GM, Ford, Chrysler Credit Ratings May Be Downgraded by S&P on Cash Concern

[Purveyor]

Source: Bloomberg News

By Caroline Salas

June 20 (Bloomberg) -- General Motors Corp., Ford Motor Co. and Chrysler LLC credit ratings may be lowered by Standard & Poor's as higher gas prices inflict ``financial damage'' on the auto industry.

S&P placed the carmakers' credit ratings, already five levels below investment grade, on CreditWatch negative, according to a statement today. New York-based S&P, a unit of McGraw-Hill Cos., said it may also downgrade their financing arms. While the carmakers will be able to pay their debts this year, their cash may shrink to ``undesirable levels'' by the end of 2009, S&P said.

``As we look forward, we do not see a lot of visibility on how bad things are going to get,'' S&P analyst Robert Schulz said in an interview on Bloomberg Television. ``We thought the best thing to do would be to stand back and look at these three companies and look at how the market could unfold.''

A weakening economy and soaring fuel prices are dragging U.S. auto sales to their lowest levels in 15 years. Ford, the second-biggest U.S. automaker behind GM, said today its losses will widen because sales of its large pickup trucks in the U.S. are plunging on $4-a-gallon gasoline. The Dearborn, Michigan- based automaker said its financing unit, Ford Motor Credit, will also have a loss.

Ford and GM shares dropped and the cost to protect against a default on their debt soared. Ford shares fell 51 cents, or 8 percent, to $5.81 in New York Stock Exchange composite trading. GM's shares declined $1, or 6.7 percent, to $13.79. Chrysler, based in Auburn Hills, Michigan, is owned by New York private equity firm Cerberus Capital Management LP.



Read more: http://www.bloomberg.com/apps/news?pid=20601103&sid=aeU3MwKXQDyg&refer=news

[phantom power]

1. Not junk-bonds, Julia, high-yield bonds!

[cliss]

2. Wow. = cash crunch.

Desperate for cash. That's what all of these companies have in common. Including the banks.

The Fed is desperately trying to keep the banks afloat. They are doing everything they can, even going to countries in the Middle East Hat in Hand begging for money.

The fed lowered the interest rate, and they are currenly lending the banks at a discount rate so they can keep making loans and keep suriving another day.
Without the discount window, they would be folding up TODAY. I've read that they are desperate for cash, and the FED is the only rescuer.