Saw this about 2 minutes before the close on scrolling news. Does it mean "bankruptcy? - no way". Or have they now opened the door a little to filing for bankruptcy?
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"GM bankruptcy not a remote possibility"
- Thread starter wilburbear
- Start date
I agree......the wording is very bad. Can be taken either way.
Today, S&P cut GM's corporate credit rating two notches to single-B. Considering that downgrade, I suspect that the "not a remote possibility" language is referring to increasing perceived risk in GM.
from: http://www2.standardandpoors.com/servlet/Satellite?pagename=sp/Page/HomePg&r=1&l=EN&b=10
General Motors Corp. Ratings Cut To 'B/B-3', Outlook Negative
Primary Credit Analysts:
Robert Schulz, CFA, New York (1) 212-438-7808;
robert_schulz@standardandpoors.com
Scott Sprinzen, New York (1) 212-438-7812;
scott_sprinzen@standardandpoors.com
Publication date: 12-Dec-05, 12:56:22 EST
Reprinted from RatingsDirect
NEW YORK (Standard & Poor's) Dec. 12, 2005--Standard & Poor's Ratings Services
said today that it lowered its corporate credit rating on General Motors Corp.
(GM) to 'B' from 'BB-' and its short-term rating to 'B-3' from 'B-2' and
removed them from CreditWatch, where they were placed on Oct. 3, 2005, with
negative implications. The outlook is negative. (The 'BB/B-1' ratings on
General Motors Acceptance Corp. [GMAC] and the 'BBB-/A-3' ratings on
Residential Capital Corp. [ResCap] remain on CreditWatch with developing
implications, reflecting the potential that GM could sell a controlling
interest in GMAC to a highly rated financial institution.) Consolidated debt
outstanding totaled $285 billion at Sept. 30, 2005.
Standard & Poor's will hold a telephone conference call on Monday, Dec.
12, 2005, at 3:30 p.m. Eastern Standard Time to discuss the rating action on
General Motors (see the call-in details below). Robert Schulz and Scott
Sprinzen, from the Standard & Poor's Corporate Auto Ratings Team, will be the
speakers for the call. At the conclusion of their remarks, they will be
available to answer questions.
"The downgrade reflects our increased skepticism about GM's ability to
turn around the performance of its North American automotive operations," said
Standard & Poor's credit analyst Robert Schulz. If recent trends persist, GM
could ultimately need to restructure its obligations (including its debt and
contractual obligations), despite its currently substantial liquidity and
management's statements that it has no intention of filing for bankruptcy.
GM has suffered meaningful market share erosion in the U.S. this year,
despite prior concerted efforts to improve the appeal of its product
offerings. At the same time, the company has experienced marked deterioration
of its product mix, given precipitous weakening of sales of its midsize and
large SUVs, products that had been highly disproportionate contributors to
GM's earnings. This product mix deterioration has partly reflected the aging
of GM's SUV models, but with SUV demand having plummeted industrywide,
particularly during the second half of 2005, it is now dubious whether GM's
new models, set to be introduced over the next year, can be counted on to help
restore the company's North American operations to profitability.
In addition, GM is paring the product scope of its brands. The company
has also announced recently that it will be undertaking yet another
significant round of production capacity cuts and workforce rationalization.
But the benefits of such measures could be undermined unless its market share
stabilizes without the company's resorting again to ruinous price discounting.
One recent positive development for GM has been the negotiation of an
agreement with the United Auto Workers providing for reduced health care
costs. Yet, this agreement (which is pending court approval) will only partly
address the competitive disadvantage posed by GM's health care burden.
Moreover, cash savings would only be realized beginning in 2008 because GM has
agreed to make $2 billion of contributions to a newly formed VEBA trust during
2006 and 2007. It remains to be seen whether GM will be able to garner further
meaningful concessions in its 2007 labor negotiations.
This year has witnessed a stunning collapse of GM's financial performance
compared with 2004 and initial expectations for 2005. In light of results
through the first nine months of 2005, we believe the full-year net loss of
GM's North American operations could approach a massive $5 billion-âbefore
substantial impairment and restructuring charges and that the company's
consolidated net loss could total about $3 billion (again before special
items). With nine-month 2005 cash outflow from automotive operations a
negative $6.6 billion (after capital expenditures, but excluding GMAC), we
expect full-year 2005 negative cash flow from automotive operations to be
substantial. GMAC's cash generation has only partly mitigated the effect of
these losses on GM's liquidity.
