General Motors Corp.'s better-than-expected second-quarter results caused the five-year credit default swaps on Ford Motor Company and several auto suppliers that rely on GM for business to tighten last week. The results also saw spread on GM CDS move to its tightest level since last September. As a bellwether credit for the sector, GM has a knock-on effect.
Ford Motor's five-year CDS tightened 40 basis points to 810, while Ford Motor Credit's five-year CDS tightened 22 basis points to 432, according to Markit. Auto suppliers that saw their CDS tighten included: Lear Corp. which came in 11 basis points to 543; American Axle & Manufacturing was 12 basis points tighter at 436 and Visteon Corp. was in seven basis points to 683.
GM CDS tightened 54 basis points to 684, now tighter than Ford Motor CDS which have widened since it posted a $123 million net loss in the second quarter. "Ford has not made as much as progress in restructuring as GM," said Gavan Nolan, an analyst at Markit.
GM reported a $3.2 billion net loss in the second quarter, compared with a $987 million net loss in the same quarter a year ago.