NEW YORK, Feb 21 (Reuters) - Moody's Investors Service on Tuesday cut its debt rating on General Motors Corp. (GM.N: Quote, Profile, Research) deeper into junk territory, citing increased uncertainty about the automaker's ability to achieve competitive wage, benefit and supplier cost structures outside of bankruptcy.

GM Chairman and Chief Executive Rick Wagoner said on Friday that a negotiated settlement between GM, Delphi and its unions was "not guaranteed."

In a separate statement, Moody's said the profile of GM's finance unit, General Motors Acceptance Corp., has weakened and now appears more like a "mid-Ba" credit, reflecting increased risks related to its connection to GM, and challenges to its liquidity and profitability.

http://today.reuters.com/investing/f...37_N21172550:1

 

You sure a good at reporting any negative GM financial news.

 

Indeed! When it makes it into the "What's News" section on the front page of the Wall Street Journal, I usually post it here.

I can't stand this prolonged bleeding. Get it over with already.

-B

 

How many levels of junk status are there?

 

All bonds are either "Investment" or "Junk" grade indicating, on a broad scale, how risky the bonds are. They are further broken down into the seven sub-categories; four of which are still investment grade and three of which are junk grade. How they are specifically referred to such as "Aaa" or "AAA" depends on the rating servive being quoted (Moody's or S&P).

The bottom level of junk for both services is "in default" and since the quote above indicates that Moody's "further cut" the rating I would assume the rating went from two levels above "bottom" down to just one level above the bottom...not a good sign to say the least.

The rating is an overall indication of a company's creditworthness. What this translates to is that if GM wants to issue a bond(s) they may have to pay, for example, a 15% interest rate rather than a 6% rate in order to get a investor to buy the bond. Likewise, anyone alrady owning a bond from GM woudl have to sell at a deeper discount if they want to get their money out of the bond early and not wait for GM to pay out. It also means that any borrowing GM might want to do is going to be more costly due to their poor credit rating.

 

So good time to buy?

 

This is an Editorial/Opinion run by Yahoo/Reuters today...

Elegy for GM--and Ourselves

It strikes home at what we have been saying in this forum for a while.
It is opinion, but it has some facts cited in it and overall is a good read.
I personally still think bankruptcy is a distant shot... but the economy and negotiation with labor could make some things change really fast.

 

Personally, I don't like bonds as an investment - I feel they only give a "feeling" of safety that isn't supported by history but because of that safe feeling, they pay far to little in return.

However, if you have money you truly can afford to loose and you can live with the risk, now IS the time to buy them.

Good rule of thumb is, never investment in anything that keeps you awake at night!

 

I agree. Bonds as an investment are more for the older crowd in being so conservative, but its no way to make money earlier in your life. Now would be a good time to buy GM stock if you're without a doubt convicted that all their financial and business related worries are on their way to being over within the next 2-3 years or so. I remember when GM stock was around $60/share about 4 years ago, now its 1/3 that. Some people could make a great deal of money, but thats speculative at this point.

 

Yeah, I meant Stock. Should have mentioned that. I'm say 75% sure GM will get out of it's troubles and get back to where they were. If I was a betting man I'd throw everything I had into GM Stock and could make a fortune...

But Unfortunately I'm not a betting man and I'm a Working man raising a family on 1 income, so I might buy a few shares ~$1000 worth possibly, but I wouldn't throw anymore then that because well, I can't take the risk w/ the family and all...