"This is yet another milestone in moving further away from the bankruptcy period," said Michelle Krebs, an analyst with researcher AutoTrader.com in Royal Oak, Mich. "They have gotten their financial house in order and this shows that they can now withstand things like the recall."
The upgrade, five years after a $49.5 billion government-backed bankruptcy, comes even as Kenneth Feinberg weighs hundreds of claims for damages related to deaths and injuries resulting from a faulty ignition switch in small cars.
S&P said credit measures will remain strong over the next year or so even after recall-related costs.
"We wanted to understand the impact of the recalls from a reputational standpoint as well as the effect they might have on the market share," said Nishit Madlani, an analyst at S&P. "The company's performance over recent months has shown that recalls haven't impacted sales. Reputational damage did not transpire, for the most part."
GM has put most of the anticipated costs behind it by the second quarter, other than some possible "tails" from ongoing additional incidents, Stevens said. Beyond the improved lending outlook for GM Financial, Stevens said he doesn't expect the upgrade to spur additional borrowing for the parent company.
"I wouldn't say that this upgrade will trigger any more or less activity as it relates to the debt market," he said in the interview. "We've been relatively clear in our intent to maintain low debt. There's enough operating leverage in the business that we certainly don't want to overlay financial risk."
GM shares fell 2.3 percent to $32.87 at the close in New York Stock Exchange trading on Thursday, before the upgrade was announced. The stock has tumbled 20 percent while the S&P 500 Index has gained 6.4 percent this year.
The upgrade is an important milestone for the automaker as it tries to move past its biggest crisis since emerging from bankruptcy. The U.S. government sold its last GM shares in December.
GM also said in January it would pay a dividend of 30 cents a share, the first quarterly payment since July 2008.
"It's taken an awful lot of money to get to this point," John Casesa, senior managing director at Guggenheim Partners, said in an interview. "The company has been completely recapitalized by the government of the United States."
The automaker has also taken advantage of its new lease on life by slimming down its brands and operations, and changing the way it operates, he said.
An agreement with unions to have new workers assemble vehicles for less pay than older workers means that GM now makes money building cars -- not just trucks -- which it couldn't do before the union agreement and restructuring in bankruptcy, he said.
"There is an operating story here, too," Casesa said. "It's a much more streamlined company which has taken drastic steps."
In a further sign of GM's moves to get beyond the recall stigma, CEO Mary Barra this week appeared with Alibaba Group Holdings Chairman and founder Jack Ma at the annual Clinton Global Initiative event in New York.
Later that day, Barra accepted an award from the Appeal of Conscience Foundation, an interfaith organization that honors leaders for putting social responsibility ahead of business results.
"Delivering segment-leading vehicles, improving the efficiency of our operations and building a fortress balance sheet made this upgrade possible," Barra said in a statement. "While we are not yet satisfied, and know we have work to do, I am confident that our renewed focus on our customers will drive even stronger business results."