I found it very significant that Moody's has downgraded GM further

[CoffeeAnnan]

in debt rating even as GM was announcing what a great success its Employee Discounts for Everyone Plan has turned out to be. While that Plan has helped GM in the short run to clear its dealer lots,Moddy's believes that the heavy discounts will affect GM's cash flow and Profits negatively.As the public gets used to such discounts, it would be impossible for all American carmakers to even sell cars in future years unless each car comes wrapped with $5000 bills.Ford and Chrysler are now feeling the same heat and joining in.

GM was given a rope and it has decided to hang itself.

[unblock]

1. another downgrade? got a link?

[CoffeeAnnan]

2. I saw that in the Business Day section of the NYT yesterday.I am not sure

if that appeared on the online edition.

On Edit: I am sure that it would have also been reported in the WSJ.

[unblock]

3. here's a link. they're only considering bringing it in line with s&p

and fitch, which are already at junk bond status while moody's is not.

http://finance.lycos.com/qc/news/story.aspx?symbols=NYSE:GM&story=200507072020_APO_V0543

7 July 2005, 4:20pm ET

NEW YORK (AP) -- Moody's Investors Service on Thursday said it is reviewing a possible downgrade of General Motors Corp. debt to junk status, citing concern about the cost of escalating incentives, a consumer shift to more fuel efficient vehicles and long-term pressure on U.S. market share.

Mentioned Last Change
INDU 10449.14 146.85dollars or (1.42%)
GM 34.68 0.86dollars or (2.54%)
GOM 21.64 0.11dollars or (0.50%)
Moody's rates GM bonds at a "Baa3", its lowest investment grade rating. General Motors Acceptance Corp., the auto company's financing division, is also being looked at for a downgrade. GMAC is rated at "Baa2."

General Motors, the world's largest maker of cars and trucks, posted a 41 percent sales increase in June, thanks in part to its "Employee Discount" promotion. The credit rating agency said this promotion _ which offers its employee discount to consumers _ might make it more difficult on profit margins.

Standard & Poor's Corp. and Fitch Ratings already rate GM and its GMAC at a speculative grade rating.

[CoffeeAnnan]

4. Thank you.This downgrade is even more significant because it comes after

the spectacular success of the Discount Program from GM.

[unblock]

5. agreed. ford is similar and has little choice but to enter a price war

so the profit success will likely be shortlived, although the sales success will probably continue to some extent.

[CoffeeAnnan]

6. I understand that Daimler Chrysler has recruited 81 year old Iacocca

to be their pitchman for selling their version of the Employee Discount plan.

[CoffeeAnnan]

7. I understand that Daimler Chrysler has recruited 81 year old Iacocca

to be their pitchman for selling their version of the Employee Discount plan.