Fitch Updates Recovery Prospects for GM in the Event of Default

NEW YORK--Sept. 19, 2006--Fitch Ratings has modified the details of its March 1, 2006 recovery analysis for General Motors (GM), available at www.fitchratings.com. Fitch now estimates a 34% recovery rate for unsecured debtholders versus an original estimate of 41% published earlier this year. The revision primarily reflects GM's recent establishment of a secured revolving credit agreement, which impairs expected recoveries for unsecured holders in the event of a default. Fitch has also modified its recovery analysis to reflect GM's ongoing restructuring efforts and updated financials.

Fitch estimates that unsecured claims would total approximately $74 billion and that GM's enterprise value available to service those claims, after extensive administrative claims, would be approximately $25 billion -- a recovery rate of 34%. This recovery rate remains within the historic corporate average of recovery values, which in Fitch's methodology translates into a Recovery Rating of 'RR4' (expected recovery of 30%-50%) for the senior unsecured debt.

The primary factor behind the lower recovery rate versus the initial scenario was the replacement of GM's unsecured revolving credit facility with a $6 billion secured credit facility, thereby subordinating the remaining unsecured debt. Fitch has assigned the new senior secured bank facility an 'RR1' (recovery of 90%-100%) based on expected full recovery for this facility in the event of a bankruptcy filing.

Fitch's analysis assumes that the sale of a 51% interest in GMAC is completed prior to any bankruptcy scenario, with GM's retained 49% interest added to the recovery values.

In a bankruptcy scenario, Fitch believes that General Motors would not seek to terminate its U.S. hourly or salaried pension plans by attempting to offload them to the Pension Benefit Guaranty Corporation (PBGC). The high asset levels and potential future asset returns on these funds, as compared to current benefit payout rates, provide some flexibility to negotiate changes to the current defined benefit program under any new labor agreement with the UAW.

Fitch's recovery analysis provides a framework for expected recoveries in the event of a bankruptcy scenario and is not meant to be a predictor of when or if a default will occur. Recovery Ratings (RR) are assigned to corporate issuers that have an Issuer Default Rating (IDR) of 'B+' or below. Fitch has an IDR of 'B' on General Motors with a Negative Rating Watch.

The full recovery analysis is available at www.fitchratings.com. Fitch's recovery analysis on Ford Motor Company, published Sept. 13, is also available.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.