Deterioration of GM's credit quality has limited GMAC's funding
capabilities. On Oct. 17, 2005, GM announced that it was considering selling a
controlling interest in GMAC to restore the latter's investment-grade rating.
GM recently indicated that it is holding talks with potential investors. As we
have stated previously, we view an investment-grade rating for GMAC as
feasible if GM sells a majority stake in GMAC to a highly rated financial
institution that has a long-range strategic commitment to the automotive
finance sector. Even then, GMAC still would be exposed to risks stemming from
its role as a provider of funding support to GM's dealers and retail
customers. However, we believe a strategic majority owner would cause GMAC to
adopt a defensive underwriting posture by curtailing its funding support of
GM's business if that business were perceived to pose heightened risks to
GMAC.
One key factor in achieving an investment-grade rating would be our
conclusions about the extent to which financial support should be attributed
to the strategic partner. We will continue to monitor GM's progress in this
process and the potential for rating separation; however, if the timeframe for
a transaction gets pushed out, or if there is further deterioration at GM,
GMAC's rating could be lowered, perhaps to the same level as GM's. Ultimately,
in the absence of a transaction that will significantly limit GM's ownership
control over GMAC, the latter's ratings would be equalized again with GM's.
The ratings on ResCap are two notches above GMAC's, its direct parent,
reflecting ResCap's ability to operate its mortgage businesses separately from
GMAC's auto finance business, from which ResCap is partially insulated by
financial covenants and governance provisions. However, we continue to link
the ratings on ResCap with those on GMAC because of the latter's full
ownership of ResCap. Consequently, should the ratings on GMAC be lowered, the
ratings on ResCap would likewise be lowered by the same amount. Or, if the
ratings on GMAC are raised, as explained above, ResCap's ratings also could be
raised.
Prospects for GM's automotive operations are clouded. The ratings could
be lowered further if we came to expect that GM's substantial cash outflow
would continue beyond the next few quarters due to further setbacks, whether
GM-specific or stemming from market conditions. Even though the concern over
the situation at GM's bankrupt lead supplier, Delphi Corp., was the primary
factor behind the rating downgrade of Oct. 10, 2005, events at Delphi could
precipitate a further review if GM were to experience severe Delphi-related
operational disruptions or if GM agreed to fund a substantial portion of
Delphi's restructuring costs. GM's rating could also be jeopardized if the
company were to distribute to shareholders a meaningful portion of proceeds
generated from the sale of a controlling interest in GMAC.
GM would need to reverse its current financial and operational trends,
and sustain such a reversal, before we would revise its outlook to stable.
TELECONFERENCE DETAILS
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teleconference calls to all interested participants on a complimentary basis.
Live Dial-In Numbers:
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U.K.: (44) 20-7943-5370
Conference ID #: 5109814
Passcode: SANDP
Replay Number:
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Replay will expire on Monday, Dec. 19, 2005
Live Audio Streaming:
URL: http://www.mymeetings.com,
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Conference ID #: 5109814
Passcode: SANDP
Complete ratings information is available to subscribers of
RatingsDirect, Standard & Poor's Web-based credit analysis system, at
www.ratingsdirect.com. All ratings affected by this rating action can be found
on Standard & Poor's public Web site at www.standardandpoors.com; under Credit
Ratings in the left navigation bar, select Find a Rating, then Credit Ratings
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from: http://www2.standardandpoors.com/servlet/Satellite?pagename=sp/Page/HomePg&r=1&l=EN&b=10
General Motors Corp. Ratings Cut To 'B/B-3', Outlook Negative
Primary Credit Analysts:
Robert Schulz, CFA, New York (1) 212-438-7808;
robert_schulz@standardandpoors.com
Scott Sprinzen, New York (1) 212-438-7812;
scott_sprinzen@standardandpoors.com
Publication date: 12-Dec-05, 12:56:22 EST
Reprinted from RatingsDirect
NEW YORK (Standard & Poor's) Dec. 12, 2005--Standard & Poor's Ratings Services
said today that it lowered its corporate credit rating on General Motors Corp.
(GM) to 'B' from 'BB-' and its short-term rating to 'B-3' from 'B-2' and
removed them from CreditWatch, where they were placed on Oct. 3, 2005, with
negative implications. The outlook is negative. (The 'BB/B-1' ratings on
General Motors Acceptance Corp. [GMAC] and the 'BBB-/A-3' ratings on
Residential Capital Corp. [ResCap] remain on CreditWatch with developing
implications, reflecting the potential that GM could sell a controlling
interest in GMAC to a highly rated financial institution.) Consolidated debt
outstanding totaled $285 billion at Sept. 30, 2005.
