Expert predicts the end of GM and Ford

Automotive icons General Motors Corp. and Ford Motor Co. fell into junk-bond status Thursday for the first time in either company's history, as the nation's leading credit-rating agency said the combination of plunging SUV sales and rising health care costs made it nervous about the automakers' futures.

Though widely expected, the decision by Standard & Poor's Corp. to downgrade both automakers is a historic marker on Detroit's bumpy road. In the short term, it could make borrowing more difficult and more costly for GM and Ford at the same time they are losing market share at home to Asian automakers, seeing sales of their most-profitable vehicles soften, and trying to deal with some of the largest retiree and health care debts in the country.

Beyond the obvious financial impact on GM and Ford, the downgrade has some psychological impact on them and the entire Detroit auto industry, said auto and financial experts. "This downgrade is just a confirmation that these are two very poor companies. This is the beginning of the end of the U.S. auto industry as most people have come to know it," said Sean Egan, managing director of Egan-Jones Rating Co., an independent credit-rating agency outside Philadelphia. It's really a tragedy is what it is. GM and Ford's managers have for too long avoided butting heads with the union and making tough decisions. The center of the auto industry has begun moving away from Detroit." Detroit Free Press

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