UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES AND EXCHANGE ACT OF 1934
Date of report (Date of Earliest Event Reported: (08-17-01)
GENERAL MOTORS ACCEPTANCE CORPORATION
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(Exact name of registrant specified in its charter)
Delaware
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(State or other jurisdiction of incorporation or organization)
1-3754 38-0572512
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(Commission File No.) (I.R.S. Employer Identification No.)
200 Renaissance Center, Detroit, Michigan 48265-2000
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313-665-6266
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(Registrant's telephone number, including area code)
ITEM 5. OTHER EVENTS
S & P and Moody's Places GMAC on CreditWatch
On August 17, 2001, Standard & Poor's placed its ratings on General Motors Corp.
(GM) and its related entities on CreditWatch with negative implications.
Included in the CreditWatch placement is the finance unit, General Motors
Acceptance Corp.
Excerpts from that announcement follows:
The CreditWatch placement reflects Standard & Poor's heightened concern about
the long-range profit potential of the automaker. To date this year, automotive
demand in their core North American market has been far stronger than previously
assumed. Yet, price competition has intensified dramatically, and the company
has experienced substantial market share erosion. At the same time, their
efforts to reduce costs have been inadequate to offset these adverse
developments. Hence, their profitability in North America has deteriorated
significantly - boding ill for their financial performance if a cyclically
weaker market environment were to unfold. Moreover, given the ongoing
proliferation of competing product entries, the company faces the prospect of
diminished earnings contributions from their sport utility vehicles and pickup
trucks, which have accounted for a disproportionately large share of overall
profits.
General Motors has made significant gains in labor productivity in recent years,
and has recently enjoyed a measure of success with certain important new sport
utilities and pickups. However, GM continues to be burdened by an overly complex
brand structure and product mix, and by a legacy of lackluster styling.
GM is diversified geographically, however, their non-North American automotive
operations are presently not meaningful contributors to earnings or cash flow,
and this is likely to remain the case for the next few years. GM's European
operations have generated heavy losses since mid-2000, and management has
indicated that an extensive restructuring plan is currently being developed. The
economic environment in Latin America is deteriorating, and this will likely
preclude further recovery of the important Brazilian market. Moreover, certain
underperforming affiliates -- Isuzu Motors Ltd. (49% owned by GM) - are also
having a negative impact on results.
Weaker operating cash flow, coupled with acquisitions and distributions to
shareholders of the past two years, have resulted in a significant reduction in
the liquidity position of GM. GM may be able to monetize its approximately 30%
ownership interest in Hughes Electronics Corp., which it is currently in
negotiations to sell. Still, overall financial flexibility remains above
average. If their commercial paper ratings were downgraded to 'A-2' from 'A-1',
which would likely occur along with any lowering of their long-term ratings,
Standard & Poor's expects that GM would be able to make any necessary
adjustments to their funding approaches. Indeed, the company has already acted
this year to reduce their reliance on commercial paper borrowings.
As part of its review, Standard & Poor's intends to meet with the management of
the company, to reassess their strategies for coping with present business
challenges, and for maintaining financial flexibility. Standard & Poor's expects
to resolve this review by late October.
RATINGS PLACED ON CREDITWATCH WITH NEGATIVE IMPLICATIONS:
General Motors Acceptance Corp.
Corporate credit rating A
Short-term corporate credit rating A-1
Senior unsecured debt A
Commercial paper A-1
In addition, Moody's Investors Service also reviewed the A2 long-term and
Prime-1 short-term ratings of both GM and GMAC for possible downgrade.
Excerpts from that announcement follows:
GMAC's ratings are closely linked with GM's given the interrelationship and
business ties between the two companies. GMAC's principal franchise is to
support the sales of GM vehicles by providing dealer and retail financing.
GMAC's subsidiaries are also key players in the residential and commercial
mortgage markets. In addition, to analyzing the overall credit impact of GM's
position through this challenging market, the review of GMAC will address the
finance company's operating and financial position going forward.
Moody's believes that GMAC is a well-managed, prudently-positioned finance
company, with demonstrated funding flexibility to support both its debt-paying
ability and its ongoing business operations through market stresses. According
to the rating agency, the finance company has investor acceptance in many of the
most liquid structured finance markets, and has demonstrated the ability to
shift debt-composition profile. Moody's review will also evaluate how GMAC will
be pressured by weakness in the auto market: the borrower quality mix may have
peaked, GM's new car volumes and pricing are suffering, and the residual
valuations on off-lease vehicles have been declining.