LONDON -- Standard & Poor's affirmed the credit ratings of the Big 3 on Wednesday, although the outlook for General Motors remains negative.
The credit ratings agency warned that GM's BBB ratings could be lowered "at any point" if doubts rose that the company could make fundamental progress in achieving a more satisfactory financial performance in its automotive operations.
While it affirmed GM's ratings, S&P said the outlook was negative and that the company's automotive earnings would be under pressure during the second half of 2004.
GM's bonds came under pressure late last week as talk swirled in the market that a ratings downgrade might be on the way.
After the affirmations, the bonds of the three automakers rose in relative value vs. government debt.
Traders said GM's 8.375 percent euro bond due in 2033 was about three basis points tighter at 284 basis points over government bonds, while bonds of Ford Motor Co. and DaimlerChrysler AG were about a basis point tighter.
"The move is in the long-dated General Motors bonds because they widened out so much last week on the rumors of a downgrade," said a trader.
For Ford, rated BBB-, at the bottom of the investment-grade category, the outlook remains stable, the agency said.
"We continue to have long-range concerns about whether Ford's strategy will be effective in boosting profitability to more satisfactory levels, in light of the competitive challenges it faces. However, we believe there is relatively little chance of a further downgrade within the two-year timeframe addressed by the outlook," S&P said.
And for DaimlerChrysler, rated BBB, the threat of a downgrade receded as the company's rating outlook was raised to stable from negative.
"The outlook revision reflects Standard & Poor's expectation that DaimlerChrysler will be able to meet its target to clearly exceed the 2003 operating profit -- before one-time items -- based primarily on Chrysler's return to being a positive contributor to earnings," said S&P credit analyst Maria Bissinger.
"It is also supported by the commercial vehicle division's continued improvements and the ongoing stable performance of the group's services division," she said.