TEXT-Fitch affirms GM's 'BB+' IDR after repurchase announcement

Wed Dec 19, 2012 10:50am EST

Dec 19 - Fitch Ratings has affirmed the ratings of General Motors Company
 (GM) and its wholly owned subsidiary, General Motors Holdings LLC (GM
Holdings), following this morning's announcement that GM will repurchase a
portion of the common stock currently held by the U.S. Treasury (UST). The
Issuer Default Ratings (IDR) for both GM and GM Holdings are 'BB+', and the
Rating Outlook for both is Stable. A full ratings list follows at the end of
this release.

GM announced this morning that it has reached agreement with the UST to
repurchase 200 million common shares currently held by the UST for $5.5 billion,
which is expected to increase the public float of GM's common stock above 50%.
GM expects to complete the transaction before year end. Following the
repurchase, the UST will continue to hold 300 million shares of common stock,
equal to a 19% stake in the company. However, in conjunction with GM's agreement
to repurchase the shares, the UST has agreed to exit its remaining stake in the
company over the next 12 to 15 months and to relinquish certain of its
governance rights.

Fitch views the transaction as neutral to creditors in the near term and
somewhat positive over the longer term. Although the share repurchase will
constitute a material use of cash, Fitch expects GM's liquidity position to
remain strong following the transaction. As of Sep. 30, 2012, GM had nearly $32
billion in automotive cash, and in November 2012, the company closed on a new
$11 billion secured credit facility. Therefore, Fitch expects GM to have
sufficient liquidity to complete the share repurchase and maintain a total
liquidity position well above the $25 billion (combined cash and credit
facility) level that Fitch has previously identified as a key liquidity target
for the company.

In the medium term, the removal of certain U.S. government restrictions on GM
will provide the company with additional flexibility in operating its business
and eliminate some of the administrative requirements that it has had to perform
as a recipient of financial assistance from the UST. Over time, Fitch also
expects the decline of the UST's ownership stake to lessen the stigma associated
with GM's government-supported bankruptcy that has hung over the company and
kept some potential customers from considering GM brands.

GM's ratings incorporate the automaker's positive free cash flow generating
capability, very low leverage, strong liquidity position, reduced (but still
heavy) pension obligations and improved product portfolio. Fitch expects GM to
continue with its strategy of keeping a relatively low level of automotive debt
on its balance sheet while maintaining a strong liquidity position, which will
provide the company with substantial financial flexibility in the event of
another industry downturn. Also supporting GM's ratings is the global diversity
of its operations, which sets it apart from the other U.S. auto manufacturers.
In particular, GM's strong presence in China and other emerging markets helps to
shield it from weakness in more mature regions.

Despite its strengthened financial position, GM also continues to face a number
of challenges. The company's margins, particularly in North America, remain
below those of its strongest competitors, and it continues to work on improving
the efficiency of its manufacturing and product development processes. In
addition, GM's European business continues to generate substantial losses, and
weak market conditions and substantial restructuring actions are likely to weigh
on the company's financial performance in the region for several more years. The
underfunded status of GM's pension plans also remains relatively high, even
after the planned defeasing of its U.S. salaried retiree obligations.

Fitch could undertake a positive rating action on GM if the company's margins,
particularly in North America, rise to the level of its strongest competitors
and if the financial performance of its European operations stabilizes. Also
factored into any positive rating action would be a demonstrated ability to at
least maintain both market share and net pricing in the company's key global
markets. Continued progress on reducing pension liabilities will also be a key
driver of any positive rating action. Fitch will look for GM to maintain a
sustained automotive liquidity position of at least $25 billion, including both
cash and revolver availability.

On the other hand, Fitch could consider a negative rating action if a very
severe downturn significantly weakens GM's liquidity position. However, Fitch
has incorporated into the current ratings the effect that a downturn would
likely have on the company's credit profile, and GM appears to be generally well
positioned to withstand the pressures of a steep decline in demand. Fitch could
also consider a negative rating action if management deviates from its plan to
maintain a strong balance sheet, either by increasing automotive debt or
allowing automotive liquidity to fall below $25 billion for an extended period
of time. Problems with operational execution or a significant decline in market
share could also lead to a negative action.

Fitch has affirmed the following ratings on GM and GM Holdings, as follows:

GM
--Long-term IDR at 'BB+';
--Preferred stock rating at 'BB-';

GM Holdings
--Long-term IDR at 'BB+';
--Secured revolving credit facilities at 'BBB-';

The Rating Outlook is Stable.

Fitch notes that the ratings of General Motors Financial Company, Inc. (GMF), a
wholly owned subsidiary of GM, remain on Rating Watch Positive pending the
successful close of GMF's purchase of certain of Ally Financial Inc.'s
international operations. Fitch expects to equalize GMF's ratings to those of GM
once the acquisition is complete. GMF's current IDR of 'BB' is one notch below
that of GM.

Additional information is available at 'www.fitchratings.com'. The ratings above
were solicited by, or on behalf of, the issuer, and therefore, Fitch has been
compensated for the provision of the ratings.

Applicable Criteria and Related Research:
--Corporate Rating Methodology (Aug. 8, 2012);
--Recovery Ratings and Notching Criteria for Nonfinancial Corporate Issuers
(Nov. 13, 2012);
--Evaluating Corporate Governance (Dec. 12, 2012);
--2013 Outlook: U.S. Auto Manufacturers and Suppliers (Dec. 17, 2012);
--The New U.S. Auto Fuel Economy and Emissions Standards: What They Are and Who
Will Benefit (Nov. 5, 2012).

Applicable Criteria and Related Research:
Corporate Rating Methodology
Recovery Ratings and Notching Criteria for Non-Financial Corporate Issuers
Evaluating Corporate Governance
2013 Outlook: U.S. Auto Manufacturers and Suppliers
The New U.S. Auto Fuel Economy and Emissions Standards: What They Are and Who
Will Benefit
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