The credit agency in lowering GM's rating to Caa1, seven steps below investment grade, said the move reflects the challenges the automaker will face in re-establishing its position in the U.S. auto market. GM earlier this month posted a $15.5 billion quarterly loss and warned to expect further red ink as it attempts to transform its business and focus on more fuel-efficient small cars.
Moody's senior vice president Bruce Clark said that though he expects GM to succeed in cutting costs and raising funds to boost liquidity, the automaker could find it hard to convince consumers to buy what they are making.
"The most difficult challenge facing GM and the other domestic producers will be accelerating the introduction of fuel-efficient vehicles, and convincing consumers that these vehicles offer as good a value proposition Asian product," Clark said. "The additional liquidity that will be raised by GM's operating plan gives the company more time to make this transition, but it will remain a very difficult transition to implement." - Lou Whiteman
See The Daily Deal story on GM's quarterly loss and restructuring
See Dealwatch: Autos
Moody's Investors Service on Wednesday lowered its credit rating on General Motors Corp. deeper into junk status, highlighting the challenges of the automaker's turnaround effort.
