Moody’s raised its credit rating and outlook on Ford Motor Co. today, returning the automaker to investment grade. Moody’s cited the company’s strength in North America, strong liquidity, and sound financial discipline. The move lifts the rating on Ford’s senior unsecured debt to Baa3 from Ba2. It also raises Ford Motor Credit Co’s credit rating to Baa3 from Ba1. Moody’s also dropped its speculative grade liquidity rating on the company.
“The key factor in our considering an investment-grade rating for Ford was whether or not the company would be able to sustain its strong performance. We concluded that the improvements Ford has made are likely to be lasting,” Moody’s Senior Vice President Brian Clark said. Ford shares slipped one cent Tuesday to $10.19.
The Moody’s upgrade is especially significant as it was the second such move by a major ratings agency and, as such, was the trigger for the release of Ford assets pledged to secure private sector funding when Ford was in danger of filing bankruptcy in 2006. Ford put up essentially all of its domestic assets, including the Blue Oval and the trademarks for the F-150 and Mustang.
In a statement, Bill Ford, Ford’s executive chairman, said: “The Ford Blue Oval is back where it belongs with the Ford family of 166,000 employees around the world. This is a great day for us and is the result of several years of hard work and progress by everyone associated with Ford.
“When we pledged the Ford Blue Oval as part of the loan package, we were not just pledging an asset. We pledged our heritage. The Ford Blue Oval is one of the most recognized symbols in the world, and it is a source of great pride and passion, both inside and outside our company. Getting the Ford Blue Oval back feels amazing, and it is one of the best days that I can remember.”
In 2006, Ford was in the worst financial shape of the Detroit automakers and perilously close to bankruptcy. The silver lining in the cloud was that Ford’s crisis hit before the meltdown of the financial markets. This enabled Ford to mortgage the farm, raising $23.5 billion from the private sector. Of that total $18.5 billion was secured by the Ford assets and $5 billion was unsecured debt.
Last September, Ford completed repayments of all the loans.
Ford has leveraged its disaster into a public relations coup because it didn’t require a bailout from the federal government’s Troubled Asset Relief Program. By the time Chrysler and General Motors faced their own crises two years later, the financial industry in the midst of its own implosion and there was no private-sector money. Many Americans who did not understand the circumstances and were angered by the bailout have embraced Ford and its products in recent years.
“We are so proud of today’s decision by Moody’s and the resulting release of all collateral – particularly the Ford Blue Oval,” said CEO Alan Mulalley. “This is an important milestone and further proof that, by staying laser-focused on our One Ford plan, the Ford team can deliver great products, build a strong business and contribute to a better world even through the most challenging external environment.
“Moving forward, we will continue to focus on driving profitable growth for all of our stakeholders. We are confident that, by staying focused on our plan and working together, we will maintain strong investment grade ratings through all economic cycles.”