Fitch: GM Not To Go Bust Anytime Soon

Bertel Schmitt
by Bertel Schmitt

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.

Bertel Schmitt
Bertel Schmitt

Bertel Schmitt comes back to journalism after taking a 35 year break in advertising and marketing. He ran and owned advertising agencies in Duesseldorf, Germany, and New York City. Volkswagen A.G. was Bertel's most important corporate account. Schmitt's advertising and marketing career touched many corners of the industry with a special focus on automotive products and services. Since 2004, he lives in Japan and China with his wife <a href="http://www.tomokoandbertel.com"> Tomoko </a>. Bertel Schmitt is a founding board member of the <a href="http://www.offshoresuperseries.com"> Offshore Super Series </a>, an American offshore powerboat racing organization. He is co-owner of the racing team Typhoon.

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  • Billfrombuckhead Billfrombuckhead on Aug 25, 2012

    I hope the short sellers get routed at some point. This whole Forbes article is corrupt. They have no basis fact but are trying to drive the stock down using political sentiment. I'm a small businessman and I would be close to nothing without government. Remeber those Jews before WW2 who had no country and no country would take them in? That's why they formed Israel. Ask the Palestinians and Roma if they wished they had a powerful government.

  • Chicagoland Chicagoland on Aug 25, 2012

    Why do GM bashers convieniently forget about bailouts of AIG, Bank of America, and MorganStanley? Also, forget about the Iraq/Afgan war costs? Includes continuing Veterans' benefits and long term care for wounded warriors? The War is #1 major contributer to the debt.

    • Bd2 Bd2 on Aug 25, 2012

      They also conveniently forget that Ford Credit received more in bailout funds than Ally/GMAC and that Ford also received $5.9B in basically zero interest loans from the Feds.

  • Billfrombuckhead Billfrombuckhead on Aug 26, 2012

    What's going on with many websites is "cafeteria capitalism". People pick out the parts of laissez-faire capitalism that helps their favorite political parties, companies, products or themselves while rejecting consistency with those principles. The Japanese buying down the yen is one such inconsistency. "Although not a proponent of mercantilism, noted 18th century Scottish economist Adam Smith (1723-1790) was responsible for coining the term "mercantile system." Mercantilism was in opposition to Smith's concepts of free trade, free enterprise, and the free movement of people and goods. In other words, it went against the precepts of a laissez-faire economy. One of the key assertions of mercantilism is that national wealth will come through the import and accumulation of gold or other precious metals such as silver. Smith was highly critical of this theory of wealth and he clearly understood the class bias in the merchant system that supported it. In fact, Smith expressed great concern about colonialism and the monopoly trade routes instituted by the merchant class, which often worked against the economic interests of the citizenry. Mercantilism as an economic system is generally held in low regard today. Japan, however, with its structural barriers to foreign competition and its discouragement of foreign direct investment has been accused of practicing a late 20th century form of mercantilism." Read more: Mercantilism http://www.referenceforbusiness.com/encyclopedia/Man-Mix/Mercantilism.html#ixzz24cb69rqz

  • Doctor olds Doctor olds on Aug 27, 2012

    @highdesertcat- so, after all your bitching about how much the GM bailout will cost, it turns out you don't even pay taxes! You're not even chipping in the few bucks it MIGHT cost the average taxpayer after all is said and done. ridiculous

    • Highdesertcat Highdesertcat on Aug 28, 2012

      Olds, it's true that my personal income is so low that I do not even have to file after I retired from the military in 1985. Most retirees are that way. Six guys I play poker with are that way. If I want to "chip in" as you say, I'll buy a new car from them. I bought a 2012 Jeep Grand Cherokee last year. My contribution to Chrysler's bailout? You decide. And until her family sold their realty business last year, my wife and the business paid more than enough in taxes to cover us all because the income of the business was more than a million a year and their tax-deductible expenses, after they laid off all the employees except family, didn't even make a dent in the taxes they had to pay. Her brother-in-law is a retired tax attorney who handled all the business tax issues. He really has his act together, citing psalm and verse of the US tax code for each business deduction. Still, they paid a lot! Since she and her family sold the business last year, her official income of record and mine combined, including both our social security checks, still is below the magic number that would require us to file. We're trying to keep it that way. If my teaching gig next month puts me over the limit, I'll donate all of it to the Salvation Army. Our children pay enough to cover all our retirement income each month since they and their spouses each have a household income over $250K/year. Way over. I didn't write the tax code. I just follow it. The key is not to keep all your money in a bank account that can easily be monitored. I learned that from my Democrat friends who have painstakingly sheltered all their wealth and keep cash money and precious metals on hand. Democrats know a lot about the tax code. More so than my Republican buddies who are caught in the income tax trap and pay through the nose. Sometimes you can't get away from it, like when you're civil service or don't have your own business. All this doesn't mean my wife and I are dead broke. I've learned a lot from the old hands at the tax game how to shelter, shelter, shelter. You know, it's not how much you make. It's how much you get to keep. I always wonder about the old codgers who receive even less money than I do each month but still seem to walk around with lots of folding money in their wallets and are the most generous people I know, spreading their own wealth around. The tax and social security laws make it unprofitable for people my age to officially go to work again without losing more than they make. Not only would they lose their free time but also part of their social security retirement income. Just not worth it. And, yes, I'm still against bailouts, handouts, and nationalization for anyone, any time, anywhere. Businesses should succeed or fail on their own merits. At least Chrysler made a comeback, now that it is foreign-owned. We could have done the same for GM, but didn't. Too bad. So sad.

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