Learnshare’s Leadership Summit to Discuss Developing High Potential Employees
Analysts warn that rising interest rates could have a debilitating effect on US auto manufacturers, which will see their cost of borrowing rise while they are still required to offer low-cost financing and other incentives to attract buyers for their cars. With both Ford and GM rated triple-B-minus, a downgrade would affect other issuers as well. Major auto-parts manufacturers, for example, also could be downgraded to below investment grade.
A downgrade of either company would send shock waves through the corporate bond market. Ford and GM are the secondand third-largest issuers of US corporate debt in the Lehman Brothers US Credit Index, following General Electric.
With their higher cost of producing vehicles compared to the Asian producers, Ford and GM likely will be forced to announce more layoffs and plant closings before too long, according to industry analysts. Both carmakers said they would reduce production for the first quarter of 2005 after disappointing sales for November. GM announced in October that it would cut as many as 12,000 jobs in Europe over the next two years in an attempt to staunch losses in the region. Ford’s luxury brand Jaguar is cutting 1,150 jobs in Britain in an effort to return to profitability.