GM and Ford move deeper in ‘junk’ status

General Motors Corp. and Ford Motor Co., the two largest U.S. automakers, had their debt cut further below junk status by Standard & Poor’s and Moody’s Investors Service.

GM’s unsecured debt was trimmed one level to C, or 11 grades below investment quality, by S&P. Moody’s lowered its rating on $26 billion in Ford debt by two grades to Caa3, or nine below investment quality.

The moves reflect unease over effects on debtholders of the $13.4 billion emergency U.S. aid plan for GM and Chrysler LLC, which comes with conditions including labor-cost cuts. S&P said unsecured lenders can expect “negligible recovery" should GM default, and Moody’s said Ford will need to restructure debt to win union concessions similar to those at GM and Chrysler.

The risk of bankruptcy remains high for U.S. automakers even with the loans announced by the U.S. and Canadian governments, S&P said in a separate release.

GM lost 97 cents, or 22 percent, to $3.52 at 4:15 p.m. in New York Stock Exchange composite trading, the shares’ biggest percentage decline since Nov. 10. Ford fell 36 cents, or 12 percent, to $2.59 for its largest drop since Nov. 19.