UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549-1004
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) February 13, 2005
GENERAL MOTORS CORPORATION
--------------------------
(Exact Name of Registrant as Specified in its Charter)
STATE OF DELAWARE 1-143 38-0572515
----------------- ----- ----------
(State or other jurisdiction of (Commission (I.R.S. Employer
Incorporation or Organization) File Number) Identification No.)
300 Renaissance Center, 48265-3000
Detroit, Michigan (Zip Code)
----------------------------------------------------------------------
(Address of Principal Executive Offices)
Registrant's telephone number, including area code (313) 556-5000
--------------
================================================================================
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
ITEM 8.01. OTHER EVENTS
On February 13, 2005, Standard & Poor's Ratings Services (S&P) affirmed its
ratings on General Motors Corporation (GM), General Motors Acceptance
Corporation (GMAC) and all related entities. Their press release follows.
On February 14, 2005, Fitch Ratings (Fitch) stated that their ratings for GM and
GMAC remain unchanged at "BBB" with a Negative Rating Outlook. Their press
release follows.
On February 14, 2005, Moody's Investors Services, Inc. (Moody's) confirmed
long-term ratings of GM and GMAC, but changed the outlook of both companies to
negative from stable. Their press release follows.
On February 14, 2005, Dominion Bond Rating Service Limited (DBRS) confirmed
ratings of GMAC and related subsidiaries, all with Stable trends, but has placed
the ratings of GM and General Motors of Canada Limited "Under review with
Negative Implications". Their press release follows:
Research Update: General Motors, GMAC Ratings Affirmed On Fiat Deal Termination
Publication date: 13-Feb-2005
Credit Rating: BBB-/Stable/A-3
Rationale
Standard & Poor's Ratings Services today affirmed its ratings on General
Motors Corp. (GM; BBB-/Stable/A-3), General Motors Acceptance Corp. (GMAC;
BBB-/Stable/A-3), and all related entities. The rating outlooks remain stable.
Consolidated debt outstanding totaled $301 billion at Dec. 31, 2004.
The affirmation follows the announcement by GM and Fiat SpA (Fiat;
BB-/Negative/B) of a settlement agreement under which GM will pay Fiat
(euro)1.55 billion and transfer to Fiat its 10% ownership stake in Fiat Auto
Holdings B.V. (Fiat Auto), in conjunction with the termination of the Master
Agreement between GM and Fiat and the transfer to GM by Fiat Auto of certain
assets (see Standard & Poor's media release: "BULLETIN: Fiat's Agreement With GM
A Neutral Development" published today). We believe GM has ample cash on hand,
given its liquidity position of $23.3 billion at year-end 2004, excluding GMAC,
to accommodate the (euro)1.55 billion payment. Termination of the Master
Agreement and related measures should not add to the considerable operating
challenges GM faces in turning around its problem-plagued European operations.
Moreover, this agreement will eliminate the considerable uncertainty that had
stemmed from the option provided for under the Master Agreement for Fiat to put
its remaining stake in Fiat Auto to GM.
The rating on GM reflects the benefits of its extensive sales finance
business, which is conducted through GMAC, of GMAC's highly profitable mortgage
business, and of substantial liquidity at both GM and GMAC. However, the rating
also reflects the clouded prospects of GM's automotive operations, given
increasingly competitive industry conditions in all of the company's core
markets. Moreover, GM is burdened with a very large unfunded retiree medical
liability, and Standard & Poor's sees little likelihood that this liability will
be reduced during the next few years, either through concessions granted by
labor or through government assistance.
GM's consolidated net income in 2004 totaled a satisfactory $3.6 billion
($6.40 per share) before special items. Management has recently indicated that
net income in 2005 is expected to total only $2.3 billion - $2.8 billion ($4.00
to $5.00 per share) before special items. The guidance for 2005 is broadly
consistent with the near-term assumptions we made when we lowered GM's ratings
on Oct. 14, 2004 (from BBB/Negative/A-2). The guidance suggests that GM will be
only about breakeven in its automotive operations (after the allocation of
legacy costs classified as "Corporate Other"), with GMAC contributing virtually
all consolidated earnings. However, we believe there is the risk that the
expected 2005 earnings level will not be achieved, particularly given
management's indication that earnings in the current quarter will be only about
breakeven, and then improve in the balance of the year--defying the normal
seasonal pattern. Moreover, we believe it could be difficult for GM to improve
earnings beyond 2005.
