While there is renewed chatter about a renewed GM bankruptcy, ratings agency Fitch thinks otherwise. The agency that assesses the chances of defaults by companies and countries raised GM’s default rating from BB to BB+, which is once notch below investment grade.
In a statement distributed via Reuters, Fitch says the better outlook reflects GM’s continued positive free cash flow generating capability, very low leverage, strong liquidity position, reduced pension obligations and an improved product portfolio.
Fitch complains that GM’s profitability is nowhere close to the levels of its strongest competitors. The efficiency of GM’s manufacturing operations and the pace of new product development needs to be increased. Fitch is worried about GM’s European losses, and thinks it will be “several years at least” before Europe stops being a drag on the bottom line. Fitch wags fingers at GM’s management turnover, and notes that the underfunded status of its pension plans remains high.
Fitch thinks that GM would burn a substantial amount of cash in a downturn, but will survive it intact.