Moody’s Investors Service has downgraded Ford’s (NYSE:F) credit rating to junk status, saying it expects weak earnings and cash generation as the car and truck maker pursues a costly and lengthy restructuring plan.
Ford responded with a statement saying that its underlying business is strong and its balance sheet is solid.
The rating for Ford’s senior unsecured notes and its corporate family dropped to Ba1, the top rating for debt that’s not investment grade. It had been Baa3, the lowest investment grade rating.
Moody’s says it expects Ford’s restructuring to extend for several years with $11 billion in charges and a $7-billion cash cost.
The ratings service said Ford’s outlook remains stable, but its cash flow and profit margins are below expectations and the performance of peer companies in the auto industry.
Moody’s spokespeople say Ford’s erosion in performance happened while the global auto industry was healthy. Now the company and CEO Jim Hackett must address operational problems as demand for vehicles is softening in major markets.
On the bright side, the company has $23.2 billion in cash, which is more than its debt, according to Moody’s. The stable outlook reflects Moody’s expectation that the restructuring will contribute to gradual improvement in earnings, profit margins and cash generation
Last weekend brought word of a Wall Street Journal report that the U.S. Justice Department was launching an antitrust investigation into a deal struck by Ford, Honda, BMW and Volkswagen with the state of California earlier this summer on fuel efficiency standards.
Shares in F went south 47 cents, or 4.9%, to $9.07