GM continues to struggle in its two most important markets, North America
and Europe. Despite robust industry sales and past success in cutting costs and
improving the quality of its products, GM earned a relatively weak $1.2 billion
after-tax in North America in 2004, before substantial impairment charges. GM
has continued to lose market share in North America, even with aggressive
discounting and higher sales to daily rental fleets. GM's earnings have been
pressured by soaring health care costs: U.S. postretirement health care expense
will increase by approximately $1 billion in 2005 from 2004 levels. Management
is expecting offsetting cost-cutting actions to contain the extent of erosion in
North American profitability this year--with net income decreasing to $500
million--but we believe this objective could be jeopardized with any material
decline in industry volume, further market share erosion by GM, or intensified
price pressures.
Between new products introduced in late 2004 and those to be launched in
2005, GM will have updated about 25% of its sales volume; however, the earnings
benefit will be limited, given the low-margin nature of most of these new
products. Its all-important large/luxury sport utility vehicles (SUVs) and
full-size pickups, which account for the bulk of its automotive earnings, will
not be renewed until 2006 and 2007. Ford Motor Co. will also be renewing its
major SUV products during 2006 and 2007, while Toyota Motor Corp. will be
introducing a new full-size pickup during this period, for which it is
constructing expanded production capacity. Moreover, we are concerned about
recent signs of the maturing of demand for large/luxury SUVs.
GM has been unprofitable in Europe since 1999, notwithstanding extensive
restructuring actions. Accelerating losses during 2004 necessitated development
of yet another turnaround plan, encompassing a 20% reduction of its European
workforce and renewed efforts to enhance revenues. For 2005, management is
anticipating a small reduction in net losses, to $500 million (before special
items), down from $742 million in 2004. Taking account of the large
restructuring charges we believe will stem from restructuring actions in Europe,
GM's global automotive operations will be in a substantial loss position in
2005.
Although GM had until recently been highly profitable in China, it is now
suffering from a rapid, industrywide slowdown in demand growth. This decline
could prove temporary, but it underscores the volatility of that market, where
virtually all the world's automakers are investing heavily to expand their
presence. GM's targeted net earnings in the Asia-Pacific region of $600 million
in 2005 (compared with $729 million in 2004) is partly predicated on a strong
rebound in market demand in China during the second half of 2005.
The robust and relatively stable earnings contribution of GMAC is a
critical factor supporting GM's current rating. In its automotive finance
operations, GMAC has benefited in recent years from low credit losses and
improving lease residual realizations. Although GMAC's unsecured borrowing
spreads have widened, the company has benefited from low general interest rates
and its access to low-cost asset-backed securitization (ABS) financing, taking
advantage of its excellent asset quality. In the near term, expected rising
interest rates will put pressure on GMAC's profit margin, but the effect will be
muted by management's previous actions to lessen use of floating-rate debt.
GMAC's mortgage unit has been able to sustain impressive profitability,
even with the decline in residential mortgage industry volume, benefiting from
growing market share in the residential sector, a countercyclical increase in
mortgage-servicing income, increased fee-based business, and expansion in
overseas markets. Management has stated that GMAC's overall net income in 2005
should total at least $2.5 billion, compared with a record $2.9 billion in 2004,
and we view this as a realistic objective.
Management is also expecting automotive cash flow (after capital
expenditures, before pension and VEBA contributions, and dividends received from
GMAC) to deteriorate--to $2 billion in 2005 (before cash costs relating to
restructuring actions in Europe), from $4.2 billion for 2004--partly as a result
of higher planned capital spending. GMAC is expected to pay a dividend of $2
billion to the parent, up from $1.5 billion in 2004. Owing to favorable
investment portfolio returns, we estimate that GM was able to reduce its
worldwide unfunded pension level to a relatively small amount at year-end 2004,
compared with an $8.6 billion deficit at year-end 2003, even with the adverse
measurement effect of a downward revision of the discount rate. (These net
liability figures do not include $13.5 billion of debt issued in 2003 to finance
pension contributions.) However, even with $9 billion of VEBA contributions,
favorable investment portfolio returns, and the estimated $4 billion benefit of
the new Medicare prescription drug program, its U.S. unfunded retiree medical
liability ($53.8 billion at year-end 2004) barely declined from the massive
level ($54.5 billion) at year-end 2003 due to the effect on the liability of an
upward revision of the assumed near-term health care cost trend rate, in light
of recent adverse experience and a downward revision of the discount rate.
