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COPYRIGHT 2005 Voxant Inc.
Original Source: NIGHTLY BUSINESS REPORT
PAUL KANGAS, NIGHTLY BUSINESS REPORT ANCHOR: Another body blow to the businesses of General Motors and Ford. Another credit service has slashed the automakers` debt to junk status. The news pressures the shares of both companies.
JEFF YASTINE, NIGHTLY BUSINESS REPORT ANCHOR: And here`s a chance to capture the flag, in fact, a chance to capture Six Flags. The amusement park company has put itself up for sale, a move that sends its stock on a wild ride today.
KANGAS: It`s a taxing day for Jackson Hewett. The tax preparation company reports a quarterly loss that is bigger than expected.
YASTINE: Then, it`s called Jollibee and you may not have not heard of it, but Filipinos have. The chain serves up half of all the fast food meals eaten in the Philippines and now it wants its burgers bought in the U.S. as well.
KANGAS: I`m Paul Kangas.
YASTINE: And I`m Jeff Yastine, Susie Gharib is off tonight. This is NIGHTLY BUSINESS REPORT for Thursday, August 25.
Good evening, everyone. More trouble tonight for two of the nation`s big automakers. Investors are scrutinizing shares of General Motors and Ford, after Moody`s became the latest credit rating agency to slash their debt to junk status. Slipping sales and competitive cost structures are pressuring the automakers` bottom line. So today General Motors announced it was extending its employee discount for everyone plan through September. Jessica Gottesman reports.
JESSICA GOTTESMAN, NIGHTLY BUSINESS REPORT CORRESPONDENT: With the cut in GM`s debt ratings, Moody`s is the last major ratings service to lower the world`s largest automaker`s corporate bonds to below investment grade. It blames GM`s operating losses in North America, and says the company needs to restructure for long-term viability. Moody`s also cut GM`s finance arm, General Motors Acceptance Corp. to junk. Ford`s debt ratings were also cut to junk by Moody`s, and the firm issued a negative outlook for both automakers. Analysts say GM has to solve several problems before its debt comes back up to investment grade.
ROBERT E. SCHULZ: If they were to reverse the market share declines, you know which is another issue that`s been going on over time and, you know if the profitability per vehicle improves, certainly that would help. The other issue they have to address is the large post retirement health care issues that they have and GM has been very public about talking to the UAW about that. We don`t see any results of that as yet, but some movement on that front could also be a positive if it was to happen.
GOTTESMAN: Also today, GM announced it`s extending the employee discount for everyone program. The successful promotion started in June, and will now run through September 30 instead of ending right after Labor Day. For the first time, some 2006 models are on the list, including some large pickups and SUV`s. The employee discount deals triggered a 41 percent surge in sales for GM. In June and a 20 percent increase for July. August sales so far have been tracking lower, but analysts say it`s all about pricing.
SCHULZ: The employee pricing arrangements that they`ve rolled out as Ford has and Chrysler has, those have been fairly successful at blowing out the `05 inventory. GM`s extended that through September. So the inventory is down substantially, that`s a positive. How the `06 model years are accepted, that`s an uncertainty. Also just how the pricing environment is going forward, that`s another thing we`re concerned about.
GOTTESMAN: Analysts say investors are less excited about GM`s sales and would instead like to see some cost cuts. If the automaker can work out healthcare issues with its union, that may make the stock more attractive. Jessica Gottesman, NIGHTLY...
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