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I heard on NPR this morning that Ford and GM have both had their credit status reduced to "junk" status.

This just goes to prove - when you produce junk, that's what you're worth!

 
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I heard something on that too.. sorta ironic

 
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Story on MSNBC.com.

 
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Yeah it's been on all the major news networks this morning. I found this article on edmunds.com in late april: http://www.edmunds.com/insideline/do...ticleId=105468 the GM/Ford dilemma is making news in japan as well.

 
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they blame the unions.

 
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BWAHAHHAHAHAHAHAHHAHAHAHAHAH First I bought a 98 Mustang complete *POS*. Then they tricked me into buying a Kia Sportage *POS*....then i think, okay no more ford, i'm going import...So i buy a Mazda 626...FORD PROBE TRANSMISSION *POS*...never again ford, I have a 2004 ex civic coupe, and I ain't neva goin back....F ford, and F GM, I hope they rot for what they've done. I wish I could support our domestic companies, but whenever they make complete trash, i think it is one of them deals where you reap what you sew. so Rot in hell, F.ix O.r R.epair D.aily...and GM (Garbage Makers) can go right there with ya...okay i feel better now!

 
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They must have made too much money in the past so that they don't care about anything anymore nowdays.

 
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You blame Ford for buying a Kia Sportage, and then say..now I'm going import? You went import wheny ou bought your POS Kia. Oh and BTW, the Ford Probe's tranny is a Mazda tranny. It's the other way around. So cry me a river, hater

 
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Funny thing about this - they placed all their faith in the fact that SUVs sold so well in the past, that they didn't develop anything to replace their profit center. Gas went up, people want economical cars, profits went down.

It really doesn't take rocket science to see how f'd up these companies are.

 
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pwned
i dont really like ford or gm either, its just that the guy was a hater.

 
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What does all this mean? That the borrowing rate for GM and Ford is now higher. But if you keep in track with the auto industry you guys would realized that Ford and GM have already refinanced.

How will it affect industry? GM/Ford will do one of two things, keep current production or take desperate mesures; this can be either a good thing or bad.

 
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You guys do realize that this may limit Mazda...and that may mean we will never see another RX-7...

Same goes for Jag, Aston Martin, Range Rover, and Volvo...

 
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you forgot to add subaru! nookie monster..

 
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Junk ratings just mean higher borrowing costs, which obviously hurts profitability.

GM banked too heavily on 0% financing and huge rebates the last ten years. People have come to expect it and GM can't continue to do it. GM also sites their rediculous health care costs as a major burden on their profitability. This isn't just an issue with GM, all American corporations are being impacted. GM is impacted so much since they have sooooo many retired workers that they still pay benefits to.

And don't be so quick to denounce both companies. Both are still selling a TON of trucks. Worse case scenario, the government will step in and bail both out. They mean wayyyy to much to the US economy.

 
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The thing is that this has a very small part since SUV sales have only dropped noticably in the past year or so. Junk bond status doesn't happen in a year, it happens over numerous years. Their whole business strategy hasn't been solid the entire time.

 
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No No not ford or gm? Oh wait yea there crap!!!
Infact our local news just ran a special about what cars not to buy becuase of recalls and saftey problems that the company swept under the rug just to keep selling, And the top of the list is!!!!! FORD thats right The maker of the 5.slow!!!!

 
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Kia has no relation to ford or gm. How did they trick you into buying one, when KIA is owned by hyundai?

 
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Basically what is does is makes there stock price tank and make it more difficult for them to get loans to payoff debts. This is wall streets way of telling gm and ford that they need to do more drastic measures then just cutting costs.

I don't think wall street will be satisfied until they see some executive heads rolls. Rightfully so, why do workers have to suffer for poor decisions made by management?

 
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This actually might be an opportunity for mazda. If i were a mazda execute, since profits for the company are up, i would actually try to buy back shares from ford at a discounted price since they need the cash pretty badly.

 
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wow... some of you guys really need to read up on what "junk bond/credit" status means... Most of you dont even have a clue of what it means but are just talkin $hit just cause its about Ford and GM.

 
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please inform us what it means then.

 
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A junk bond is basically a bond issued by a crediting company that is considered to be a higher credit risk then if they would have lent the same money to say toyota or something. The crediting company is worried about their return so they give them these bonds knowing that its speculative as to how well the companies are going to do. BUT this means in business terms that an investor will most likely invest all his money into the company because he knows if the company defaults then he is going to have a high rate of return, then if he would have stuck it into another say toyotas bonds. BUT with all this money pouring into the company through these "RISK" investors most companies will overcome their challenges and prevail. Great example of this is WALMART! Walmart was never profitable until their status got reduced to junk bonds. After that they started doing just fine. FORD and GM will do fine as long as they improve their products and it seems like they are on the right track.

