Standard & Poor’s has decided that General Motors Co. (NYSE: GM) is now investment grade. The credit ratings agency raised GM’s corporate credit rating to “BBB-” from double “BB+” and the automotive giant’s outlook has moved to stable from positive. Also moved to investment-grade was GM Financial, up to “BBB-,” with its rating having been “BB+” and the outlook revised to stable from positive.

S&P signaled in its release that the upgrade reflects an improved assessment of GM’s business risk profile based on better prospects for profit diversification across regions over the next two to three years. It further signaled a belief that GM’s credit metrics will remain strong with an improving track record of profitability in North America.

Another boost was not China, but a belief that GM will hit its European profitability target mid-decade.

The ratings agency upgrade did say that GM’s high-profile recalls so far in 2014 do remain a negative factor in assessing its business. Still, S&P expects that GM will have ongoing cash flows that can easily manage these recalls. Those recalls have cost roughly $2.5 billion in charges and a fund set up for faulty ignition switches for up to $600 million.

With nearly $39 billion in total automotive liquidity, including almost $28 billion in cash, S&P believes that GM has ample capacity to make payments.

GM shares closed down 2.3% at $32.87 on Thursday against a 52-week range of $31.70 to $41.85. Shares were up by 0.5% or so after the upgrade in Thursday’s after-hours trading session, and the consensus analyst price target for the stock is up around $42.50.

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