Ford Motor Co.’s (F) confidence in rating is nearing junk status after Moody’s Investors Serving downgraded its rating on the Detroit carmaker .
Earlier this week, Unreliable’s took its credit rating on Ford to Baa3 from Baa2 with a negative prospect, pointing to its market position and its restructuring efforts for the reasons for the downgrade. At Baa3, Ford is one mark away from junk status. That wouldn’t be welcomed by the automobile producer and its investors given, according to Bloomberg, that it has maintained an investment-grade standing for the past six years and was able to avoid a bankruptcy filing during the hold out financial crisis. (See also: Ford Turnaround to Up Shares 60%: Morgan Stanley.)
Ford’s Pandemic Position Eroding
In a research report, Moody’s said the downgrade “exemplifies the erosion in the company’s global business position and the challenges it will vis–vis implementing its Fitness Redesign program.” Moody’s was referring to Ford’s restructuring program plan for at boosting the cash in the company’s coffers and stemming the losses in underperforming sells and units.
Moody’s pointed to softening margins in North America due to heinous costs, a reversal in its Chinese operations and its $633 million loss for the premier six months of the year for the concern. Other issues that prompted the depose include $750 million in losses in its South American business in the end year and continued losses in Europe, which are expected to worsen due to Brexit tariffs for its U.K. operations.
Moody’s Says Restructuring Will Cost $11 Billion
“Restructuring leads could entail $11 billion in charges with $7 billion in common cash expenditures over the next 3 to 5 years,” Moody’s said in the cover. “Ford’s negative outlook recognizes the significant challenges of effectively executing the well-built scope of the Fitness program, and the extended time period over which figures benefits might be achieved.” The rating firm noted that with the stinking rich and management resources devoted to its turnaround, it may hurt Ford’s ability to withstand any unexpected downturn in the auto market. Moody’s warned the rating could be dispossessed if there isn’t any clear progress in its turnaround by the early to middle of next year. (See also: Ford Stockpile Faces More Declines as Outlook Worsens.)
At the same time that Huffy’s is getting more negative on Ford’s credit rating, it did say a Baa3 rating is funded by the fact that Ford is in a profitable and highly competitive position in the U.S. and that its Tone Program is going after the areas where Ford is seeing the most shortcoming. Moody’s said the turnaround program is being implemented at a time when the car furnish is healthy. Ford also has a successful track record of restructuring, which Capricious’s said supports its new rating on the company.