lower sales and high commodity costs, would be helped by such a filing.
GM’s benchmark 8.375 percent bonds due in 2033 fell to a record low of 49.5 cents on the dollar on Thursday, down two cents on the day, according to MarketAxess.
Ford Motor Credit’s 9.875 percent notes due in 2011 fell to 80.5 cents on the dollar, down one cent.
(Reporting by Walden Siew; Additional reporting by Dena Aubin; Editing by James Dalgleish)
Thu Jul 31, 2008