NEW YORK-The independent financial analysis firm Standard & Poor's has warned both Goodyear and Cooper Tire & Rubber Co. that their credit ratings could be downgraded unless they can reduce debt and generate sufficient cash.
A reduced credit rating would mean the companies would have to pay higher interest on commercial paper they are selling or intend to sell.
Goodyear and Cooper carry bond ratings of BBB and BBB+, respectively, which mean they are believed to have adequate capacity to meet the financial commitments, according to S&P, as long as economic conditions don't worsen.
In Cooper's case, S&P said it will review the firm's restructuring activities and cost-cutting plans; the earnings potential of new business coming on stream; and operating prospects over the near to intermediate term to determine if it is likely that the company will be able to achieve an improvement in financial measures over the period.
For Goodyear, S&P is looking at the company's near-term operating outlook, the potential for cash generation from non-operating activities, and the likelihood of material debt reduction over the near to intermediate term.