Moody’s Weighs Cut in GM’s Bond Rating

General Motors Corp.’s debt may be downgraded by Moody’s Investors Service, suggesting that the automaker’s best sales month in 18 years may not be enough to preserve its last remaining investment-grade debt rating.

Moody’s said Thursday that it was considering cutting its rating on $175 billion of debt issued by GM and its financing unit, citing concerns about incentive costs, U.S. competition and falling sales of sport utility vehicles. GM’s credit is rated Baa3, Moody’s lowest investment grade, and the financing unit is rated Baa2, two levels above junk.

Standard & Poor’s and Fitch Ratings already cut the debt of Detroit-based GM to junk in May after a first-quarter loss of $1.1 billion. GM’s U.S. sales jumped 47% in June after the automaker offered an employee discount to all buyers.

Moody’s is “essentially playing catch-up,” said Brian Reynolds, chief market strategist at MS Howells & Co. in Dunstable, Mass. “I don’t think it will have a big impact on either the corporate bond market or stock market because you already have two of the three agencies at junk.”

Moody’s said GM’s U.S. market-share gains in June might not be sustainable. GM had a 32.8% share after recording its highest monthly sales since 1986 in June. GM’s share had dropped to 25.7% through May.

The ratings company also said GM’s consideration of “strategic options” for GMAC and its subsidiaries might reduce GM’s access to dividends from the finance unit, which GM said would be “in excess” of $2 billion this year.

GM shares fell 40 cents to $33.82. The shares have fallen 16% this year.