GM Being Reviewed by S&P for Possible Downgrade

[steinravnik]

GM Being Reviewed by S&P for Possible Downgrade

March 17 (Bloomberg) -- General Motors Corp., the world's largest automaker, is being reviewed by Standard & Poor's for a possible debt-rating downgrade because of the strike at supplier American Axle & Manufacturing Holdings Inc.

American Axle and GM suppliers Lear Corp. and Tenneco Inc. also are under review, S&P said today in a statement. GM currently is rated B, or five steps below investment grade.

A rating cut would boost the cost of borrowing for GM, which has had to idle all of parts of 29 North American plants since the American Axle walkout began on Feb. 26. The strike may drag on for 60 days, David Cole, chairman of the Center for Automotive Research in Ann Arbor, Michigan, said last week.

``We believe the strike has gone on long enough to possibly begin to affect the financial resources of GM and those suppliers most exposed to the automaker,'' S&P said.

American Axle, a former GM unit, is the Detroit-based automaker's biggest supplier of axles. The United Auto Workers union has cited wage, health-care and pensions as issues in the dispute with the Detroit-based supplier, which wants to cut pay and benefit costs to a range of $20 to $30 an hour from $73.48.

The companies whose debt ratings are being reviewed have adequate liquidity relative to near-term cash demands, S&P said. To resolve the CreditWatch listing, S&P said it will assess the strike's effect once production resumes.

GM spokeswoman Julie Gibson and American Axle spokeswoman Renee Rogers said their companies had no comment.

Lear's Response
Lear had $600 million in cash and an untapped $1.7 billion line of credit at the end of 2007, Chief Financial Officer Matthew Simoncini said in an interview. Only a ``handful'' of Lear's 215 factories worldwide have been affected by the strike, he said, declining to be specific.

``The liquidity concern as related to the American Axle strike is unwarranted,'' Simoncini said. ``We don't see that level of concern being warranted. They are raising issues at this point that are unfounded. I have an issue because we were singled out.''

Tenneco was disappointed by S&P's move, spokeswoman Jane Ostrander said. ``We're working very hard to minimize the impact from the strike.''

Lear is rated B+, American Axle at BB and Tenneco at BB-, S&P said in the statement. Talks between American Axle and the UAW were suspended on March 10 and resumed March 13.

GM's 8.375 percent note due in July 2033 fell 2.06 cents to 68 cents on the dollar, the lowest price since January 2006, while the yield rose to 12.6 percent, according to Trace, the NASD's bond-price reporting service.

http://www.bloomberg.com/apps/news?p...d=apdErh6WPdAg

[Tennpenn83]

Great... just great.

American Axle is now going to be the nail in the coffin for GM. Brilliant timing for a strike.

[coaster.n3rd]

FIND ANOTHER SUPPLIER!

God I hate the union.

[Bvonscott]

GM is sitting back and waiting for truck supplies to dwindle, that's all. As soon as supplies get low enough they will step in and demand talks be completed.

[mgescuro]

I would have expected a downgrade anyways, but not due to "supplier issues."
It's because the American automotive market will probably stagnate or shrink this year and possibly next due to recessionary pressures.