Management has indicated that GM is unlikely to make additional pension fund or
VEBA contributions for the next few years. We assume that the bulk of any
surplus cash that materializes will be used to reduce other liabilities or to
add to cash reserves.
Short-term credit factors.
GM's short-term rating is 'A-3', the same as GMAC's. GM's fundamental
challenges are short and long term in nature. However, GM's liquidity and
financial flexibility minimize any potential for near-term financial stress.
We believe GM will generate free cash flow (before pension and VEBA
contributions, and dividends from GMAC, but taking account of working capital
changes and capital expenditures) in 2005. Notwithstanding the high operating
leverage--and the resulting volatility--experienced by automakers, we believe GM
is highly unlikely to experience negative cash flow during the next year, even
if industry conditions become significantly more difficult than expected.
Moreover, GMAC should be able to continue paying substantial dividends to the
parent without its financial leverage suffering appreciably.
Key aspects of GM's financial flexibility and liquidity are as follows:
-- A large liquidity position--Cash, marketable securities, and
short-term VEBA funds totaled $23.3 billion at Dec. 31, 2004
(excluding GMAC);
-- Moderate near-term, parent-level debt maturities--Long-term debt has
an exceptionally high average maturity;
-- In the wake of recent funding actions, GM faces neither
ERISA-mandated pension fund contributions through this decade nor the
need to make contributions to avoid Pension Benefit Guaranty Corp.
variable-rate premiums; and
-- As of Sept. 30, 2004, GM had unrestricted access to a $5.6 billion
committed bank credit facility expiring in June 2008, $800 million in
committed credit facilities with various maturities, and uncommitted
lines of credit of $1.7 billion.
GMAC has substantial ongoing funding needs. As of Sept. 30, 2004,
short-term debt (including current maturities of long-term debt) was $87.6
billion, not including maturing off-balance-sheet securitizations. Reflecting
the close linkage between GMAC and GM, GMAC's funding flexibility has suffered
in recent years from the problems affecting GM's automotive operations. Thus,
GMAC's unsecured bond spreads have been volatile, calling into question the
extent to which GMAC can rely on consistent future access to the public
unsecured debt market.
However, GMAC has responded by taking the following actions:
-- Accumulating a large cash position ($24.4 billion at Sept. 30, 2004);
-- Expanding its relatively less-credit-sensitive retail debt issuance
programs, such as its SmartNotes program;
-- Diversifying its securitized funding channels, including expanding
its bank conduit ABS and, recently, completing a securitization of
lease assets;
-- Entering the nascent whole-loan market and establishing committed,
whole-loan sale flow agreements; and
-- Commencing operations of GMAC Automotive Bank, a Utah-charted ILC.
At Sept. 30, 2004, GMAC had a $4.6 billion syndicated line of credit
committed through June 2005, $4.4 billion committed through June 2008, $4.6
billion of bilateral committed lines with various maturities, and $21.3 billion
in uncommitted lines of credit. In addition, New Center Asset Trust (NCAT) had
$19.5 billion of liquidity facilities committed through June 2005. Mortgage
Interest Networking Trust (MINT) had $3.4 billion of liquidity facilities
committed through April 2005. NCAT and MINT are qualified special-purpose
entities administered by GMAC for purchasing assets as part of GMAC's
securitization and mortgage warehouse funding programs. These entities fund the
purchase of assets through the issuance of asset-backed commercial paper. GMAC
also had $54.8 billion in funding commitments (of which $25.6 billion was
unused) with third parties, including third-party asset-backed commercial paper
conduits, that may be used as additional secured funding sources.
A leverage covenant in the bank credit facilities restricts the ratio of
consolidated debt to total stockholders' equity to no more than 11.0 to 1
(excluding on-balance-sheet securitized debt from the definition of consolidated
debt). Per this definition, the debt-to-equity ratio was 8.0 to 1 at Sept. 30,
2004. This covenant would be problematic only if, contrary to our expectations,
GMAC's access to the ABS market were disrupted. (GM and GMAC have no financial
covenants or other credit triggers in financing arrangements that we view as
potentially problematic.)
GMAC's automotive asset composition is highly liquid, given that about
half of its total gross receivables is due within one year and that a
substantial portion of receivables is typically repaid before contractual
maturity dates. However, GMAC is constrained in its ability to reduce the size
of its automotive portfolio, given its need to support GM's marketing efforts.