 
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yup, please chill out it's not like they've declared going out of business or something


Probable scenario -

Prospective auto buyers will look elsewhere before these guys
The companies will recover.
Hardcore domestic supporters' heads will grow fatter, as this event will add to the 'legacy' story of how they pulled through rough times.


what do you think guys?

 
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i agree with you on the most part, but it doesn't mean investors will invest in gm or ford bonds just because they offer higher yields. Yes junk bond status does offer higher returns, but there's a higher chance of defaulting. Most investors need to be convined the company is taking steps to fix the problems they have for them to fall to junk status.

I haven't read any steps both ford or gm have taken to try to fix the company's problems. The only statement i read is about cutting costs and getting rid of some brands. They've done that for the last 5 yrs and it hasn't fix any of there problems.

I agree with most people, the companies have been able to subsidize there losses in market share with high margin SUV's and trucks. Guess what, the japanese companies took that hint and started offering there own SUV and trucks. **** even honda offers trucks now. That just gives a clue how about much more competition there is now in those market segments then five yrs ago. Higher competition will shrink profit margains.

I'll even stipulate that gm and ford makes nice sports cars. I like the GTO and i think the new mustang is ok, but there compact and midsize cars are crap. Most people buy cars like civics and accords, they don't buy mustangs or GTO's. The raise in gas prices have just amplified this effect.

If they said they would focus on developing a comparable car to a civic and accord and i'm not saying hp wise, i'm speaking in terms of quality and economy. Then i would be convinced there going in the right direction. Its not like they dont have access to the technology to go in that direction. Suburu was rated on of the most reliable cars for 2004 and Ford has a controlling share in suburu. They just refuse to use all the tools at there disposal.

In short basically, if they focused on making better cars not faster cars then they would regain some market share.

 
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Dude, I'm not arguing for or against any of these car makers, but i'd have to say that ford and gm have come a LONG way in quality and in durability. My honda sucks flat out. I'm never going to purchase a honda ever again. But the average joe out in the middle of kentucky is not going to go out and buy a honda ridgeline just so he can drive it around on the country roads. Most of america is still pretty rural, and the only reason that SUV sales have declined is because of people that live in the city and thought they needed one so they got one are no longer buying them. Most of the country is still going to be purchasing these SUV's the trend is not going to go away anytime soon. Ford and GM also both have proven track records with their pickup trucks all over the WORLD! Ive been to many parts of the world and I've seen tons and tons of fords and gm's and rarely a japanese trucks. As for the investors, they will invest in high yeild, high risk bonds, because as you know bonds with greater risks have higher returns. The average investor will invest in high yeild high risk bonds, and supplement his income with low risk low yeild stocks. Thats just how the market goes. Walmart again is a great example of this, Chrysler is also a great example of this.

 
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^^^^^^

I agree ford and gm quality has gone up, but are still sub par compared to japanese makers and even in some cases to hyundai. The only reason both ford and gm went up in quality at all is because they adopted some japanese manufacturing techniques. It goes back to my original statement that the domestics can make cars as reliable as japanese cars, but they choose not to do so.


i'm not arguing who makes better trucks or SUVS, my point was that there's a lot more competition in that market segment then there was 5yrs ago. I brought up the ridgeline as a example of more competition.

Yes the majority of America is still rural, but then again 90% of US GDP is only produced by four states. The majority of people in the largest car markets buy compact and midside cars, with maybe the exception of Texas.

Sales of trucks and suvs were down 20% for ford and 17% for gm. I'm saying the company shouldn't just focus on making good trucks and suv's. They should focus on making good cars, because there dominance in the suv and truck market is declining and the majority of income comes from cars.

walmart is not a good example, because they don't produce there own products, but rather sell other people's manufactured goods at a cheap price. People are not buying gm and ford cars because there too expensive, there not buying them because there crap. Thats what they ford and gm execs dont understand.

Chrysler is a better example of how a company that's been losing money and market share for the last 10yrs to a company that grew 9%. The germans cleaned house and was able to being that company out of its hole into one of the few profitable domestic producers. Chrysler did so well, they even out performed there more expensive counterpart, Mercedes.

Toyota grew 23% and honda 13% perspectively, obviously, there doing something correctly.

Why would investors want to invest in a company that hasn't changed its business plan since 2001?