Ford gets credit rating boost from Moody’s, shares rise – Automotive News

Posted: Thursday, February 18, 2016

DETROIT — Moody’s Investors Service has upgraded Ford Motor Co.’s credit rating for the first time since 2012, citing the automaker’s strong financial results and “positive momentum.”

Ford is “more capable than in the past of contending with cyclical downturns, unexpected operational challenges and the probability of intensifying competitive threats,” Moody’s said in a statement late Tuesday. The company upgraded its long-term ratings of both Ford and Ford Motor Credit to “Baa2” from “Baa3” with a stable outlook.

The new rating is one notch above the lowest investment grade and Moody’s highest rating for Ford since 2005.

It’s the first upgrade for Ford by any of the three major ratings companies since September 2013. Both Standard & Poor’s and Fitch Ratings still have Ford at the lowest investment grade.

“The key factor in the Ford upgrade is our conclusion that the company has the operational and financial resources necessary to contend with and recover from the stress that it will eventually face,” Bruce Clark, a Moody’s senior vice president, said in the statement.

The upgrade comes amid widespread negativity toward Ford on Wall Street, even as the company generated a record pretax profit in 2015. Ford shares were down 16 percent this year when the markets closed Tuesday before rising 3.4 percent to close at $12.27 in today’s trading. 

Analysts have attributed the stock slide to concerns that auto sales may be peaking and challenges from technology companies such as Google, Apple and Uber. Ford CEO Mark Fields is working to get the automaker heavily involved in mobility services to keep its newfound competition at bay.

“Ford had a very strong performance during 2015 and the company’s positive momentum should continue through 2016,” Moody’s said in its statement. “This breakout performance is supported by Ford’s progress in achieving important objectives that include: the successful launch of the new aluminum body F-150; reaching breakeven performance in Europe following extensive restructuring actions; and building a competitive and profitable position in China.

“In addition to these operational achievements, Ford is also benefiting from favorable market conditions that include: healthy demand and favorable pricing in North America; low gas prices; recovering demand in Europe; and still-growing demand in China.”

Moody’s said it upgraded Ford Credit because the financing unit has consistently produced strong results, bolstered its lending portfolio and reduced its use of securitization. It also upgraded Ford Credit’s short-term rating to Prime-2 from Prime-3.

Ford earned net income of $7.4 billion in 2015. It has said its pretax profit in 2016 will match or beat last year’s $10.8 billion.

“We are very pleased that Moody’s has recognized the progress on the Ford plan and confirmed that with a ratings upgrade,” a Ford spokeswoman said in an email today.

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