Given the liquidation of loans originated in recent years, GMAC's automotive
asset levels are unlikely to increase substantially in the next one to two
years, even if price competition in the auto sector remains intense as expected.
As part of its funding diversification strategy, GMAC is pursuing opportunities
to fund part of its commercial mortgage operations externally. In addition, we
believe that if GM were to experience liquidity pressures, it could monetize
GMAC's mortgage operations.
GMAC has disclosed that it is considering a restructuring of its
residential mortgage operations, involving placement of its two existing
residential mortgage subsidiaries within a newly formed holding company. If this
restructuring enables the existing, substantial intercompany advances extended
by GMAC to the mortgage units to be refinanced externally, we believe it would
represent a modest positive development for GM and GMAC because it would enhance
funding flexibility. (Note: Given the establishment of separate funding channels
and satisfactory corporate governance protections, and if our assessment of the
separate business position and financial condition of the newly formed entity
warranted this, we could rate this entity a notch or two higher than GM/GMAC, in
keeping with our long-standing approach to rating non-captive finance
subsidiaries of industrial parents. We believe such an approach would be
appropriate under the assumption that, if the parent experienced financial
distress, it would most likely divest a non-captive finance business rather than
take actions that would harm the subsidiary's credit quality. Even so, the risks
stemming from ownership affiliation could never be dismissed entirely. However,
GMAC, given its predominantly captive role, will continue to be rated the same
as GM. We regard GMAC and GM as a single economic entity, with effectively the
same default risk, given their strategic importance to each other, GM's ability
to influence GMAC's actions, and the ultimate risk that, in the unlikely event
GM were to file for bankruptcy, this would precipitate a bankruptcy filing by
GMAC.)
Outlook
Although the outlook remains stable, our concerns regarding GM's ability
to improve its competitiveness over a longer period have grown incrementally
since the downgrade in October 2004. In coming months, we will further assess
our views regarding GM's long-range prospects, focusing on the appropriateness
of the stable rating outlook. We currently expect to complete this process by
midyear. Of course, in keeping with our policy of continual surveillance, this
would not rule out a more immediate review if developments warranted such
action.
BULLETIN: Fiat's Agreement With GM A Neutral Development
Publication date: 13-Feb-2005
PARIS (Standard & Poor's) Feb. 14, 2005--Standard & Poor's Ratings
Services said today the announcement that Fiat SpA (BB-/Negative/B) and General
Motors Corp. (GM; BBB-/Stable/A-3) have reached an agreement pursuant to which
GM will pay Fiat (euro)1.55 billion to terminate the Master Agreement including
the put option with respect to Fiat's remaining ownership stake in its
automotive unit, Fiat Auto Holdings B.V. ('Fiat Auto') and to acquire an
interest in various assets, including diesel engine assets, will not directly
impact Fiat's ratings. (For impact on GM, see Standard & Poor's media release
"General Motors, GMAC Ratings Affirmed On Fiat Deal Termination", published
today.)
On the one hand, this cash settlement will provide Fiat with a substantial
and welcome cash infusion, which will improve the group's stretched financial
flexibility at a time when Fiat Auto is still generating negative cash flow and
significant 2006 debt maturities are looming. We do not expect the acquisition
by GM of selected diesel engine assets as likely to weaken Fiat's competitive
position.
On the other hand, Fiat gives up the potential to readily dispose of
ailing Fiat Auto, which has incurred large losses over the past four years and
which is now not expected to break even until at least 2006. Retaining the put
option could have provided Fiat with a potential exit strategy, should the group
fail to turn Fiat Auto around. On balance, Standard & Poor's views this
transaction as neutral from a credit standpoint.
Fitch: No Ratings Changes For GM Following Fiat Settlement
14 Feb 2005 10:20 AM (EST)
Fitch Ratings-New York-February 14, 2005: The settlement reached between
GM and Fiat is in line with expectations previously incorporated into the
ratings of GM and GMAC, and therefore will have no effect, according to Fitch
Ratings. The ratings remain at 'BBB' with a Negative Rating Outlook, which has
been in effect since October 2004 following a rating downgrade by Fitch.
The settlement marginally weakens a GM balance sheet that has deteriorated
over the past several years but also removes a large uncertainty regarding the
ability of Fiat to exercise the put of its auto operations to GM. Future rating
actions will continue to focus on the capacity of GM to improve profitability in
its global auto operations through competitive product offerings and a
significant reduction in its cost base during a period of unrelenting
competition.
