Jim Hackett, President and Chief Executive Officer of Ford Motor Co., speaks with media representatives at an event during the 2018 International Motor Show in Detroit on January 14, 2018.
Moody's ranked Ford's credit rating at Downgraded to junk bond status Wednesday and warned it could be further reduced as the automaker in Detroit fights overseas and invests an estimated $ 1
The US second-largest automaker faces weak profit margins in North America, declining business in China, and losses in South America and Europe that could at least partially worsen further, Moody's said in a research note.
Investments are needed, but it will be several more years before Moo & # 39; s performs better.
"Success could be challenged by having to address the serious performance issues in multiple business units simultaneously," said Moody's. He added that it will hold a negative outlook on its creditworthiness "primarily on the basis of the difficult changes that the automaker must make".
Moody's said that the company's debt rating could be lowered even further in the middle of next year if it makes no "clear progress" on its turnaround plan.
Since CEO Jim Hackett took the reins in 2017, investors have been showing impatience at times with what they have said is a clear indication of how Ford is improving its business and strengthening its stock price. At the same time, Ford has taken some bold steps under Hackett, such as the decision to sell traditional cars to the US market.
China is a particular problem in the short term, according to the report. Ford needs to regain lost market share as it competes with a growing swarm of Chinese automakers and other foreign companies.
Ford's plan to improve what Hackett called his "operational capability" could bring $ 11 billion in fees, including $ 7 billion in spending over the next three to five years. Moody's said Ford's decision to abandon the North American auto business is a positive factor in Ford's credit, reflecting Ford's willingness to make aggressive and disciplined decisions about where to invest capital, the report said. But it will be years before the benefits of the plan become apparent.
"What we are looking for is a very recognizable progression that will grab the components of the company's restructuring and fitness plan and deliver results," said Bruce Clark, senior vice president of Moody's Corporate Finance Group
Ford's challenges have many strengths. The company is competitive and profitable in North America, and the automaker's fitness plan takes off in areas where it is the weakest. Ford has also decided to revise its business while car sales are still healthy.
"Since Ford came through the Great Recession, Ford Motor Company has delivered solid financial results and operating cash flows year after year," Ford said in a statement. "The company has a strong track record that provides financial flexibility and we know that we can capitalize on our strengths and support poorly performing products and regions where we can not deliver adequate returns."