Standard & Poor's will hold a telephone conference call on Monday, Dec.
12, 2005, at 3:30 p.m. Eastern Standard Time to discuss the rating action on
General Motors (see the call-in details below). Robert Schulz and Scott
Sprinzen, from the Standard & Poor's Corporate Auto Ratings Team, will be the
speakers for the call. At the conclusion of their remarks, they will be
available to answer questions.
"The downgrade reflects our increased skepticism about GM's ability to
turn around the performance of its North American automotive operations," said
Standard & Poor's credit analyst Robert Schulz. If recent trends persist, GM
could ultimately need to restructure its obligations (including its debt and
contractual obligations), despite its currently substantial liquidity and
management's statements that it has no intention of filing for bankruptcy.
GM has suffered meaningful market share erosion in the U.S. this year,
despite prior concerted efforts to improve the appeal of its product
offerings. At the same time, the company has experienced marked deterioration
of its product mix, given precipitous weakening of sales of its midsize and
large SUVs, products that had been highly disproportionate contributors to
GM's earnings. This product mix deterioration has partly reflected the aging
of GM's SUV models, but with SUV demand having plummeted industrywide,
particularly during the second half of 2005, it is now dubious whether GM's
new models, set to be introduced over the next year, can be counted on to help
restore the company's North American operations to profitability.
In addition, GM is paring the product scope of its brands. The company
has also announced recently that it will be undertaking yet another
significant round of production capacity cuts and workforce rationalization.
But the benefits of such measures could be undermined unless its market share
stabilizes without the company's resorting again to ruinous price discounting.
One recent positive development for GM has been the negotiation of an
agreement with the United Auto Workers providing for reduced health care
costs. Yet, this agreement (which is pending court approval) will only partly
address the competitive disadvantage posed by GM's health care burden.
Moreover, cash savings would only be realized beginning in 2008 because GM has
agreed to make $2 billion of contributions to a newly formed VEBA trust during
2006 and 2007. It remains to be seen whether GM will be able to garner further
meaningful concessions in its 2007 labor negotiations.
This year has witnessed a stunning collapse of GM's financial performance
compared with 2004 and initial expectations for 2005. In light of results
through the first nine months of 2005, we believe the full-year net loss of
GM's North American operations could approach a massive $5 billion-âbefore
substantial impairment and restructuring charges and that the company's
consolidated net loss could total about $3 billion (again before special
items). With nine-month 2005 cash outflow from automotive operations a
negative $6.6 billion (after capital expenditures, but excluding GMAC), we
expect full-year 2005 negative cash flow from automotive operations to be
substantial. GMAC's cash generation has only partly mitigated the effect of
these losses on GM's liquidity.
Deterioration of GM's credit quality has limited GMAC's funding
capabilities. On Oct. 17, 2005, GM announced that it was considering selling a
controlling interest in GMAC to restore the latter's investment-grade rating.
GM recently indicated that it is holding talks with potential investors. As we
have stated previously, we view an investment-grade rating for GMAC as
feasible if GM sells a majority stake in GMAC to a highly rated financial
institution that has a long-range strategic commitment to the automotive
finance sector. Even then, GMAC still would be exposed to risks stemming from
its role as a provider of funding support to GM's dealers and retail
customers. However, we believe a strategic majority owner would cause GMAC to
adopt a defensive underwriting posture by curtailing its funding support of
GM's business if that business were perceived to pose heightened risks to
GMAC.
One key factor in achieving an investment-grade rating would be our
conclusions about the extent to which financial support should be attributed
to the strategic partner. We will continue to monitor GM's progress in this
process and the potential for rating separation; however, if the timeframe for
a transaction gets pushed out, or if there is further deterioration at GM,
GMAC's rating could be lowered, perhaps to the same level as GM's. Ultimately,
in the absence of a transaction that will significantly limit GM's ownership
control over GMAC, the latter's ratings would be equalized again with GM's.
The ratings on ResCap are two notches above GMAC's, its direct parent,
reflecting ResCap's ability to operate its mortgage businesses separately from
GMAC's auto finance business, from which ResCap is partially insulated by
financial covenants and governance provisions. However, we continue to link
the ratings on ResCap with those on GMAC because of the latter's full
ownership of ResCap. Consequently, should the ratings on GMAC be lowered, the
ratings on ResCap would likewise be lowered by the same amount. Or, if the
ratings on GMAC are raised, as explained above, ResCap's ratings also could be
raised.