The ratings and Outlook are based on numerous challenges to GM's operating
and financial profile over the near term, including a deteriorating product mix
that is coming under increasing competitive pressure, a car portfolio that
remains weak, a long string of losses in Europe that will be difficult to
reverse in the near term, a high and relatively inflexible fixed-cost structure,
and significant post-employment benefit obligations. GM faces a difficult
environment through 2005 as weak pricing, higher commodity costs, and rising
health care costs combine with a trough in GM's product cycle. Profitability
remains concentrated in large SUV and pickup segments that will be subject to
increasing competition from transplants, while GM's key product rollout, the 900
series, will not be introduced until 2006 and 2007. In addition, recent sales
trends could indicate that the market is transitioning away from the larger SUV
segments that represent heavy GM volumes. In light of these challenges, it will
be critical for GM to show continued progress in attacking its cost base.
Of particular concern is the continuing pace of escalation in health care
costs, which disproportionately disadvantages GM due to its legacy liabilities
and represents perhaps the most significant cost headwind. GM faces a major
challenge in introducing further structural reform to its health care
liabilities, as changes are increasingly likely to be sought from organized
labor. Fitch expects that this will be the major topic in 2007 labor contracts,
although the escalation in health care costs and GM's operating profile indicate
that GM may be forced to explore this issue with the union prior to 2007.
However, GM has become much more aggressive in prefunding its health care
liabilities through VEBA accounts, which have now reached $20 billion. Earnings
on this portfolio are expected to offset a portion of the health care cost
escalation being incurred by GM. Together with GM's pension assets that Fitch
estimates at approximately $90 billion, assumed portfolio returns constitute a
significant part of operating results. GM's recent announcements concerning 2005
expectations and its health care costs in particular, accentuate the
difficulties facing the company but do not represent a significant deterioration
from trends incorporated into the 2004 downgrade. The retention of a Negative
Outlook indicates that the rating could be reviewed for further action at any
time that Fitch views it as warranted.
GM's balance sheet has lost substantial flexibility over the past several
years, primarily resulting from the decision to boost funding of its pension
assets. Total debt has increased substantially over the past several years,
although liquidity remains adequate to maintain required capital investment
programs. In addition, other GM assets, most notably Hughes and Direct TV, were
monetized to boost pension contributions, reducing asset protection. Although
benefits paid to retirees from GM's pension assets remain high, significant
contributions over the past several years have reduced the likelihood of further
required funding over the near term. Over the longer term, GM remains exposed to
equity market underperformance in its pension assets as benefit payments from
these assets will remain significant.
14 FEB 2005
Rating Action: General Motors Corporation
MOODY'S CONFIRMS Baa2 RATING OF GM AND Baa1/P-2 RATINGS OF GMAC; OUTLOOK
CHANGED TO NEGATIVE FROM STABLE.
Approximately $150 Billion of Debt Affected.
New York, February 14, 2005 -- Moody's Investors Service confirmed the
Baa2 long-term rating of General Motors Corporation (GM) and the Baa1 long-term
and Prime-2 short-term ratings of General Motors Acceptance Corporation (GMAC),
but changed the outlook of both companies to negative from stable. The change in
outlook follows the announcement that GM has agreed to pay Fiat S.p.A.
(euro)1.55 billion to terminate the Master Agreement between the companies and
to realign their industrial relationships. Although the (euro)1.55 billion
payment does not represent a significant erosion in GM's automotive liquidity
position of $23 billion, this outflow comes as the company is facing increasing
challenges in its competitive and operating environment. These challenges
include the continued erosion in its North American market share position (26.2%
for January 2005), still-high domestic inventory levels, elevated shipments to
the daily rental segment, US incentive levels that remain elevated, and more
negative prospects for the company's burdensome health care costs. The negative
outlook reflects Moody's view that this more stressful environment, in
combination with the (euro)1.55 billion Fiat transaction, will result in credit
metrics that remain weak for the Baa2 level through 2006. In its ongoing
assessment of GM's rating and outlook, Moody's will focus on the company's
ability to remain on track for delivering more appropriate debt protection
measures by 2007 as a result of various new product and cost cutting
initiatives. In order to more solidly support the Baa2 rating, GM's credit
metrics should approximate the following by 2007: EBITA margin should exceed 4%;
fixed charge coverage should be in the 4.0 to 4.5 times range; retained cash
flow to net total debt should exceed 50%; and free cash flow to total debt
should be greater than 15%. For 2004, GM's metrics approximated the following:
EBITA margin of less than 1%; fixed charge coverage below 2 times; retained cash
flow to net debt moderately in excess of 35%; and, free cash flow to total debt
of about 10%.
