Saw this about 2 minutes before the close on scrolling news. Does it mean "bankruptcy? - no way". Or have they now opened the door a little to filing for bankruptcy?
Today, S&P cut GM's corporate credit rating two notches to single-B. Considering that downgrade, I suspect that the "not a remote possibility" language is referring to increasing perceived risk in GM. from: http://www2.standardandpoors.com/servlet/Satellite?pagename=sp/Page/HomePg&r=1&l=EN&b=10 General Motors Corp. Ratings Cut To 'B/B-3', Outlook Negative Primary Credit Analysts: Robert Schulz, CFA, New York (1) 212-438-7808; robert_schulz@standardandpoors.com Scott Sprinzen, New York (1) 212-438-7812; scott_sprinzen@standardandpoors.com Publication date: 12-Dec-05, 12:56:22 EST Reprinted from RatingsDirect NEW YORK (Standard & Poor's) Dec. 12, 2005--Standard & Poor's Ratings Services said today that it lowered its corporate credit rating on General Motors Corp. (GM) to 'B' from 'BB-' and its short-term rating to 'B-3' from 'B-2' and removed them from CreditWatch, where they were placed on Oct. 3, 2005, with negative implications. The outlook is negative. (The 'BB/B-1' ratings on General Motors Acceptance Corp. [GMAC] and the 'BBB-/A-3' ratings on Residential Capital Corp. [ResCap] remain on CreditWatch with developing implications, reflecting the potential that GM could sell a controlling interest in GMAC to a highly rated financial institution.) Consolidated debt outstanding totaled $285 billion at Sept. 30, 2005. Standard & Poor's will hold a telephone conference call on Monday, Dec. 12, 2005, at 3:30 p.m. Eastern Standard Time to discuss the rating action on General Motors (see the call-in details below). Robert Schulz and Scott Sprinzen, from the Standard & Poor's Corporate Auto Ratings Team, will be the speakers for the call. At the conclusion of their remarks, they will be available to answer questions. "The downgrade reflects our increased skepticism about GM's ability to turn around the performance of its North American automotive operations," said Standard & Poor's credit analyst Robert Schulz. If recent trends persist, GM could ultimately need to restructure its obligations (including its debt and contractual obligations), despite its currently substantial liquidity and management's statements that it has no intention of filing for bankruptcy. GM has suffered meaningful market share erosion in the U.S. this year, despite prior concerted efforts to improve the appeal of its product offerings. At the same time, the company has experienced marked deterioration of its product mix, given precipitous weakening of sales of its midsize and large SUVs, products that had been highly disproportionate contributors to GM's earnings. This product mix deterioration has partly reflected the aging of GM's SUV models, but with SUV demand having plummeted industrywide, particularly during the second half of 2005, it is now dubious whether GM's new models, set to be introduced over the next year, can be counted on to help restore the company's North American operations to profitability. In addition, GM is paring the product scope of its brands. The company has also announced recently that it will be undertaking yet another significant round of production capacity cuts and workforce rationalization. But the benefits of such measures could be undermined unless its market share stabilizes without the company's resorting again to ruinous price discounting. One recent positive development for GM has been the negotiation of an agreement with the United Auto Workers providing for reduced health care costs. Yet, this agreement (which is pending court approval) will only partly address the competitive disadvantage posed by GM's health care burden. Moreover, cash savings would only be realized beginning in 2008 because GM has agreed to make $2 billion of contributions to a newly formed VEBA trust during 2006 and 2007. It remains to be seen whether GM will be able to garner further meaningful concessions in its 2007 labor negotiations. This year has witnessed a stunning collapse of GM's financial performance compared with 2004 and initial expectations for 2005. In light of results through the first nine months of 2005, we believe the full-year net loss of GM's North American operations could approach a massive $5 billion-âbefore substantial impairment and restructuring charges and that the company's consolidated net loss could total about $3 billion (again before special items). With nine-month 