GM & GMAC Ratings Raised by S&P; Outlook Stable
27 January 1998
GM & GMAC Ratings Raised by S&P; Outlook Stable
NEW YORK, Jan. 27 -- Standard & Poor's today raised its
corporate credit, senior debt, and commercial paper ratings on General Motors
Corp. (GM) and its subsidiary, General Motors Acceptance Corp. (GMAC) (see
table below).
Senior debt and commercial paper ratings on various overseas GMAC
affiliates were likewise raised by Standard & Poor's. Standard & Poor's also
raised its preference stock ratings on GM (see table below). The rating
outlook is now stable.
At the same time, Standard & Poor's affirmed its ratings on GM's
subsidiary, Hughes Electronics Corp. and on Hughes Electronics' affiliate,
PanAmSat Corp (see table below). The rating outlook remains developing.
GM's consolidated debt outstanding totals approximately $93 billion. The
upgrades reflect GM's further demonstration of progress in bolstering the
competitiveness of its North American automotive operations(NAO). NAO's cost
position has improved significantly as a result of ongoing efforts to contain
material costs, enhance labor productivity, lower employment levels, and
rationalize its internal components operations, while streamlining its
automotive product portfolio. Also, the generally favorable reception of new
vehicles launched over the past year has stabilized its market share.
GM has generated very strong overall earnings and cash flow over the past
four years, largely reflecting the effectiveness of restructuring measures
implemented at NAO -? amidst cyclically favorable market conditions -- as well
as the substantial contributions of its automotive finance unit(GMAC), and of
its international automotive operations. The near-term prospects of the
latter are now clouded by fierce price competition in Europe and by economic
turmoil in various developing countries. However, recently-initiated cost
cutting actions should help to restore GM's European operations to adequate
profitability. Also, over the long term, based on ongoing investment
projects, GM is very well-positioned to capitalize on growth in automotive
demand outside its established markets. Moreover, the improved competitive
profile of NAO lends comfort that GM will be able to maintain adequate
financial performance, even when the inevitable cyclical downturn in North
America occurs.
Importantly, management continues to pursue a balanced financial policy.
The company has taken advantage of robust cash generation in recent years to
reduce its formerly huge unfunded pension liability to a manageable level and
to accumulate a large cash position -- which totaled $17.5 billion at Dec. 31,
1997, or $11.2 billion in excess of debt (excluding GMAC) -- while acting to
directly reward shareholders through share repurchases and the recently-
completed spin-off of its aerospace and defense unit.
OUTLOOK: STABLE
Intensively competitive automotive industry conditions limit further
upgrade potential for the ratings. On the other hand, as the world's largest
automaker, GM has exceptional financial flexibility, affording considerable
downside protection, Standard & Poor's said. -- CreditWire
RATINGS RAISED
TO FROM
General Motors Corp.
Corporate credit rating A A-
Short-term corp credit rtg A-1 A-2
Senior debt rating A A-
Commercial paper A-1 A-2
Equipment trust certificates A A-
Preference stock A- BBB+
Preferred stock A- BBB+
General Motors Acceptance Corp.
Corporate credit rating A A-
Senior debt rtg A A-
Commercial paper A-1 A-2
OUTSTANDING AFFIRMED RATINGS
Hughes Electronics Corp.
Corporate credit rating A-
Senior debt A-
Commercial paper A-2
Short-term corporate A-2
credit rating
PanAmSat Corp.
Corporate credit rating A-
Senior debt A-
Bank loan rating A-
SOURCE Standard & Poor's CreditWire