GM is undertaking a number of initiatives that could enable it to
strengthen its performance from the weak levels that will be generated during
2005. These initiatives include: 1) a much more robust new product cadence in
the US during late 2005 and continuing through 2007; 2) the continuation of a
healthy new product cadence in Europe during 2005; and, 3) the achievement of
approximately (euro)500 million in annual cost savings due to the elimination of
up to 12,000 employees as part of its Europe restructuring. During the next
twelve months Moody's expects to track GM's progress in implementing these
initiatives and in laying the groundwork for stronger performance during 2007.
Moody's near-term assessment of GM's prospects for sufficiently strengthening
its 2007 performance will consider the company's ability to: 1) maintain US
market share above 27% without relying on increased incentive levels; 2)
demonstrate solid customer acceptance of the products launched during late 2005
in both the US and Europe; 3) reduce US inventory levels; 4) wean itself from a
relatively high dependence on the US daily rental market; and 5) effectively
restructure and strengthen its European operations as it unwinds the
three-year-old joint venture with Fiat.
Moody's change of GMAC's outlook to negative reflects the significant
business ties between GM and GMAC that influence GMAC's origination volumes,
asset mix, and asset quality. GMAC's outlook change did not result from a change
in Moody's views regarding GMAC's intrinsic credit strength, including its
resilient earnings base and strong liquidity. GMAC has appropriately evolved its
funding profile by lengthening debt maturities and by tapping new sources of
funding, taking advantage of the liquidity and high quality of its finance and
mortgage assets. An important consideration in the rating differential between
GMAC and GM is the expectation that GMAC's unsecured creditors would have
superior asset recovery experience relative to the unsecured creditors of GM if
the companies were to come under severe stress. Moody's will continue to monitor
GMAC's capital levels and the relative characteristics of its pledged and
unencumbered assets.
Under the terms of the Fiat settlement, GM will pay Fiat (euro)1.55
billion to terminate the Master Agreement (including the put option) and to
acquire an interest in key strategic diesel engine assets, and other important
rights with respect to diesel engine technology. Moody's believes that the
acquisition of the diesel engine assets and the related technology rights will
enhance the company's strategic position in the European market by ensuring
access to diesel engines. There is important long-term strategic and economic
value to this component of the transaction. However, the amount paid by GM to
relieve itself of the Fiat put exceeds the rating agency's expectations and
contributes to the negative outlook.
A key consideration in Moody's ongoing assessment of GM is the solid
liquidity of the automotive operations. At year end 2004, the company had
approximately $23 billion in cash, marketable securities and short-term VEBA.
This compares with $32 billion in automotive debt that has an average maturity
of approximately 19 years, with about $3 billion maturing during the next five
years. This strong liquidity position affords the company a critical financial
cushion as it attempts to implement its cost cutting initiatives and its new
product program. Moody's notes, however, that the strength of GM liquidity
position and its debt protection measures are moderated by the company's $54
billion unfunded OPEB liability.
Moody's also recognizes that GM, despite the operational and competitive
pressures it faces, generated over $4 billion in free cash flow during 2004.
During 2005, free cash flow could approximate $2 billion prior to the outflows
associated with the European restructuring and the payment associated with the
Fiat settlement agreement.
General Motors Corporation, headquartered in Detroit, Michigan, is the
world's largest producer of cars and light trucks. GMAC, a wholly-owned
subsidiary of GM, provides retail and wholesale financing in support of GM's
automotive operations and is one of the worlds largest non-bank financial
institutions.
