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Fitch downgrades GM
Fitch Ratings said it downgraded General Motors Corp.'s issuer default and senior debt ratings to B from B+ and assigned an RR4 recovery rating to the company's senior unsecured debt. The company remains on Rating Watch negative.
General Motors Acceptance Corp.'s BB issuer default, senior debt and short-term ratings remain on Rating Watch evolving pending further developments in GM's intent to sell a controlling interest in it.
The downgrade reflects the company's lack of substantive progress toward reducing its cash operating costs, which Fitch predicted will result in negative cash flows persisting through 2007. Furthermore, the UAW contract may not be re-opened until the official September 2007 date, limiting GM's ability to realize substantive cost reduction targets on a timely basis.
When combined with revenue pressures, restructuring costs, a stressed supplier base and projected financial support to resolve the Delphi situation, liquidity will continue to deteriorate from current healthy levels, the agency said.
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