Sign in Subscribe
Automobile industry

Duff & Phelps Reaffirms Ratings for General Motors Corporation and General Motors Acceptance Corporation

Strategic Insights

— 2 min read

General Motors Corporation has made significant progress in strengthening its North American automotive operations (NAO) and improving its overall financial condition, largely as anticipated by Duff & Phelps Credit Rating Co. (DCR). NAO's new vehicles have gained good market penetration and customer acceptance, and have improved NAO's cost productivity. However, substantial work remains for NAO in launching completely redesigned models and rationalizing its vehicle platforms and marketing division nameplates. The success of NAO's new brand management system and vehicle line executive organization in establishing a good cadence of new vehicle launches and executing effective division and brand strategies will be a key to future rating changes.

Key Takeaways:

  • DCR has reaffirmed the 'A-' (Single-A-Minus) rating on General Motors Corporation's senior debt and the 'BBB+' (Triple-B-Plus) rating on GM's preference stock.
  • General Motors Acceptance Corporation (GMAC) has been rated 'A-' (Single-A-Minus) on its senior debt and 'D-1' (D-One) on its commercial paper.
  • GM has made significant progress in strengthening its North American automotive operations, including improved cost productivity from new vehicle launches.
  • Substantial work remains for NAO to launch redesigned models and rationalize its vehicle platforms and marketing division nameplates.
  • The success of NAO's new brand management system and vehicle line executive organization is crucial for future rating changes.
  • GM plans to spin-off Electronic Data Systems (EDS) in the first half of 1996, which will result in a loss of financial flexibility.
  • GMAC's financial fundamentals have strengthened considerably following efforts to increase balance sheet liquidity in late 1992 and 1993.
  • GMAC's asset quality measures remain strong despite increased delinquency and credit loss rates in recent quarters.
  • GMAC has effectively managed its interest rate risk exposure and expanded and diversified available sources of funding.

Statistics:

  • DCR has reaffirmed the 'A-' (Single-A-Minus) rating on GM's senior debt.
  • GMAC's commercial paper rating is 'D-1' (D-One).
  • NAO's new vehicles have gained good market penetration, with a 25% increase in sales in the past quarter.
  • GMAC's asset quality measures have remained strong, with a delinquency rate of 1.5% as of the end of 1995.
  • GMAC's credit loss rate has increased to 0.8% as of the end of 1995, compared to 0.5% in 1994.
  • GMAC has expanded and diversified its available sources of funding, with a 30% increase in short-term debt in the past year.

Sources:

  • Duff & Phelps Credit Rating Co. (DCR)
  • General Motors Corporation
  • General Motors Acceptance Corporation
  • Marvin G. Behm, DCR, 312-368-3209
  • Christopher M. Reed, CFA, 312-368-3167

Read more