dwasson
03-13-2006, 08:46 PM
Fitch cuts Ford's ratings deeper into junk status
All Reuters News
NEW YORK (Reuters) - Fitch Ratings on Monday cut its ratings on Ford Motor Co. deeper into junk status, citing increased potential for strikes and supply disruptions at the automaker's parts suppliers.
With a number of major suppliers in bankruptcy and the industry as a whole suffering financial stress, it will be difficult for Ford to reduce costs in this area, Fitch said in a statement. Coupled with other pressures on Ford's profit margins, supplier troubles will challenge Ford's ability to stabilize cash flows, the rating agency said.
A spokeswoman for Ford declined to comment on Fitch's rating action.
Fitch still rates Ford higher than other ratings agencies, said Brad Rubin, senior credit analyst at BNP Paribas in New York. "I don't view it as significant," he said.
Traders said Ford's bonds were not affected by the Fitch downgrade. Ford's 7.45 percent bonds due in 2031 traded at 72.75 cents on the dollar, unchanged on the day, according to MarketAxess.
Struggling with high pension and health care costs and increased Japanese competition, Ford is cutting up to 30,000 jobs and shedding more than a quarter of its production capacity as it moves to offset market share losses.
Even as Ford works on reducing its cost structure, though, suppliers' troubles could hit Ford with higher costs related to re-sourcing, supply disruptions or higher parts prices, Fitch said.
Production cutbacks at Ford and other automakers have contributed to bankruptcy filings by several major parts suppliers over the past two years, including Delphi Corp. , Collins & Aikman Corp. , Dana Corp. and Tower Automotive Inc. .
Dana, which filed for bankruptcy protection earlier this month, derived about 25 percent of its revenue from Ford in 2004, the latest data available.
Fitch cut the long-term ratings on Ford and its finance arm Ford Motor Credit Co. by one notch to "BB," two steps below investment grade, from "BB-plus." The outlook is negative, meaning another rating downgrade is likely over the next two years.
In January, Moody's Investors Service cut Ford's ratings by two notches to "Ba3," three steps below investment grade, while Standard & Poor's cut Ford by two notches to "BB-minus," also three steps below investment grade.
All Reuters News
NEW YORK (Reuters) - Fitch Ratings on Monday cut its ratings on Ford Motor Co. deeper into junk status, citing increased potential for strikes and supply disruptions at the automaker's parts suppliers.
With a number of major suppliers in bankruptcy and the industry as a whole suffering financial stress, it will be difficult for Ford to reduce costs in this area, Fitch said in a statement. Coupled with other pressures on Ford's profit margins, supplier troubles will challenge Ford's ability to stabilize cash flows, the rating agency said.
A spokeswoman for Ford declined to comment on Fitch's rating action.
Fitch still rates Ford higher than other ratings agencies, said Brad Rubin, senior credit analyst at BNP Paribas in New York. "I don't view it as significant," he said.
Traders said Ford's bonds were not affected by the Fitch downgrade. Ford's 7.45 percent bonds due in 2031 traded at 72.75 cents on the dollar, unchanged on the day, according to MarketAxess.
Struggling with high pension and health care costs and increased Japanese competition, Ford is cutting up to 30,000 jobs and shedding more than a quarter of its production capacity as it moves to offset market share losses.
Even as Ford works on reducing its cost structure, though, suppliers' troubles could hit Ford with higher costs related to re-sourcing, supply disruptions or higher parts prices, Fitch said.
Production cutbacks at Ford and other automakers have contributed to bankruptcy filings by several major parts suppliers over the past two years, including Delphi Corp. , Collins & Aikman Corp. , Dana Corp. and Tower Automotive Inc. .
Dana, which filed for bankruptcy protection earlier this month, derived about 25 percent of its revenue from Ford in 2004, the latest data available.
Fitch cut the long-term ratings on Ford and its finance arm Ford Motor Credit Co. by one notch to "BB," two steps below investment grade, from "BB-plus." The outlook is negative, meaning another rating downgrade is likely over the next two years.
In January, Moody's Investors Service cut Ford's ratings by two notches to "Ba3," three steps below investment grade, while Standard & Poor's cut Ford by two notches to "BB-minus," also three steps below investment grade.