Motown's Comeback

No More Junk in Ford's Trunk


Stephen Odell (left), chief of Ford Motor's Europe unit, stands with Ford CEO Alan Mulally at the 2012 Geneva International Motor Show in Switzerland.

Photographer: Chris Ratcliffe/Bloomberg

Stephen Odell (left), chief of Ford Motor's Europe unit, stands with Ford CEO Alan Mulally at the 2012 Geneva International Motor Show in Switzerland.

When I was in grade school, Dad thought he was doing the household a favor by buying a pair of silver 1983 Ford Thunderbirds. What a disaster. A case study in halfhearted manufacturing and product design, the twins were always in the shop. Soviet-inspired electrical wiring. A/C always on the fritz. Ford truly meant Fix or Repair Daily.

So how meshuga is it that I now lust after a Ford (F)? The 2013 Fusion Hybrid is slated to get 47 mpg in the city. It can drive up to 62 mph on electric alone. And this from the only U.S. carmaker not to take a bailout.

Do call it a comeback. And give props to the turnaround leadership of Ford Chief Executive Alan Mulally, who arrived in September 2006 and focused the multinational on streamlining operations, procurement, and marketing. Critically, he took advantage of a still-promiscuous lending environment to borrow $23.4 billion, which was used to avoid bailouts and bankruptcies. Ford earned $29.5 billion in the last three years, reversing $30.1 billion in losses from 2006 through 2008. Its stock price has more than 10-bagged from its November 2008 low of $1.26.

On Tuesday, Dearborn got back its investment-grade credit rating from Fitch, which cited improved earnings and reduced pension costs. Fitch, the lesser-followed Mr. Pibb of credit raters, had ranked Ford’s debt as junk since December 2005. Standard & Poor’s and Moody’s could follow soon.

Ford’s huge debt load would just adore credit upgrades. The company’s bonds yield three points more than government debt on average, vs. 36 percentage points at the peak of the credit crisis in March 2009, says Bloomberg. Companies rated at the lowest investment-grade rating borrow at an average spread of 2.55 percentage points. During the worst of Detroit’s meltdown, things got so dicey for Ford that it had to put up not just its headquarters for collateral, but even its famous blue logo. Thanks to the credit upgrade, Ford can now declare from the rooftops that it actually owns its icon, fair and square.

Don’t knock that high before you’ve tried it.

“Getting the collateral back, getting the blue oval back has been a huge rallying cry and one that we all feel emotionally connected to,” Ford Treasurer Neil Schloss told reporters last month. “Investment-grade companies feel better about themselves.”

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Farzad is a Bloomberg Businessweek contributor. Follow him on Twitter @robenfarzad.

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