Prospects for GM's automotive operations are clouded. The ratings could
be lowered further if we came to expect that GM's substantial cash outflow
would continue beyond the next few quarters due to further setbacks, whether
GM-specific or stemming from market conditions. Even though the concern over
the situation at GM's bankrupt lead supplier, Delphi Corp., was the primary
factor behind the rating downgrade of Oct. 10, 2005, events at Delphi could
precipitate a further review if GM were to experience severe Delphi-related
operational disruptions or if GM agreed to fund a substantial portion of
Delphi's restructuring costs. GM's rating could also be jeopardized if the
company were to distribute to shareholders a meaningful portion of proceeds
generated from the sale of a controlling interest in GMAC.
GM would need to reverse its current financial and operational trends,
and sustain such a reversal, before we would revise its outlook to stable.
TELECONFERENCE DETAILS
The call will begin promptly at the time indicated. Please call at least 20
minutes before the scheduled start of the call to complete the pre-call
registration process.
Please note that Standard & Poor's offers all of its broadcast
teleconference calls to all interested participants on a complimentary basis.
Live Dial-In Numbers:
U.S./All others: (1) 210-234-9748
U.K.: (44) 20-7943-5370
Conference ID #: 5109814
Passcode: SANDP
Replay Number:
(1) 203-369-0700
Replay will expire on Monday, Dec. 19, 2005
Live Audio Streaming:
URL: http://www.mymeetings.com,
Under "Events," select "Join an event"
Conference ID #: 5109814
Passcode: SANDP
Complete ratings information is available to subscribers of
RatingsDirect, Standard & Poor's Web-based credit analysis system, at
www.ratingsdirect.com. All ratings affected by this rating action can be found
on Standard & Poor's public Web site at www.standardandpoors.com; under Credit
Ratings in the left navigation bar, select Find a Rating, then Credit Ratings
Search.
Disclaimers Privacy Notice Terms of Use Regulatory Disclosures Site Map Help
Copyright (c) Standard & Poor's, a division of The McGraw-Hill Companies, Inc. All rights reserved.
Seems pretty straightforward wording to me. You just re-wrote it wrong......
S&P: GM Bankruptcy "Isn't a Farfetched Possibility"
Dec 12 at 15:58
By Simona Covel, Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--A bankruptcy filing "isn't a farfetched possibility"
for General Motors Corp. (GM), Standard & Poor's analysts said Monday following
a two-notch ratings downgrade of the auto maker's credit.
The possibility of a restructuring, however - either in or out of court -
isn't any more acute than for other single-B-rated companies, the analysts said.
S&P cut GM to single-B earlier on Monday, from double-B-minus.
On a conference call with investors and analysts, S&P ratings officials
faced a slew of questions on potential bankruptcy scenarios for the Detroit
giant, as well as questions regarding GM's planned sale of a majority stake in
its financing unit, General Motors Acceptance Corp.
The ratings agency expressed concern that GM will be able to turn around
its sagging North American sales. Pressure from rising healthcare costs and a
possible worker strike at bankrupt parts supplier Delphi Corp. (DPHIQ) also
weigh on the ratings outlook.
S&P, though, left GMAC's double-B rating alone pending the outcome of the
planned sale, which GM has said is designed to return the finance company to
investment grade status.
While S&P analysts said they view an investment grade rating as feasible
for GMAC, their analysis is predicated on the idea that GMAC will be acquired by
a highly-rated financial institution. Regarding the possibility that a private
equity or other buyer could be involved, "we wouldn't get the same feeling of
comfort from those alternative approaches," said S&P auto analyst Scott
Sprinzen.
"It will be more difficult to get the desired investment grade outcome
following other such approaches," he added.
Monday's downgrade took some market participants aback. S&P indicated in
earlier statements that it was planning to conclude a review of GM's ratings by
mid-to-late January. However, Sprinzen said simply, "we did reach a conclusion (
on the rating). We didn't think it was in anyone's interest to prolong the
review."
In response to the downgrade, GM spokeswoman Gina Proia said the company
has " an aggressive and well-thought-out strategy to turn around our North
American business, and we're making progress in some important areas."
That progress, she said, includes GM's recently expanded plan to cut
30,000 jobs and close operations at nine North American factories, for a total
savings of $7 billion by the end of next year.
