DETROIT – Moody’s Investors Service raised the corporate debt ratings for General Motors Co. and Ford Motor Co. on Thursday, citing new labor agreements and improvements in their finances.
The ratings were raised from “Ba2” to “Ba1,” which is one notch below investment grade. The upgrades will make it cheaper for the automakers to borrow money.
Ford’s and GM’s debt fell below investment grade in 2005 when the companies were deeply indebted. GM later declared bankruptcy and took government loans to stay afloat, while Ford borrowed heavily to fund a restructuring. Both are now profitable. The U.S. government still owns 27 percent of GM.
Moody’s said new contracts with the United Auto Workers union will give the companies a more competitive and flexible cost structure. The agreements give workers profit-sharing checks instead of annual raises, and they also allow the companies to hire more new workers at lower wage rates than longtime workers.