GM Debt Rating May Change:

[Perian]

Rating outlook woes hit GM's corporate bonds


Reuters / March 02, 2005

NEW YORK -- Investors sold General Motors bonds on Wednesday as worries mounted that its rating outlook could be changed to negative, setting the stage for a downgrade to junk.

GM on Tuesday posted a 13 percent decline in February vehicle sales as Asian rivals continued to eat its market share.

"If they didn't already, Standard & Poor's must be getting itchy fingers at this news, and a change in the rating outlook at least to negative must be very, very close," said Suki Mann, a credit strategist at SG of Paris, in a note to clients.

S&P in January affirmed GM's debt rating at BBB-minus, one step above junk, but said it was considering changing the company's stable outlook, with a decision likely by midyear. S&P said it was not ruling out more immediate action.

A change in the outlook would signal that a cut to junk is more likely within the next two years. Downgrades to junk can raise borrowing costs dramatically.

[86fleet]

theres only one thing I can say...

[Globalist]

It's wild out there. Wall Street is becoming very nervous and is trying to re-make its new virginity post-Enron and Co.

And GM monthly sales news are not helping either, so the downgrade is most likely to happen.

[Perian]

An amazing fact:

GM common stock closed at $ 35.30 today (03/02/05).

GM common stock pays a $ 2.00 per share dividend.

That represents a return of 5.56%.

Is a dividend cut coming to preserve cash?

Only time will tell.

[ethayes]

GM needs to bet the farm like Chrysler did (three times). Having a cash cushion of $20 billion is nice, but to have cars that sell with minimal incentives and a growing market share, that is, well, priceless.

They need to make the Buick Velite ASAP not in 2007 but yesterday. And they need to make a four door version of the same. If they change the styling one iota, then the world is Toyota's

Take the money and make a stable of world class minivans for their brands with completely distinct characteristics for each. They need this last year.

If the Chevy Aveo is doing so well then import more of the Daewoo line. That is easy market share a no brainer. And of course the Camaro return would not hurt.

Bring the Cadillac BLS to America to woo singles to the brand, and a coupe version would not hurt, BMW seems to sell a lot. Throw the V-Series in there if you insist. Singles are not going to drive a family car no matter how pretty it is.

And you know what? The funny thing is they know all this they just won't do it. Okay Downgrade.

[GReekBoy]

Throw a nice 2 door tahoe/yukon in there too, that isnt too expensive and you have yourself a buyer. Hell even a escalade version.

[vdoh182]

i don think this is really going to effect them to much, some peopel say there is new "renaissance" going on b/c all the good products they here about always seem to be coming soon, but look at most of the cars they made in 99-2000, then look at most of the cars for 05-06, there is a big imprvement, they may not be amazing yet, but they r amazingly better, if they continue this momentum they will get there, u cant expect them to pull a V turn.

[Globalist]

Originally Posted by Perian

An amazing fact:

GM common stock closed at $ 35.30 today (03/02/05).

GM common stock pays a $ 2.00 per share dividend.

That represents a return of 5.56%.

Is a dividend cut coming to preserve cash?

Only time will tell.

I don't think the dividend will go away because the $2/share will shield GM's stock price if it goes south--As you mentioned, the return gets higher as the price goes down, which triggers a buy effect and helps move it north, or at least stabilize it.

[Globalist]

Originally Posted by vdoh182

i don think this is really going to effect them to much, some peopel say there is new "renaissance" going on b/c all the good products they here about always seem to be coming soon, but look at most of the cars they made in 99-2000, then look at most of the cars for 05-06, there is a big imprvement, they may not be amazing yet, but they r amazingly better, if they continue this momentum they will get there, u cant expect them to pull a V turn.

I agree with you, GM is much better compared to the 90s. GM is in a transition, and things might get worse before they get better.

[tgagneguam]

Originally Posted by Globalist

I agree with you, GM is much better compared to the 90s. GM is in a transition, and things might get worse before they get better.

Wow, it seems like this transition has been going on since Smith (Roger, not Jack) was [unfortunately] running GM. Time to see some solid results, no?

[ByTheLake]

Originally Posted by tgagneguam

Wow, it seems like this transition has been going on since Smith (Roger, not Jack) was [unfortunately] running GM. Time to see some solid results, no?

Agreed. GM has been 'turning itself around' for most of my life.

[Globalist]

Originally Posted by tgagneguam

Wow, it seems like this transition has been going on since Smith (Roger, not Jack) was [unfortunately] running GM. Time to see some solid results, no?

Indeed, it is a long transition.

And I have a funny anecdote about transitions.
When I was student, I asked my Fluid Mechanics professor a question about an interesting phenomena--Transition regimes-- because Fluids flow can be characterized as:
1) Laminar (smooth, well organized, focused)
2) Transition (???)
3) Turbulent (chaotic)
My question was: how come we know exactly how to describe mathematically Laminar and turbulent regimes, but we know nothing about transition regimes. And his answer was very simple:
"My son, Human beings call transition every thing they don't understand."

I think that through its history, GM went from turbulent (early creation) to smooth (50s - 60s) to turbulent (early 90s) and it's heading back to smooth, but it is now in the transition area. And it's well known that transition time between Turbulent regime to Laminar regime depends on how big was the chaos before.

[fan]

At this moment GM's inventories are high...
Why doesn't GM try to renegotiate with UAW?
If the UAW doesn't agree to reconsider it's position(to try understanding that their company goes through some major financial problems), the worst thing they could is to strike...but yet again the inventories are high and some two weeks production stoppage would only realign production with demand(and I don't think they will be paid during the strike also).
Also by striking, they will get more attention from "the goverment" who, afterwards, maybe will pay more attention to GM' s(+ Ford+DCX) problems.
If they agree and don't strike it's OK...if they strike it's still OK, but maybe it's worth trying.
But maybe a strike would drag down GM's bonds to junk status...this could be bad.

[yoblues]

If this happens FIRE every single GM Vice President of everything. This company is LONGGGGGGGGGGGGGGG overdue for a SUIT housecleaning.

[the Blue One]

maybe will pay more attention to GM' s(+ Ford+DCX) problems

GM's problems are of their own making. Let GM solve their own problems without any Federal money. The UAW asked for the world and GM, who NEVER thinks long term, gave it to them to preserve short term profits.

GM is long overdue to a downgrade to junk status. GMAC knows this and has been quietly making arrangements to secure additional funds later in the year that are not tied to GM's rating. You can not continue to lose market share and not expect something to happen. Meanwhile, in the RenCen (GM headquarters) it's "business as usual", pretending that a reduced market share is temporary.