General Motors Group of Companies Bond Ratings

Press Release: General Motors Group of Companies
Date of Release: Oct 23, 2001
Confirms at "A" and R-1 (low), Long-Term Trend Now Negative

David Schroeder, Kam Hon / 416-593-5577 ext.2232, ext.2243 / e-mail:
dschroeder@dbrs.com

General Motors Corporation
Rating	Trend	Rating Action	Debt Rated	
"A"	Negative	Trend Change	Long Term Debt	
R-1 (low)	Stable	Confirmed	Commercial Paper	
General Motors Acceptance Corporation of Canada (guaranteed by General
Motors Acceptance Corporation)
Rating	Trend	Rating Action	Debt Rated	
"A"	Negative	Trend Change 	Notes &Debentures	
R-1 (low)	Stable	Confirmed	Commercial Paper	
General Motors of Canada Limited
Rating	Trend	Rating Action	Debt Rated	
"A"	Negative	Trend Change 	Long Term Debt	
R-1 (low)	Stable	Confirmed	Commercial Paper	

The trend on the long term ratings of the General Motors group of
companies is being changed from Stable to Negative, while the commercial
paper ratings are confirmed with Stable trends. Currently, it appears
that most of the challenges GM faces are cyclical in nature, but the
rating trend change on the long-term debt has been made due to the
concern that several structural issues could become a bigger problem.
(1) Although overall North American market share has stabilized on gains
made in trucks, market share in cars continues to erode and the outlook
remains a challege. GM's cars plants are running at less than full
capacity utilization which has contributed to poor profitability. The
closure of Ste-Therese will only help modestly and the Company has
limited ability to make other cuts to capacity before current union
contracts expire in September 2003. (2) Competition in the highly
profitable SUV and pickup truck segments is growing, which will reduce
profit margins. (3) GM's international operations continue to
underperform, operating near breakeven and will likely take an extended
period before profits improve. (4) Although the balance sheet is
currently strong and the Company is well positioned for a short
downturn, a longer downturn could see debt levels rise significantly,
which could be problematic for the rating. The events of September 11
has worsened market demand and the decline in demand could now be more
severe. Also, the use of incentives to boost sales could pull forward
sales leading to a more prolonged downturn. (5) Currently Pension and
OPEB funding remains a long-term challenge, but is manageable. (6) The
recent rise in the Company's cost of raising funds in the capital
markets will further depress the Company's earnings and delay the
recovery in profitability.
The cyclical nature of the industry has been a major consideration
limiting the rating in the past. GM is in a much stronger position to
weather a downturn in volumes than it was during previous downturns as
seen by the following: (1) Net cash (cash plus VEBA funding less total
automotive debt) at the manufacturing company is positive and can remain
so even with a modest decline in volumes. The finance company has highly
liquid receivables with an average term under 24 months and a low loss
rate near 1%. While the Company could be forced to buy the remaining 80%
of Fiat auto it doesn't already own by 2004, Hughes represents a
significant, value to the company which could be monetized. The average
term of GM debt is over 15 years and the Company has reduced short-term
commercial paper funding from about $35 billion at year 2000 to about $8
billion currently. Capital markets are more liquid for the auto
manufacturers than in the past with the increase use of securitization.
(2) GM is in a better competitive position this cycle than last, having
spun off parts maker Delphi, and it continues to cut costs. (3)
Inflation, interest rates and oil prices, three critical issues for the
auto industry remain low.

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