Moody's Investors Service issued a warning on Wednesday that The Ford rating was lowered to just about junk status and said, "The outlook is negative."
The rating, Baa3, "is the lowest investment-grade rating, a rung above speculative class, meaning the likelihood of default," a Moody's spokesman told the free press.
This analysis "reflects the erosion in the company's global business position and the challenges it will face to implement its fitness redesign program," said Moody's.
Ford spokesman Bradley Carroll said within minutes of hearing the report, "Since the onset of the Great Recession, the Ford Motor Company has delivered solid financial results and operating cash flows year after year." The company has a strong financial footprint We know we can take advantage of our strengths, strengthen products and regions that are not performing well, and invest in facilities where we can not achieve reasonable returns, and we are confident the market will see our progress. " Moody & # 39; s said negative developments affecting Ford include: Margin increases in North America due to higher costs; Reversal of Chinese operations where earnings before interest and taxes fell from $ 70 million in the first half of 2017 to $ 633 million in the first half of 2018; Burden on South American farms, which lost $ 750 million in 2017; and further losses in Europe, which are likely to worsen due to Brexit costs from British Ford activities.
A junk rating is not ruled out: "Ratings could be downgraded if fitness initiatives are not clearly tracked by early 2006 by mid-2019, with evidence that the company is on a strong path to recovery," said Moody & # 39; s.
Under the fitness program, Ford will re-evaluate its "With the goal of restructuring, contracting or getting out of companies that do not Restructuring initiatives could cost $ 7 billion over the next three to five years, with $ 7 billion in spending, "Moody's
wrote," The decision The company's reduction in automotive business in North America, which we rated as positive, reflects its willingness to make disciplined capital allocation decisions, "said Moody's Assistance.
On the upside, Ford has a "highly competitive and profitable position in North America; the fitness program targets the company's main portfolio weaknesses, the program is being implemented while the global automotive markets are reasonably healthy." In addition, Ford has a strong $ 25 billion liquidity profile. "
CEO Jim Hackett aggressively focused on his fitness plan over the past year, Moody's termed "necessity."
"But it will take years to realize significant financial and operational benefits from the program, which could be challenged by having to address the serious performance issues in multiple business units simultaneously," Moody's wrote.
"At the same time, Ford needs to continue investing in areas of key importance to the future of the automotive industry, including alternative propulsion, autonomous driving, car pooling and connectivity, and investments in some regional markets to reduce CO2 Of particular short-term concern is China, where Ford needs to quickly renew its product range and rebuild relationships with dealers in order to regain lost market share. "In revitalization in China, Ford will have to deal with an environment in which Chinese domestic Manufacturers are more competitive, price pressures are rising, and non-Chinese manufacturers are trying to expand their presence. "
coupled with an unexpected cyclical downturn could aggravate the situation.
"The prospects for upgrading the Ford ratings by 2020 are very modest," wrote Moody's. "If the company is able to successfully run the fitness program, however, an improvement could be possible in the longer term."
Rebecca Lindland, chief analyst at Kelley Blue Book, said after the message, "Ugh, that's shit."  "It seems very unfair to compare how Tesla continues to be valued," said Lindland, "but Mary Barra has done an excellent job communicating that she will make extremely tough decisions that will make General Motors profitable and ready I think, Ford, I like their decision to reduce limos At the same time I think Ford needs to be even more transparent Where is their five-year plan? Fiat Chrysler has a great Made a job and shared his plan General Motors has done a good job communicating its strategy and I can not say that I have the same clear vision of Ford. "
Shareholders will be disappointed with recent developments.
"That does not create confidence in the stock that is already working to preserve their value," she said.
Dave Sullivan, product analysis manager for AutoPacific, Inc., also said Ford needs to publish a clear plan.
"The alarm bells should go out in Dearborn a while ago, Sullivan said," Had Ford really had a bullish outlook with China, they might have kept Aston Martin, Volvo … Ford is trying to add more crossovers, but they are too late to the market. FCA and others got in while the market was hot thinking many on Wall Street think that Ford is a one-trick pony and the name of this pony is F-Series.
Hackett must take a game from the former FCA boss's manual Sergio Marchionne was right when he said there was a consolidation in the industry, Sullivan said. "I think Ford will have to explore other options quickly, as well Volkswagen, because I do not see how they can do it on their own. "
Much of it depends on Hackett, who was in his job for over a year.
" Last year, Wall Street was owned by the Presentation in New York not thrilled. Nothing has been done to solve the image problem that has since existed, "Sullivan said." Now is the time to show their cards in their entirety. If they do not, the fear that there is nothing will continue to grow. "
Contact Phoebe Wall Howard: phoward @ freepress.com or 313- 222-6512. Follow her on Twitter @phoebesaid
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