If you believe that the bond rating agencies either matter or still offer any relevance in the post-meltdown (or is it mid-meltdown?) world, then you can see they are at it again.  Moody’s has downgraded General Motors Corporation (NYSE: GM) this morning on the corporate debt credit ratings.  The corporate family rating has been taken down another notch in various forms in yet another version of "And or, Duh!" coverage from the ratings agency.

Here is a break-down of the coverage:

• Corporate Family to Caa1 from B3;
• Probability of Default to Caa1 from B3;
• senior unsecured to Caa2 from Caa1;
• senior secured credit facility to B1 from Ba3;
• Speculative Grade Liquidity rating remains at SGL-2;
• and the outlook is Negative (as if you didn’t gather that already).

There are all sorts of "new" discoveries and all sorts of new revelationsin today’s coverage. These downgrades are based upon competitivechallenges, cash flows, demand shift away from trucks and SUV’s, slowerindustry sales, portfolio expansion time, pricing power, and all theother things you already know.

GM’s operating plan is meant to generate $10 billion in additionalcash, and it plans to generate $5 billion in proceeds by the end of2009 in asset sales.  While this will help the company’s liquidity,Moody’s notes that the level of savings and additional capital inflowsmay be challenging and goes to say the company still faces long-termformidable challenges.

If the sarcasm is a bit harsh, just ask yourself one key question…"Throughout this entire credit mess and slowing economy, how many greatmoney-saving and preemptive calls have the ratings agencies given youahead of a blow-up?"…….. This is not just meant for Moody’s by the way, as most of the corporate debt ratings agencies all missed the mark.

Somehow this is managing to impact the stock as it theoretically raisesits costs of future borrowing on new issues.  Shares are down 5% now to$10.53 on only about 5.2 million shares.  Ford Motor Co. (NYSE: F) is down by 4.4% to $4.96 in sympathy.

Jon C. Ogg
August 13, 2008

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