I’ve missed this news from May ’05 but I haven’t read anything about this on-line. Standard&Poor;’s cut debt ratings for General Motors and Ford to “junk status” or “non-investment-grade” in May 5, 2005. In other words, G.M. and Ford are rated as junk bonds….

End of March 2005, G.M. had a consolidated debt of $292 billion and Ford a total debt of $161 billion!! That means, G.M. and Ford together have a cumulated debt of … $453 billion.

Just to give you a possible comparison: Spain, with 43 million inhabitants, had a public debt of $485 billion in 2004 (source: Wikipedia)…

Have a look at this NYTimes’ article (free registration required).

In explaining the downgrades, the agency used nearly identical language to describe a range of parallel concerns at each company, like falling sales of sport utility vehicles as gas prices have risen.

G.M.’s downgrade “reflects our conclusion that management’s strategies may be ineffective in addressing G.M.’s competitive disadvantages,” S.&P.; said in its report. For Ford, “the downgrade to non-investment grade reflects our skepticism about whether management’s strategies will be sufficient to counteract mounting competitive challenges,” S.&P.; wrote.

[S.&P.;] also blamed much of the companies’ problems on their huge financial commitments to its retirees, both in pensions and in medical benefits. Ford’s unfunded pension liability was $12.3 billion and its unfunded medical liability $32.4 billion at the start of the year, S.& P. said, while G.M.’s unfunded medical liability was $61 billion.