Moody’s Investors Service has lowered the ratings of both Ford Motor Company and Ford Motor Credit while Standard & Poor’s has downgraded the long-term corporate credit rating on Ford Motor one notch to B due to weak large vehicle sales and a rise in materials costs that are clouding the company’s business prospects.
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Moody’s attributed the downgrade to the intense pressure Ford is facing as a result of the shift in consumer preference away from trucks and SUVs, and toward more fuel efficient vehicles.
The financial firm said that despite Ford’s acceleration of its Way Forward restructuring plan, it still expects the company’s operating performance and cash flow to be very weak until 2009.
Moody’s anticipated that it will be challenging for the company to achieve all of the cost, revenue and pricing objectives contemplated by the plan.
Moody’s has downgraded Ford Motor Company to B3, from B2, with the analysts’ rating outlook at negative.
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By GlobalDataFord Motor Credit Company, the world’s largest vehicle finance company, also had its rating lowered by Moody’s – to B1 from Ba3.
Moody’s senior vice president Bruce Clark said: “Ford’s US$23bn in cash and $6bn in committed bank lines give it a sizeable cushion to cover near-term expenditures. However, the company’s historically robust liquidity will be significantly reduced by these expenditures and could be further eroded by events such as a slowdown in the US economy, a spike in oil prices, an escalation in price discounting, or a UAW work action in 2007.
“Consequently, Ford may need to supplement these resources with asset sales and other strategic alternatives that are currently being investigated.”
Ford’s accelerated restructuring plan, announced last week (15 September), included plans to cut North American salaried-related work force by about a third and offer buyout packages to all Ford and Automotive Components Holdings (ACH) hourly employees in the US – lowering operating costs by US$5bn.
All in all, it could constitute the loss of 25,000 to 35,000 hourly jobs, 14,000 salaried jobs and closure of around 23 plants in total.
According to Kyodo News, Standard & Poors meanwhile said its revised rating outlook for Ford Motor Compnay is negative with one of the concerns being the automaker’s increasingly negative cash flow in its North American operations.
S&P earlier relegated Ford Motor to the speculative grade of B-plus in June. Various challenges facing the company will likely require more cash than projected in June, the rating agency said.
Despite the restructuring measures announced last week, whatever cash savings will be generated through such steps should take some time before they materialise, S&P said, according to Kyodo News.
