Reply #12: Moody's cuts GM, Ford debt ratings to junk status [View All]

[UpInArms]

(posted blurbs after the bell yesterday)

http://today.reuters.com/business/newsarticle.aspx?type=tnBusinessNews&storyID=nN24637460&imageid=&cap=

NEW YORK, Aug 24 (Reuters) - Moody's Investors Service cut its ratings on Ford Motor Co. (F.N: Quote, Profile, Research) and General Motors Corp. (GM.N: Quote, Profile, Research) to junk status on Wednesday, the latest blow to the automakers as they battle global competition and rising costs.

The downgrades reflect challenges the automakers face in trimming their high fixed costs to become competitive over the long term, Moody's said.

Ford and General Motors have been battling fierce competition from foreign automakers and have had to offer costly discounts as surging oil prices eat into demand for their high-profit sports utility vehicles.

"I think the worst is yet to come," said Peter Morici, business professor at the University of Maryland in College Park. "I expect their market share to continue to shrink and their balance sheets to become more troubled."

Ford's downgrade will cement its status as a junk-rated credit, hampering its access to funding as it prepares a restructuring plan to return its North American vehicle operations to profitability. Standard & Poor's had cut Ford's rating to junk in May.

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