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DCR Assigns 'D-1+' to General Motors Commercial Paper

20 August 1997

DCR Assigns 'D-1+' to General Motors Commercial Paper

    CHICAGO, Aug. 20 -- Duff & Phelps Credit Rating Co. (DCR)
assigned a short-term debt rating of 'D-1+' (D-One-Plus) to the $1 million
commercial paper program being initiated by General Motors Corporation.  GM's
long-term debt is rated 'A-' (Single-A-Minus) and its preference stocks are
rated 'BBB+' (Triple-B-Plus).
    The commercial paper notes will be general, unsecured obligations of GM
Corp., in maturities ranging from one to 270 days, with no automatic renewal
or rollover.  GM will use the proceeds of the new commercial paper program to
add flexibilty in managing the liquidity of its corporate headquarters and its
worldwide manufacturing operations.
    The commercial paper rating particularly reflects GM's comparatively large
cash reserves and expectations that GM's operations will continue to generate
free cash flow.  As of June 30, 1997, GM's manufacturing operations had a
consolidated cash balance of $14.9 billion versus total debt of $7.4 billion,
which includes $1.3 billion of short-term debt and current maturities.  GM's
financial strategy continues to include a $13 billion cash balance target as
protection for its automotive operations against a potential economic
downturn.
    GM's cash flow is expected to remain strong due to the continuation of a
relatively strong North American vehicle market, now in an unprecedented fifth
straight year of total volume of 16 million or more units.  GM's international
automotive operations are among the most profitable in the industry, but GM is
building new plants in many emerging markets, and this heavy investment may
keep international net cash flows from being significantly above break-even
until late 1998 or 1999.  Also, GM is expected to continue to return free cash
flow to shareholders via discretionary stock repurchases.
    General Motors Acceptance Corp. (GMAC), GM's financial services
subsidiary, will act as dealer agent for placing the notes.  GMAC is a large,
experienced direct issuer of commercial paper, with typically $20 billion or
more in notes outstanding.  GM Corp.'s rating of 'D-1+' is higher than GMAC's
'D-1' (D-One) commercial paper rating due solely to the very strong liquidity
support of GM Corp.'s cash reserves, which DCR believes outweighs the shared
business risks and close financial and marketing ties between GM Corp. and
GMAC that typically drive equivalent ratings for a parent and subsidiary.
    GM's ratings anticipate its plan to spin off its Hughes Aircraft defense
and aerospace business later this year.  The spinoff, like GM's 1996 spinoff
of Electronic Data Systems, should not materially impact GM's
creditworthiness.  While GM will lose some product diversification with
the spinoff, this is offset by the other parts of the plan, such as the
$4 billion cash infusion into the remaining Hughes telecommunications and
space unit and by the cost and revenue synergies possible after GM resumes
direct control of Delco Electronics, which is currently another Hughes unit.

SOURCE  Duff & Phelps Credit Rating Co.