Moody's lowers GM

Moody's Investors Service said it lowered the corporate family and probability of default rating of General Motors Corp. to Caa2 from Caa1, and also lowered the company's speculative-grade liquidity rating to SGL-4 from SGL-2.

The outlook is negative.

Moody's said it placed the B3 senior unsecured rating of GMAC LLC on review for possible downgrade.

The downgrade of GM reflects the expectation that the pace and severity of erosion in the U.S. automotive sector will severely outpace the company's ability to respond effectively, and that even with the benefit of the U.S. government's $25 billion guaranteed loan program to assist auto companies in developing new fuel efficient vehicles, GM's liquidity profile will continue to erode into 2009, the agency noted.

"The Caa2 long-term and SGL-4 liquidity ratings reflect the risk that despite all of GM's business restructuring and liquidity raising efforts to date, the magnitude of cash outflows due to ongoing operating losses, debt repayments, and other uses will consume the company's available cash during 2009," said Bruce Clark, senior vice president with Moody's.

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