Moody's: GM's restructuring effort is 'credit-positive'

Nora Naughton
The Detroit News
Assembly worker Julaynne Trusel works on a Chevrolet Volt at the General Motors Hamtramck Assembly plant.

Moody's Investor Service called General Motors Co.'s restructuring plan — which will idle five plants and cut 8,000 salaried jobs across the company to save $6 billion by 2020 — "credit-positive" and a sign of the company's commitment to financial discipline.

"We view the company's cost reduction plan as an undertaking to maintain its current strengths, and to improve its ability to remain at the forefront of the auto industry's movement toward electrification, autonomous driving, ride hailing and connectivity," Bruce Clark, Moody's Senior Vice President and lead auto analyst, said in a statement Wednesday.

The credit-ratings agency said it sees GM's restructuring actions coming from a position of strength, as opposed to most restructuring efforts that are prompted by operational incompetence or extreme market conditions.

"The type of cost-reduction undertakings being pursued by GM are most commonly
implemented when companies need to restructure their operations because of operational, weakness or severe market downturns," Moody's wrote in its report. "This is not the case with GM's actions which are proactive attempts to remain ahead of the competitive curve."

Despite the initial costs of restructuring — GM is expecting to take a pre-tax charge of up to $3.8 billion as part of this effort — Moody's says these negative impacts will be "mitigated by the relatively rapid payback on the actions."

GM CEO Mary Barra said Monday that the automaker's restructuring efforts in 2019 will foster more investment in autonomy and electrification. That will include continued hiring in these disciplines, particularly at the self-driving car development operation GM Cruise LLC, even as GM cuts 15 percent of its North American salaried staff and 25 percent of its global executive team — a move that will require laying off nearly 6,000 workers.

"This industry is changing rapidly (and) we want to make sure we are well-positioned" for the future, Barra said. "This is about making sure GM is lean and agile and getting in front of and leading in autonomous and electric vehicles."

Moody's likens GM's latest cost-cutting actions to the company's recent moves in global markets, including selling Opel-Vauxhall to exit Europe and aggressively restructuring in Korea.

"The actions taken relating to both Europe and Korea reflected a willingness to make difficult decisions that will ultimately improve return on capital and operating competitiveness," Moody's wrote.

Twitter: @NoraNaughton