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The Ripple Effect: More Credit Downgrades

Standard and Poors today lowered its credit rating for ArvinMeritor, a major supplier of chassis and exhaust systems to the auto industry, to junk bond status.

S&P cited cited weak operating performance and higher steel prices, but also emphasized weaker orders  from two main customers, GM and Ford.

Last week, S&P downgraded its credit ratings for both GM and Ford to junk bond status (earlier post), citing, among other factors, the companies’ dependence on revenue from SUV sales—a segment that appears to be in decline.

Earlier ArvinMeritor announced that it will lay off about 1,850 employees as it closes or consolidates 11 plants worldwide. The reductions come after the company has already cut about 400 to 500 salaried positions. The $8 billion company has more than  30,000 employees worldwide.


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