Ford's credit rating lowered
Long-term debt worries Standard & Poor's
October 28, 2002
BY JOHN PORRETTO
Citing concerns about Ford Motor Co.'s restructuring, Standard & Poor's lowered its credit rating on the automaker's long-term corporate debt on Friday.
S&P cut the long-term rating for Ford and its financial arm, Ford Motor Credit Co., from BBB-plus to BBB -- just as it did to General Motors Corp. on Oct. 16. At the time, the ratings service said it was reviewing Ford's status to see whether it should be lowered.
Credit ratings help determine the interest rate a company pays on debt and debt-trading prices. S&P said Ford, the world's second-largest automaker behind GM, had consolidated debt of $162 billion as of Sept. 30.
"The downgrade primarily reflects concerns about the adequacy of restructuring measures being implemented by Ford to restore the competitiveness" of core automotive operations, said S&P credit analyst Scott Sprinzen.
S&P said Ford ratings could be lowered further if the agency sees evidence the automaker will be unable to sustain "some earnings improvement."
Ford is in the 10th month of a revitalization plan that calls for the elimination of 35,000 jobs worldwide. The carmaker aims to improve profits by $9 billion by mid-decade.
Analysts say Ford appears to be progressing in its effort to reduce costs and improve efficiency, but market share loss, price wars with GM and DaimlerChrysler and weak performance by luxury brands such as Jaguar concern investors.
Next week will mark one year since William Clay Ford Jr. began running the Dearborn-based company his great-grandfather founded 99 years ago. Ford lost more than $5 billion in 2001.
While making the rounds among investment professionals in New York and Boston this week, Ford said he'll cut another $1 billion in costs -- news that boosted the company's slumping stock price.
Ford shares lost ground again Friday, falling 14 cents, or 1.6 percent, to close at $8.72 a share on the New York Stock Exchange.
In a statement, Ford vice chairman and chief financial officer Allan Gilmour said the downgrade does not reflect the fundamental strength of the company's business and that the revitalization plan is on track.
"On the automotive side, we have strong liquidity with nearly $26 billion in gross cash, less than $1 billion in debt coming due within five years and a manageable pension liability with no mandatory contributions due before 2006," Gilmour said.
In its report, S&P said Ford has made significant improvements in product quality and European operations.
But the agency said restructuring benefits "could eventually be offset by decreasing industry demand in North America, industrywide intensification of price deterioration . . . and Ford's market share weakness."
To compete for customers in the sluggish economy, Ford, GM and Chrysler continue to offer lucrative incentives that squeeze profits. Detroit's automakers also face enormous pension liabilities because of slumping investment returns.
My first car was a 67 Mustang Coupe, 2nd one was a 67 Cougar XR-7, 3rd one was a 66 Mustang Coupe. Why did I get rid of these cars for ? I know why, because I'm stupid, stupid, stupid.
My next Ford.....