Moody's Downgrades Chrysler Even Deeper Into Junk

Robert Farago
by Robert Farago

As Moody’s has downgraded GM and GMAC to Caa2, it only makes sense that the ratings agency has assigned potential “partner” Chrysler and Chrysler Financial the exact same rating. MarketWatch reports that the ChryCo Bros. are now at Caa2. Folks, Caa2 is the third circle of junk credit Hell, only a blink away from the last part of this category (Caa3). In other words, “Obligations rated Caa are judged to be of poor standing and are subject to very high credit risk, and have extremely poor credit quality.” There are only two ratings lower: Ca and then C. And then… game over. Bottom line: Chrysler’s “plenty o’ cash contention” was the complete B.S. anyone with industry insight knew it to be. Or, as Moody’s puts it, “The downgrade of the Chrysler rating reflects the increased pressure on the company’s liquidity position due to the precipitous decline in US automotive demand and the likelihood that shipment levels will remain depressed through 2009.” Bottom line II: the only institution that will lend GM. GMAC, Chrysler and Chrysler Financial is you (a.k.a. the U.S. government). That said, Chrysler’s owners Cerberus have plenty deep pockets. According to their website: “Cerberus holds controlling or significant minority interests in companies around the world. In aggregate, these companies currently generate over $100 billion in annual revenues [emphasis added].” But Feinberg’s Boyz know better than to throw good money after bad.

Robert Farago
Robert Farago

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  • BlueBrat BlueBrat on Oct 28, 2008

    I remember seeing a Chrysler 300 that some nimrod put an Audi ring logo on the front grill of. Maybe that's not too impossible now, eh.

  • Jolo Jolo on Oct 28, 2008

    Anyone know what Ford's credit rating is?

  • Zarba Zarba on Oct 28, 2008

    Moody's Downgraded Ford to B1 Yesterday. That's three grades above Chrysler, and four grades below "Investment Grade". "Rating "B" - Bonds which are rated B generally lack characteristics of the desirable investment. Assurance of interest and principal payments and of maintenance of other terms of the contract over any long period of time may be small." That definition pretty much sums it up.

  • Threeer Threeer on Oct 28, 2008

    Hmmm...so their financial rating roughly equates to their product rating? Brilliant!

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