General Motors debt rating outlook changed to positive from negative

General Motors debt rating outlook changed to positive from negative - Moody's

	Published : Tue, 16 Oct 2007 17:59 By : Agencies Print this Story

MUMBAI (Thomson Financial) - Moody's Investors Service said it has changed its outlook on General Motors Corp's long-term-debt rating to positive from negative, after the automobile maker's announcement of the terms of its new contract with its main union, the United Auto Workers (UAW).

Moody's has also raised the company's speculative grade liquidity rating to 'SGL-1' from 'SGL-3'.

The positive outlook recognizes the substantial long-term cost benefits of the new UAW contract, balanced against the significant near-term product and revenue challenges the company will continue to face during 2008 and 2009, Moody's said.

The contract will help to significantly narrow the cost disadvantage that GM has relative to Asian transplants. Its various elements could save the company as much as 4 bln usd per year, and lower wage and benefit costs by more than 800 usd per vehicle, Moody's said.

However, Moody's cautioned that meaningful cost benefits from the contract won't begin to take hold until 2010, and GM will face a tough environment until then.

Meanwhile, GM's substantial liquidity position, consisting of 30 bln usd in cash and 5.8 bln usd in long-term credit facilities, will provide ample financial flexibility during the next two years and the period until 2010, Moody's added.

Also, if the company demonstrates the capacity to make progress in addressing product and revenue challenges in the next 12 to 18 months, its rating could be considered for possible upgrade, the ratings firm said.

The increase in the speculative grade liquidity rating recognizes that GM will have very strong sources of liquidity to cover all cash requirements through 2008, Moody's said.

GM's existing long-term ratings - including 'B3' corporate family, 'Ba3' senior secured and 'Caa1' senior unsecured - are unchanged.

TFN.newsdesk@thomson.com

ypv/jfr

The copying, republication or redistribution of Thomson Financial News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Financial News.

General Motors debt rating outlook changed to positive from negative - Moody's