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Transportation equipment industry

Automakers Take Hit as Moody's Cuts Ratings to Junk Status

Strategic Insights

— 1 min read

The two largest automakers in the US, Ford Motor Co. and General Motors Corp., took a hit in post-market trading after Moody's Investors Service cut their debt ratings to junk status. Moody's cut Ford's senior unsecured debt to Ba1 from Baa3 and General Motors' to Ba2 from Baa3, affecting approximately $150 billion and $170 billion of debt, respectively. The ratings change reflects the automakers' weakened market share, uncompetitive cost structure, and operating losses in North America.

Key Takeaways:

  • Moody's cut Ford's senior unsecured debt to Ba1 from Baa3, affecting $150 billion of debt, citing erosion in operating results and cash flow generation.
  • Moody's cut General Motors' senior unsecured-debt rating to Ba2 from Baa3, affecting $170 billion of debt, citing continued operating losses and challenges in restructuring the company.
  • Ford Motor Co. shares fell 12 cents to $9.80, and General Motors Corp. shares fell 27 cents to $34.
  • Tivo Inc. fell 35 cents to $5.77 after posting a slim second-quarter profit but warning it would return to the red in the third quarter.
  • Intuit Inc. fell 52 cents to $45.81 after warning that fiscal first-quarter earnings would fall short of the Wall Street target.
  • Ford's operating losses and cash flow generation were major factors in Moody's rating downgrade, while General Motors' restructuring challenges were also a concern.

Statistics:

  • $320 billion: Total debt affected by Moody's rating downgrade on Ford and General Motors.
  • 12 cents: Ford Motor Co. shares fell in post-market trading.
  • 27 cents: General Motors Corp. shares fell in post-market trading.
  • $240,000: Tivo Inc.'s profit attributable to common shareholders for the quarter ended in July.
  • 254,000: New subscribers added by Tivo during the second quarter.
  • $41 million to $43 million: Tivo's expected revenue for the third quarter ending in October.
  • $3.18 million: Mean analyst expectation of Tivo's loss in the third quarter.
  • $20 million to $25 million: Tivo's expected loss for the third quarter.
  • 11 cents: Intuit Inc.'s loss per share for the first quarter ended July 31.
  • $42.2 million: Intuit's mean analyst expectation of revenue for the fiscal first quarter.

Sources:

  • Moody's Investors Service
  • Dow Jones Commodities News Select
  • Comtex SmarTrend(SM)
  • Intuit Inc.
  • Tivo Inc.
  • General Motors Corp.
  • Ford Motor Co.

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