Fitch upgrades GM to investment grade

Fitch Ratings announced today that it has upgraded General Motors’ rating from BB+ to BBB-, bumping it to an investment-grade rating for the first time in several years. With this upgrade, GM is now considered investment-worthy by all major U.S. ratings agencies.
“Fitch’s news today confirms that we are delivering on our commitment to generate strong operating results and implement our customer-focused strategy,” GM CEO Mary Barra said. “But, as much as we like this recognition, we are focused on achieving even stronger performance and enhancing long-term shareholder value in the years to come.”

In its announcement, Fitch cited several factors that could contribute to GM’s rating changing in the future. Upgrade factors would include a continued strong North American operating margin, improving to further profitability in Europe and growing global market share and sales (with a focus on the U.S. and China).

Potential pitfalls would include several items that have landed GM in the headlines over the past year, including prolonged dips in GM’s available cash (whether due to recalls, policy changes, or needing to shore up GM Financial’s liquidity for whatever reason), sustained periods of negative cash flow, and perhaps most ominously, the outcome of an unexpected merger or acquisition that negatively impacts GM’s credit profile.

Fitch downgraded GM and GM Financial to BB+ ratings in August, 2012 and August, 2013, respectively. U.S. ratings agencies increased GM’s credit rating to investment-grade over the past year, with Fitch being the last of the major agencies to do so.