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Oracle of Delphi

S&P may cut debt ratings on Ford, GM, Chrysler

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DETROIT -- In another blow to beleaguered U.S. automakers, Standard & Poor's on Friday said it may cut its ratings on Ford Motor Co., General Motors and Chrysler LLC, citing financial damage resulting from high gasoline prices.

Bonds and shares of Ford and GM extended losses, while the cost of protecting their debt rose.

S&P said it was concerned about cash outflows from all three automakers as high gas prices erode demand for sport utility vehicles and pickups. The "dire state" of the vehicle finance market was also worrisome, S&P said.

The rating agency also said it may cut its ratings on automakers' finance units Ford Motor Credit Co. and DaimlerChrysler Financial Services Americas LLC, as well as GM's 49 percent-owned finance affiliate GMAC LLC.

The rating warning came after Ford said it would post a deeper loss for its auto business this year and warned it would be difficult to avoid a loss in 2009. That was a weaker outlook than Ford offered just last month.

"All of the factors behind Ford's weaker guidance also apply to the other U.S.-based automakers," S&P said in a statement.

Sales of light trucks and SUVs, historically key profit centers for the automakers, have plunged as consumers shift to more fuel-efficient cars.

"Although these segments have been weak for some time, the exodus of demand that began in April, caused by escalating gas prices and consumer preferences for smaller vehicles, is gathering speed," S&P said in a statement.

Ford's shares were down 55 cents, or 8.7 percent to $5.77, while GM's shares fell 95 cents or 6.4 percent to $13.84 on the New York stock exchange.

Automakers' bonds, hurt earlier by Ford's lowered guidance, extended losses.

Link: http://www.autonews.com/article/20080620/A...paign_id=alerts

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