US:CEO tells staff to prove critics are wrong
Ford: CEO tells staff to prove critics are wrong
BY JAMIE BUTTERS
DETROIT FREE PRESS BUSINESS WRITER
When Standard & Poor's Corp. cut Ford Motor Co.'s credit rating to junk status for the first time ever Thursday, Chairman and CEO Bill Ford came out swinging.
In an e-mail to employees, Ford challenged employees to help his determined effort to improve the company's performance. "It is our job to prove our critics wrong," he said.
His language was considerably more feisty than the public statement issued by Chief Financial Officer Don Leclair.
"We disagree with S&P's action" Thursday, he said. "We're disappointed that it discounts our considerable liquidity and our access to diverse funding sources, as well as the recent successes of our new products."
If S&P did not give Ford much credit for new models, such as the Mustang coupe and the Freestyle crossover wagon, it is because it sees Ford's financial performance as still heavily dependent on profits generated by sales of its SUVs.
"Of greatest immediate concern is that Ford faces the prospect that its overall sport-utility vehicle business will not be able to generate the profitability it has enjoyed historically," S&P wrote in its report.
Ford has new SUVs coming, but those will be going up against brand-new offerings from GM, as well.
More generally, S&P said the move to a so-called speculative-grade rating "reflects our skepticism about whether management's strategies will be sufficient to counteract mounting competitive challenges."
Previously, S&P had stressed the importance of Ford generating profits from automaking, as opposed to just lending. Last year, it did, but this year, the company now expects only break-even automotive operations.
Ford also acknowledged this year that it will no longer meet its longstanding goal of earning $7 billion before taxes in 2006.
Bill Ford told employees they need to fight back against this skepticism with deeds, not words.
"Everyone who is part of the Ford Motor Co. family has a role to play in our continued recovery," he said. "I will step up efforts to examine and challenge everything we do and how we do it, asking whether it delivers value to customers and if there is a better way. You should do the same."
The downgrade includes all debt issued by the parent company Ford Motor Co. and by Ford Motor Credit, the company's highly profitable financial business.
It does not affect Hertz Corp., the car-rental company that Ford owns. Hertz still has a BBB- credit rating, and it has been under review since Ford said April 21 that it is considering selling the subsidiary.
Ford bonds fell about 7 percent Thursday, according to Debtwire, a news service that covers the bond markets and distressed companies.
Ford stock fell 46 cents, or 4.5 percent, to close at $9.70.
The shares had risen 59 cents the previous day, as Kirk Kerkorian's investment in GM boosted spirits and helped assure investors that U.S. automakers were not going bankrupt.
A year ago, Ford shares were trading in the mid-teens.
Last month, Ford announced it had earned about $1.2 billion in the first three months of the year. But it warned that it would not likely earn a profit in the second quarter and that its full-year results would be at the low end of the expectations set out in January.
S&P also singled out an expense it anticipates Ford will incur, assuming it reaches a final deal to restructure its relationship with former parts division Visteon Corp.
In his report, he says "we assume Ford will have to subsidize in some fashion a radical restructuring of Visteon's operations, at a cost that could well be greater than all the direct support it has already extended."
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.....