2005 cash outflow from automotive operations a negative $6.6 billion (after capital expenditures, but excluding GMAC), we expect full-year 2005 negative cash flow from automotive operations to be substantial. GMAC's cash generation has only partly mitigated the effect of these losses on GM's liquidity. Deterioration of GM's credit quality has limited GMAC's funding capabilities. On Oct. 17, 2005, GM announced that it was considering selling a controlling interest in GMAC to restore the latter's investment-grade rating. GM recently indicated that it is holding talks with potential investors. As we have stated previously, we view an investment-grade rating for GMAC as feasible if GM sells a majority stake in GMAC to a highly rated financial institution that has a long-range strategic commitment to the automotive finance sector. Even then, GMAC still would be exposed to risks stemming from its role as a provider of funding support to GM's dealers and retail customers. However, we believe a strategic majority owner would cause GMAC to adopt a defensive underwriting posture by curtailing its funding support of GM's business if that business were perceived to pose heightened risks to GMAC. One key factor in achieving an investment-grade rating would be our conclusions about the extent to which financial support should be attributed to the strategic partner. We will continue to monitor GM's progress in this process and the potential for rating separation; however, if the timeframe for a transaction gets pushed out, or if there is further deterioration at GM, GMAC's rating could be lowered, perhaps to the same level as GM's. Ultimately, in the absence of a transaction that will significantly limit GM's ownership control over GMAC, the latter's ratings would be equalized again with GM's. The ratings on ResCap are two notches above GMAC's, its direct parent, reflecting ResCap's ability to operate its mortgage businesses separately from GMAC's auto finance business, from which ResCap is partially insulated by financial covenants and governance provisions. However, we continue to link the ratings on ResCap with those on GMAC because of the latter's full ownership of ResCap. Consequently, should the ratings on GMAC be lowered, the ratings on ResCap would likewise be lowered by the same amount. Or, if the ratings on GMAC are raised, as explained above, ResCap's ratings also could be raised. Prospects for GM's automotive operations are clouded. The ratings could be lowered further if we came to expect that GM's substantial cash outflow would continue beyond the next few quarters due to further setbacks, whether GM-specific or stemming from market conditions. Even though the concern over the situation at GM's bankrupt lead supplier, Delphi Corp., was the primary factor behind the rating downgrade of Oct. 10, 2005, events at Delphi could precipitate a further review if GM were to experience severe Delphi-related operational disruptions or if GM agreed to fund a substantial portion of Delphi's restructuring costs. GM's rating could also be jeopardized if the company were to distribute to shareholders a meaningful portion of proceeds generated from the sale of a controlling interest in GMAC. GM would need to reverse its current financial and operational trends, and sustain such a reversal, before we would revise its outlook to stable. TELECONFERENCE DETAILS The call will begin promptly at the time indicated. Please call at least 20 minutes before the scheduled start of the call to complete the pre-call registration process. Please note that Standard & Poor's offers all of its broadcast teleconference calls to all interested participants on a complimentary basis. Live Dial-In Numbers: U.S./All others: (1) 210-234-9748 U.K.: (44) 20-7943-5370 Conference ID #: 5109814 Passcode: SANDP Replay Number: (1) 203-369-0700 Replay will expire on Monday, Dec. 19, 2005 Live Audio Streaming: URL: http://www.mymeetings.com, Under "Events," select "Join an event" Conference ID #: 5109814 Passcode: SANDP Complete ratings information is available to subscribers of RatingsDirect, Standard & Poor's Web-based credit analysis system, at www.ratingsdirect.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com; under Credit Ratings in the left navigation bar, select Find a Rating, then Credit Ratings Search. Disclaimers Privacy Notice Terms of Use Regulatory Disclosures Site Map Help Copyright (c) Standard & Poor's, a division of The McGraw-Hill Companies, Inc. All rights reserved.
