S&P Skeptical GM/Chrysler Deal Would Boost Liquidity
Standard&Poor’s Ratings Services today expressed skepticism that a merger or tie-up between General Motors (NYSE: GM) and privately held Chrysler LLC would do much to address either companies liquidity issues.
S&P said its ratings on GM, including the ‘B-’ long-term corporate credit rating, and ratings on GM’s 49%-owned finance affiliate GMAC LLC, including the ‘B-’ long-term counterparty credit rating, remain on CreditWatch, where they were placed with negative implications on Oct. 9, 2008.
Since the CreditWatch placement, various published reports have discussed talks being held about a merger or partnership between GM and privately held Chrysler. Nissan Motor Co. Ltd. (BBB+/Stable/A-2) and Renault S.A. (BBB+/Negative/A-2)–foreign automakers with a successful existing alliance–have also been reported to be talking with Chrysler.
The CreditWatch placement is not immediately affected by the possibility of a GM-Chrysler combination or alliance, despite the potential cost savings, but also massive execution risks, that we anticipate would result from such a transaction. Our most serious concerns regarding GM are more immediate: the pressure on GM’s liquidity during 2009 from the rapidly weakening state of most global automotive markets and the constrained state of the capital markets.
We would be skeptical that a GM-Chrysler transaction could easily address our primary concern by resulting in a substantial increase of current liquidity for the parties involved.
S&P also said its ratings on Chrysler LLC (CCC+/Negative/–) and finance affiliate DaimlerChrysler Financial Services Americas LLC (CCC+/Negative/–) were not immediately affected by the reported merger talks.
“Our most serious concerns regarding Chrysler are more immediate: the pressure on the company’s liquidity during 2009 from the rapidly weakening state of most global automotive markets and the constrained state of the capital markets.”
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