Bloomberg News

Ford Credit Ratings Upgraded Two Levels by S&P on Labor Pact

October 21, 2011

(Updates share price in the fifth paragraph.)

Oct. 21 (Bloomberg) -- Standard & Poor’s raised Ford Motor Co.’s credit rating two levels saying the automaker’s new labor contract will not impede profitability or cash generation.

The ratings company today lifted Ford’s corporate credit rating to BB+, the highest non-investment grade, from BB-, and assigned a stable outlook. Such an outlook implies there is less than a one-third chance that the company will be upgraded again within a year, Robert Schulz, S&P’s auto analyst, said Oct. 19.

“We believe the company’s automotive operations in North America will remain profitable with industry light-vehicle sales at or even somewhat below current levels,” Schulz said today in a statement. “We also believe Ford has good prospects for generating at least $2 billion in automotive operating cash flow in 2012, even if the key U.S. auto market does not recover significantly.”

Ford workers voted 63 percent in favor of a new four-year contract in balloting this month, the United Auto Workers said Oct. 19. Fitch Ratings said yesterday it upgraded Ford to BB+ from BB and assigned a positive outlook. Moody’s Investors Service also has said it is reviewing ratings on the Dearborn, Michigan-based automaker, which fell to so-called junk status six years ago.

Ford rose 4.8 percent to $12.26 at the close in New York , the highest since Aug. 1. The shares have fallen 27 percent this year.

“As long as they continue on the track they’re on, and providing that the auto industry doesn’t tank, they should be pretty well on their way to investment grade,” Jody Lurie, a credit analyst at Janney Montgomery Scott LLC in Philadelphia, said in a phone interview. “I see it as a possibility in the near term. They have investment grade in their eyesight.”

--Editors: Jamie Butters, John Lear.

To contact the reporters on this story: Keith Naughton in Southfield, Michigan, at knaughton3@bloomberg.net; Craig Trudell in Southfield, Michigan, at ctrudell1@bloomberg.net

To contact the editor responsible for this story: Jamie Butters at jbutters@bloomberg.net


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