Seems pretty straightforward wording to me. You just re-wrote it wrong...... S&P: GM Bankruptcy "Isn't a Farfetched Possibility" Dec 12 at 15:58 By Simona Covel, Of DOW JONES NEWSWIRES NEW YORK (Dow Jones)--A bankruptcy filing "isn't a farfetched possibility" for General Motors Corp. (GM), Standard & Poor's analysts said Monday following a two-notch ratings downgrade of the auto maker's credit. The possibility of a restructuring, however - either in or out of court - isn't any more acute than for other single-B-rated companies, the analysts said. S&P cut GM to single-B earlier on Monday, from double-B-minus. On a conference call with investors and analysts, S&P ratings officials faced a slew of questions on potential bankruptcy scenarios for the Detroit giant, as well as questions regarding GM's planned sale of a majority stake in its financing unit, General Motors Acceptance Corp. The ratings agency expressed concern that GM will be able to turn around its sagging North American sales. Pressure from rising healthcare costs and a possible worker strike at bankrupt parts supplier Delphi Corp. (DPHIQ) also weigh on the ratings outlook. S&P, though, left GMAC's double-B rating alone pending the outcome of the planned sale, which GM has said is designed to return the finance company to investment grade status. While S&P analysts said they view an investment grade rating as feasible for GMAC, their analysis is predicated on the idea that GMAC will be acquired by a highly-rated financial institution. Regarding the possibility that a private equity or other buyer could be involved, "we wouldn't get the same feeling of comfort from those alternative approaches," said S&P auto analyst Scott Sprinzen. "It will be more difficult to get the desired investment grade outcome following other such approaches," he added. Monday's downgrade took some market participants aback. S&P indicated in earlier statements that it was planning to conclude a review of GM's ratings by mid-to-late January. However, Sprinzen said simply, "we did reach a conclusion ( on the rating). We didn't think it was in anyone's interest to prolong the review." In response to the downgrade, GM spokeswoman Gina Proia said the company has " an aggressive and well-thought-out strategy to turn around our North American business, and we're making progress in some important areas." That progress, she said, includes GM's recently expanded plan to cut 30,000 jobs and close operations at nine North American factories, for a total savings of $7 billion by the end of next year. "Certainly things would be much worse for the company if they hadn't taken this latest round of downsizing," Sprinzen said. GM's North American operations have bled more than $4 billion so far this year, but the company still has $19 billion in cash reserve. Even so, said S&P's Sprinzen, "it would be possible to file (for bankruptcy) with a great deal of liquidity still available to them." If a sale of GMAC falls through, Sprinzen said, its ratings will be lowered to that of its auto maker parent. An investment grade rating for GMAC isn't out of the question if GM sheds, for example, its residential mortgage unit Residential Capital Corp., Sprinzen said. "We would have to see how the whole transaction is structured," he said. If no component of GMAC is sold and it remains a wholly-owned part of GM, Sprinzen noted that in the case of a GM bankruptcy GMAC would probably end up in court, too. "It's our view that it's most likely that a GM filing would ultimately precipitate one at GMAC," he said. GM has about $285 billion in total debt outstanding. Most of that is held by GMAC. -Dow Jones Newswires
Yes, this is the way I initially read it - that the door is now opening a little for a bankruptcy filing.
If they go bankrupt and get rid of their huge underfunded pension fund... then the PBGC gets the first dibs on assets. So GM won't go bankrupt yet, as they still have lots of cash to burn.
The PBGC should have #1 priority over the assets of GM in order to fund all pension liabilities and maybe even make a small profit. I hope GM bond and shareholders get fucked in the ass. Better them than the taxpayer!
Taxpayers should not have to foot the bill on this one. Bailouts are a ghost of the past so let GM file for bankruptcy. Nobody should be immune from the beast we call capitalism. Bondholders should have dumped their positions with the first debt downgrade.
For the sake of Capitalism and the future of the United States of America, GM must not be allowed to receive a government bailout.