Printer Friendly

GENERAL MOTORS, GMAC 'A-' SENIOR DEBT AFFIRMED BY FITCH AFTER PENSION DISCLOSURE -- FITCH FINANCIAL WIRE --

 NEW YORK, May 13 /PRNewswire/ -- Fitch affirms General Motors Corp.'s 'A-' senior debt and 'BBB+' preference shares. General Motors Acceptance Corp.'s 'A-' senior debt and 'F-1' commercial paper also are affirmed. GM's credit trend is improving, while GMAC's is stable.
 The affirmation follows GM's recent disclosure that lowering the discount rate to calculate the present value of its pension liabilities could raise its global unfunded liability to $19 billion by year-end 1993 from $14 billion at year-end 1992. This potential change is driven by the 90-100 basis point decline in long-term interest rates from the 8.6% rate by which GM discounted these future liabilities in 1992. The associated charge to year-end 1993 shareholders' equity is estimated at $1.8 billion; equity was $6.6 billion at March 31, 1993. The same interest rate trends and change in the discount rate also would raise GM's FASB 106 obligation by $5 billion, but would have no immediate impact on shareholders' equity or cash flow.
 While Fitch is concerned as to the magnitude of this accounting liability, the funded status of GM's pension plans on a true economic basis improved recently from year-end 1992; investment performance and plan contributions more than offset additional liabilities arising from GM's early retirement program. GM now assumes a 10 percent return on plan assets, compared with an actual 14.4 percent average return achieved over the last decade.
 Accounting concerns also are somewhat mitigated near-term by recent improvements in operating and financial performance. North American operations have returned to profit, albeit only for two quarters, cash and cash flow have improved substantially, and GM has not raised external capital for six months. Importantly, GM's board remains highly committed to funding this gap over the 1990s, but this implies substantial annual funding needs going forward.
 Longer-term concerns center on auto business cyclicality and the impact of changes in pension provisions that GM might negotiate in its new labor contract. Between now and 2000, the U.S. is likely to experience another recession, and accompanying cash flow weakness may confront GM with a painful tradeoff between its product and pension funding. GM clearly cannot afford another contract such as the present one, indicating that labor negotiations this year will be tough and could be further complicated by the Clinton administration's health-care reform proposals. Expensive pension costs, combined with escalating health-care inflation, continue to underscore the issue of GM's competitive disadvantage.
 -0- 5/13/93
 /CONTACT: Mary Anne Sudol, CFA, 212-908-0562 (GM), or Nancy E. Stroker, CFA, 212-908-0533 (GMAC), both of Fitch/
 (GM)


CO: General Motors Corp. ST: New York IN: AUT SU: RTG

LD -- NY102 -- 8386 05/13/93 18:53 EDT
COPYRIGHT 1993 PR Newswire Association LLC
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1993 Gale, Cengage Learning. All rights reserved.

Article Details
Printer friendly Cite/link Email Feedback
Publication:PR Newswire
Date:May 13, 1993
Words:446
Previous Article:ALEX. HAMILTON LIFE 'AA' CLAIMS-PAYING ABILITY AFFIRMED BY FITCH -- FITCH FINANCIAL WIRE --
Next Article:SAMSON ENERGY REPORTS HIGHER 1993 FIRST QUARTER CASH FLOW AND INCOME
Topics:


Related Articles
GM, GMAC RATINGS AFFIRMED BY FITCH AFTER GMHE ANNOUNCEMENT -- FITCH FINANCIAL WIRE --
GM $20.8 BILLION ACCOUNTING CHARGE AS EXPECTED, NOTES FITCH -- FITCH FINANCIAL WIRE --
GENERAL MOTORS $300 MILLION 7 PERCENT NOTES DUE 2003 RATED 'A-' BY FITCH -- FITCH FINANCIAL WIRE --
GM, GMAC RATINGS AFFIRMED BY FITCH AFTER PENSION DISCLOSURE -- FITCH FINANCIAL WIRE --
GM, GMAC 'A-' SENIOR DEBT AFFIRMED BY FITCH AFTER PENSION PROPOSAL -- FITCH FINANCIAL WIRE --
GENERAL MOTORS $500 MILLION DEBENTURES RATED 'A-' BY FITCH -- FITCH FINANCIAL WIRE --
GM, GMAC 'A-' SENIOR DEBT, 'F-1' CP RATINGS AFFIRMED BY FITCH -- FITCH FINANCIAL WIRE --
GM ISSUES TOTALING $377 MILLION RATED 'A-' BY FITCH -- FITCH FINANCIAL WIRE --
FITCH AFFIRMS GM, GMAC RATINGS ON DAYTON SETTLEMENT -- FITCH FINANCIAL WIRE --
GM, GMAC 'A-' SENIOR DEBT RATINGS AFFIRMED BY FITCH - FITCH FINANCIAL WIRE -

Terms of use | Copyright © 2017 Farlex, Inc. | Feedback | For webmasters