Agencies question GM, Ford financing

Expected to report sales drops on Monday

The competitive position of General Motors Corp. and Ford Motor Co. has deteriorated further in recent months, raising fresh questions about the carmakers’ long-term finances, Standard & Poor’s warned yesterday.

Citing softening consumer demand, a turbulent pricing environment, excess production capacity and high fuel prices, Scott Sprinzen, an analyst, told investors, “ We’re not feeling all that sanguine about our ratings.”

S&P cut GM’s and Ford’s ratings to “junk” in May and has a negative outlook on both companies. Fitch Ratings cut the ratings of GM and GMAC, its financing arm, further into junk territory this week.

Mr. Sprinzen said a further risk to GM was the new-found determination of Delphi Corp., North America’s biggest automotive-parts maker, to put its business on a sounder footing. Delphi, which was spun off from GM six years ago, has warned it may file for protection from creditors if it cannot secure financial support from GM and concessions from the United Auto Workers union.

GM and Ford are expected to report a sharp drop in sales and market share when they publish September figures on Monday. Analysts project further gains for Toyota Motor Corp., Honda Motor Co. and Nissan Motor Co.

Mr. Sprinzen said an employee-discount scheme implemented by GM, Ford and DaimlerChrysler AG’s Chrysler division had triggered “almost a buying panic” during the summer but consumer fatigue was setting in. The program “made the consumer even more oriented to the deal-of-the-moment at a time when GM is trying to get away from overtly simplistic discounts.”

He questioned whether GM’s effort to secure health-care cost savings would yield results. Both companies have strong cash reserves and ample liquidity.