Fitch Gives Ford Positive Outlook
CHICAGO & NEW YORK - Fitch Ratings assigned a 'CC/RR6' rating to Ford Motor Company's issuance of $2.875 billion seven-year senior unsecured convertible notes, a positive ratings outlook.
The Positive Outlook reflects the better-than-expected progress on Ford's cost reduction program, production and inventory discipline that has resulted in solid pricing performance and continued market share gains. Although Fitch expects a weak rebound in industry sales in 2010, Fitch expects that cash drains will be materially reduced and comfortably within Ford's liquidity position.
Fitch expects that industry sales will show only modest improvement in 2010, based on macroeconomic factors, including increased unemployment, reduced wealth, consumer spending pressures and a higher savings rate. Other factors muting a rebound in industry sales include more limited financing capacity, potential increases in gas prices and evolving consumer thinking that may stretch average vehicle age. Nevertheless, the combination of Ford's cost reduction efforts and price performance has led to sharply reduced cash drains in a trough environment.
Fitch expects that even if U.S. industry sales were to remain flat at roughly 10.5 million vehicles in 2010, Ford's cash drain would be less than $5 billion. As U.S. industry sales climb above an 11.5 SAAR rate, Ford should be able to achieve positive free cash flow.
Although cost reductions should continue to be realized through fourth-quarter-2010, the step change in fixed cost reductions have largely been completed, and margin expansion going forward will need to be derived primarily from capacity utilization and scale efficiencies associated with increases in industry volumes. The recent contract talks demonstrate, however, that full labor-cost parity may still be a challenge.
More Industry

World EV Adoption Set to Grow
A new report says the segment, despite recent setbacks in some regions, is poised for acceleration as many countries look to reduce pollution.
Read More →
Black Book: Weekly Market Update
Wholesale automotive auction business stayed steady last week as bidders encountered lower prices, analysts observed.
Read More →
Pricing Transparency Drives Purchase Consideration
An annual study by JD Power found that clear pricing matters to consumers on automaker websites, so much so that it increases their purchase consideration.
Read More →
Black Book: Weekly Market Update
Used-vehicle market depreciation was the prevailing story in the wholesale market last week.
Read More →
Smaller Is Looking Better
A growing number of Americans in the market for a new vehicle are opting for more affordable options, not waiting for market stability to bite the bullet.
Read More →
U.S. EV Market Slowly Stabilizes
U.S. electric-vehicle interest is slowly stabilizing since a major dip in sales after last year's end of the federal EV tax credit, and hybrids remain the leading electrified power train.
Read More →
Global EV Market Entering New Phase
Automakers are making investments to lower battery costs and optimize production to meet changing consumer needs.
Read More →
Black Book Weekly Market Update
The holiday weekend, not surprisingly, put a drag on wholesale automotive activity last week, analysts observed.
Read More →
Auto Affordability in Context
Cox Automotive points out the complex circumstances that have led to eye-popping vehicle prices.
Read More →
Black Book: Weekly Market Update
Automotive auction inventory increased last week, giving choosy bidders even more leeway.
Read More →