Standard & Poor’s is taking theaxe to its credit ratings for the major automobile manufacturers. GM, Ford Motor,and Chrysler were cut to B- from B. GM and Ford were removed from CreditWatch with negative implications as part ofthis move. A rating of B- is six steps below the investment grade threshold.
S&P said the following in its announcement of the action:
“We believe sharply lower U.S. light-vehicle demand and the recent dramatic shift in demand away from large pickuptrucks and SUVs amid higher gas prices will complicate the turnaround efforts of all three automakers and reduce theircurrently adequate liquidity considerably over the next year and a half,” said Standard & Poor’s credit analyst Robert Schulz. “This will leave them more vulnerable to already adverse industry,economic, and credit market conditions.” The greatest threats to the ratings over thenext 18 months are the depth of economic weakness and the extent of the demand shift away from light trucks in theU.S.