"Certainly things would be much worse for the company if they hadn't taken
this latest round of downsizing," Sprinzen said.
GM's North American operations have bled more than $4 billion so far
this year, but the company still has $19 billion in cash reserve. Even so,
said S&P's Sprinzen, "it would be possible to file (for bankruptcy) with a great
deal of liquidity still available to them."
If a sale of GMAC falls through, Sprinzen said, its ratings will be
lowered to that of its auto maker parent. An investment grade rating for GMAC
isn't out of the question if GM sheds, for example, its residential mortgage
unit Residential Capital Corp., Sprinzen said. "We would have to see how the
whole transaction is structured," he said.
If no component of GMAC is sold and it remains a wholly-owned part of GM,
Sprinzen noted that in the case of a GM bankruptcy GMAC would probably end up in
court, too. "It's our view that it's most likely that a GM filing would
ultimately precipitate one at GMAC," he said.
GM has about $285 billion in total debt outstanding. Most of that is
held by GMAC.
-Dow Jones Newswires
S&P: GM Bankruptcy "Isn't a Farfetched Possibility"
Dec 12 at 15:58
By Simona Covel, Of DOW JONES NEWSWIRES
NEW YORK (Dow Jones)--A bankruptcy filing "isn't a farfetched possibility"
for General Motors Corp. (GM), Standard & Poor's analysts said Monday following
a two-notch ratings downgrade of the auto maker's credit.
The possibility of a restructuring, however - either in or out of court -
isn't any more acute than for other single-B-rated companies, the analysts said.
S&P cut GM to single-B earlier on Monday, from double-B-minus.
On a conference call with investors and analysts, S&P ratings officials
faced a slew of questions on potential bankruptcy scenarios for the Detroit
giant, as well as questions regarding GM's planned sale of a majority stake in
its financing unit, General Motors Acceptance Corp.
The ratings agency expressed concern that GM will be able to turn around
its sagging North American sales. Pressure from rising healthcare costs and a
possible worker strike at bankrupt parts supplier Delphi Corp. (DPHIQ) also
weigh on the ratings outlook.
S&P, though, left GMAC's double-B rating alone pending the outcome of the
planned sale, which GM has said is designed to return the finance company to
investment grade status.
While S&P analysts said they view an investment grade rating as feasible
for GMAC, their analysis is predicated on the idea that GMAC will be acquired by
a highly-rated financial institution. Regarding the possibility that a private
equity or other buyer could be involved, "we wouldn't get the same feeling of
comfort from those alternative approaches," said S&P auto analyst Scott
Sprinzen.
"It will be more difficult to get the desired investment grade outcome
following other such approaches," he added.
Monday's downgrade took some market participants aback. S&P indicated in
earlier statements that it was planning to conclude a review of GM's ratings by
mid-to-late January. However, Sprinzen said simply, "we did reach a conclusion (
on the rating). We didn't think it was in anyone's interest to prolong the
review."
In response to the downgrade, GM spokeswoman Gina Proia said the company
has " an aggressive and well-thought-out strategy to turn around our North
American business, and we're making progress in some important areas."
That progress, she said, includes GM's recently expanded plan to cut
30,000 jobs and close operations at nine North American factories, for a total
savings of $7 billion by the end of next year.
"Certainly things would be much worse for the company if they hadn't taken
this latest round of downsizing," Sprinzen said.
GM's North American operations have bled more than $4 billion so far
this year, but the company still has $19 billion in cash reserve. Even so,
said S&P's Sprinzen, "it would be possible to file (for bankruptcy) with a great
deal of liquidity still available to them."
If a sale of GMAC falls through, Sprinzen said, its ratings will be
lowered to that of its auto maker parent. An investment grade rating for GMAC
isn't out of the question if GM sheds, for example, its residential mortgage
unit Residential Capital Corp., Sprinzen said. "We would have to see how the
whole transaction is structured," he said.
If no component of GMAC is sold and it remains a wholly-owned part of GM,
Sprinzen noted that in the case of a GM bankruptcy GMAC would probably end up in
court, too. "It's our view that it's most likely that a GM filing would
ultimately precipitate one at GMAC," he said.
GM has about $285 billion in total debt outstanding. Most of that is
held by GMAC.
-Dow Jones Newswires
Yes, this is the way I initially read it - that the door is now opening a little for a bankruptcy filing.
If they go bankrupt and get rid of their huge underfunded pension fund... then the PBGC gets the first dibs on assets. So GM won't go bankrupt yet, as they still have lots of cash to burn.