Dominion Bond Rating Service Limited (DBRS)
General Motors Acceptance Corporation & Related Subsidiaries
Confirms at BBB (high) & R-1 (low)
Date of Release: February 14, 2005
Issuer Debt Rated Rating Rating Trend
Action
-------------------------------------------------------------------------------
General Motors Acceptance Commercial Confirmed R-1 Stb
Corporation Paper (low)
--------------------------
General Motors Acceptance Commercial Confirmed R-1 Stb
Corporation (N.Z.) Limited Paper (low)
--------------------------
General Motors Acceptance Commercial Confirmed R-1 Stb
Corporation (U.K.) plc Paper (low)
--------------------------
General Motors Acceptance Commercial Confirmed R-1 Stb
Corporation of Canada, Paper (guar. by (low)
Limited GMAC)
--------------------------
General Motors Acceptance Commercial Confirmed R-1 Stb
Corporation, Australia Paper (low)
--------------------------
GMAC Bank GmbH Commercial Confirmed R-1 Stb
Paper (low)
--------------------------
GMAC Commercial Mortgage Commercial Confirmed R-1 Stb
Bank Europe, plc Paper (low)
--------------------------
GMAC Commercial Mortgage Commercial Confirmed R-1 Stb
Japan, K.K. Paper (low)
--------------------------
GMAC International Finance Commercial Confirmed R-1 Stb
B.V. Paper (low)
--------------------------
GMAC, Australia (Finance) Commercial Confirmed R-1 Stb
Limited Paper (low)
--------------------------
General Motors Acceptance Long-Term Debt Confirmed BBB Stb
Corporation (high)
--------------------------
General Motors Acceptance Medium & Confirmed BBB Stb
Corporation (N.Z.) Limited Long-Term Debt (high)
--------------------------
General Motors Acceptance Notes & Confirmed BBB Stb
Corporation of Canada, Debentures (high)
Limited (guar. by GMAC)
--------------------------
General Motors Acceptance Medium & Confirmed BBB Stb
Corporation, Australia Long-Term Debt (high)
--------------------------
GMAC Bank GmbH Medium & Confirmed BBB Stb
Long-Term Debt (high)
--------------------------
GMAC Commercial Mortgage Long-Term Debt Confirmed BBB Stb
Funding, plc (high)
--------------------------
GMAC Commercial Mortgage Medium & Confirmed BBB Stb
Japan, K.K. Long-Term Debt (high)
--------------------------
GMAC International Finance Medium & Confirmed BBB Stb
B.V. Long-Term Debt (high)
Dominion Bond Rating Service ("DBRS") has confirmed the above ratings of
General Motors Acceptance Corporation ("GMAC"), with the trends remaining
Stable.
General Motors Corporation ("GM"), GMAC's wholly owned parent, announced
on February 13, 2005, that GM has agreed to pay (euro)1.55 billion to Fiat
S.p.A. ("Fiat") to terminate the Master Agreement (including the put option) and
to acquire an interest in key strategic diesel engine assets and other important
rights with respect to diesel engine technology and expertise. GM will take an
after-tax charge to earnings of approximately US$840 million. DBRS has confirmed
the ratings of GMAC and related subsidiaries, all with Stable trends, but has
placed the ratings of GM and General Motors of Canada Limited "Under Review with
Negative Implications", reflecting the weakening operating results and outlook.
While DBRS's ratings for captive finance companies are typically
equivalent to the credit strength of the operating parent ("parent"), DBRS
policies have always provided the opportunity whereby a captive finance company
("captive") could be rated higher than the parent. Key general considerations
for such an event include:
(1) The value and first claim ability of the captive assets;
(2) The relationship between the captive and the parent;
(3) The stand-alone strength of the captive, and;
(4) The level of ratings in the credit spectrum.
Based on an evaluation of these factors and all the related sub-factors,
DBRS has concluded that at the present time, the ratings for GMAC should be
slightly higher than the base ratings for GM. Along with these considerations,
DBRS continues to heavily weigh the strength of the parent in assessing the
ratings of this and any other captive subsidiary (driven first and foremost by
the captive's heavy dependence on the parent for products), which meaningfully
limits the degree to which captives can be rated above their respective parent
companies.
Note: General Motors Acceptance Corporation of Canada, Limited; General
Motors Acceptance Corporation (N.Z.) Limited; General Motors Acceptance
Corporation, Australia; GMAC Bank GmbH, GMAC Commercial Mortgage Funding, plc;
GMAC Commercial Mortgage Japan, K.K.; and GMAC International Finance B.V. debt
is guaranteed by General Motors Acceptance Corporation.
# # #
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
GENERAL MOTORS CORPORATION
--------------------------
(Registrant)
Date: February 15, 2005 By: /s/PETER R. BIBLE
--- -----------------
(Peter R. Bible,
Chief Accounting Officer)