Ford Motor Co.
(
F
) must be celebrating as it regained its investment-grade ratings
from two agencies, including Moody's recently, and got its iconic
blue oval back following the release of all the assets pledged
while securing the $23.5 billion loan in 2006 for its turnaround
plan.
Moody's rating agency, controlled by
Moody's Corp.
(
MCO
), raised the senior unsecured ratings of Ford to Baa3 from Ba2 and
of Ford Credit, its financial arm, to Baa3 from Ba1, as well as
dropped its speculative grade liquidity rating on the company. The
agency left unchanged its "stable" rating outlook for the company
and its financial arm.
The upgrade was driven by the company's strong market position
and higher profitability in North America, high cash balance,
ability to match production with market demand and sound operating
and financial management.
Moody's upgrade was preceded by Fitch Ratings' upgrade to
investment grade last month. It is only Standard & Poor's,
which rates the company below investment grade as of now.
Currently, all the three agencies rate the other members of
Big-Three --
General Motors Company
(
GM
) and Chrysler -- as "junk."
However, with securing investment grade ratings from two of the
three main agencies, the company succeeded in reclaiming its
collateral for $23.5 billion loan, including the blue oval logo
that is embossed on its vehicles.
Ford lost its investment grade rating in 2005 soon before it
borrowed $23.5 billion for restructuring in 2006. The automaker
pledged all its domestic assets including the trademarks for its
logo, the F-150 truck and the Mustang sports car for securing the
loan.
Moody's and other agencies pushed Ford to "junk" status
following the sharp fall in demand for its vehicles. Since then,
the automaker has been eager to obtain the investment grade rating
from the rating agencies.
Ford has now made a comeback after six years by undertaking
effective restructuring measures. The measures include cost
reductions, renegotiating UAW contracts, and streamlining global
operations.
Ford, a Zacks #3 Rank (Hold) stock, posted a sharp 20% fall in
profits to $1.6 billion in the first quarter of 2012 from $2.0
billion in the same quarter of 2011. On per share basis, profits
ebbed 17% to 39 cents from 47 cents in the first quarter of 2011.
Nevertheless, it was higher than the Zacks Consensus Estimate of 35
cents.
The automaker has attributed the decrease in profits to higher
tax expense, lower operating results and higher charges emanating
from buyouts of hourly workers in the U.S. as part of its UAW
agreement in 2011.
The company's profits drastically fell in all its operating
regions, except North America. In fact, it recorded a loss in
Europe and Asia Pacific Africa compared with a profit in the
comparable quarter of 2011.
Total revenue in the quarter slipped 2% to $32.4 billion, barely
surpassing the Zacks Consensus Estimate of $32.0 billion. The fall
in revenues was attributable to lower wholesale volumes in Europe
and Asia, partially offset by higher volumes in North America and
South America.
FORD MOTOR CO (F): Free Stock Analysis Report
GENERAL MOTORS (GM): Free Stock Analysis Report
MOODYS CORP (MCO): Free Stock Analysis Report
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