By Craig Trudell; Bloomberg ~ Oct 06, 2010

General Motors Co. was given the same credit rating as Ford Motor Co. from Fitch Ratings, which said the largest U.S. automaker has improved its balance sheet as it plans an initial public offering to pare government stakes.

GM was given an initial BB- issuer default rating, the same as Dearborn, Michigan-based Ford, Fitch said in a statement today. The rating for Detroit-based GM, 61 percent owned by the U.S. government, reflects its “strong liquidity position, low leverage, improved cost structure and increasingly competitive product portfolio,” wrote Stephen Brown, a Fitch analyst.

“Although they have similar ratings, you sort of get to them from different paths,” Brown, who is based in Chicago, said today in a telephone interview. “GM doesn’t have a whole lot of debt, but they have very large pension obligations. Ford’s pension obligations are significant, but they’re lower than GM’s by quite a bit. But Ford has a lot of debt.”

GM emerged from bankruptcy in July 2009 having received $50 billion in federal aid. GM and the U.S. Treasury aim to hold an $8 billion to $10 billion IPO in November, two people familiar with the plans said last month.

The company’s pension plans were underfunded by $27 billion through 2009, Fitch said. Ford’s pensions were underfunded by about $6.1 billion through last year, down from $16 billion in 2008, Fitch said in an Aug. 6 report. Fitch raised its rating on Ford in that report two steps to BB-, three levels below investment grade.

GM Debt

GM had $8.2 billion of debt at the end of the second quarter, compared to $32 billion in cash, Fitch said. Ford had about $27 billion in debt and $22 billion in cash for its automotive operations at the end of the first half of 2010.

“With the significant shedding of debt, the balance sheet at GM is going to look much better than it did a year and a half ago,” said Greg Petryszyn, a fixed-income analyst at Minneapolis-based Thrivent Financial.

GM’s 8.375 percent bonds due July 2033, which were issued by old General Motors Corp. and convert to shares in the new GM, were unchanged at 34.5 cents on the dollar at 4:20 p.m. today in New York, according to Trace, the bond-pricing service of the Financial Industry Regulatory Authority.

Ford’s 7.45 percent notes due in July 2031 rose 1.19 cents to 108.44 cents on the dollar at 1:38 p.m. in New York, according to Trace.

To contact the reporter on this story: Craig Trudell in New York at [email protected]

To contact the editor responsible for this story: Jamie Butters at [email protected]

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