GM146;s rating junked deeper

General Motors Corp8217;s ratings slide deepened on Monday as Fitch Ratings cut the world8217;s largest automaker deeper into junk status,...

General Motors Corp8217;s ratings slide deepened on Monday as Fitch Ratings cut the world8217;s largest automaker deeper into junk status, citing limited progress at cutting costs and risks surrounding Delphi Corp8217;s restructuring.

Fitch has downgraded GM8217;s ratings three times this year as the automaker battled soaring employee benefit costs and competition from foreign rivals. GM lost 2.5 billion in North America in the first half of 2005.

Fitch also cut its ratings on GM8217;s Finance arm, General Motors Acceptance Corp, citing its linkage with GM.

Recent sales incentives have lowered market prices, making GM increasingly vulnerable to sales volume declines, Fitch said. Persistently high gasoline prices are also expected to reduce demand for GM8217;s large vehicles, which comprise the majority of its new products, the rating agency said.

8216;8216;We are firmly committed to improving our performance in North America,8217;8217; said GM spokesman Jerry Dubrowski. 8216;8216;We recognise that there is work to be done to improve our cost position.8217;8217;

GM bonds with an 8.375 per cent coupon due in 2033 were little changed at 79.75 cents on the dollar, versus 79.38 cents on Monday, according to MarketAxess. Its shares rose 8 cents, or 0.26 per cent, to 31.15 on the New York stock exchange.

Fitch said it was concerned over the financial support GM may have to extend to Delphi Corp to help the auto parts maker restructure. Delphi has been in talks with its former parent and the United Auto Workers UAW on a deal to help it drastically cut costs.

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GM has also been negotiating with UAW since April to try to cut its own Union health care and other benefits, and achieving those concessions will be the key to the automaker8217;s turnaround, analysts said.

8216;8216;Until we have concessions negotiated and agreed upon, no one8217;s going to be excited about Ford and GM,8217;8217; said Diane Swonk, Chief economist at Mesirow Financial.

8216;8216;In the face of higher energy costs, it makes the situation look even bleaker, because they just don8217;t have the vehicles to compete on a fuel-efficient basis with many of their foreign competitors,8217;8217; she said.

8212; Reuters