Ford’s credit rating has been cut to junk by Moody’s Investors Service, with the agency citing an outlook for weak earnings and cash generation during a costly restructuring.
Moody’s cut the rating on Ford’s bonds one notch to Ba1 with a stable outlook from Baa3. The other two major credit rating groups, S&P and Fitch, each have investment-grade ratings for Ford.
The downgrade comes as Ford undertakes an $11bn restructuring plan “from a weak position as measures of cash flow and profit margins are below our expectations, and below the performance of investment-grade rated auto peers”, Moody’s said in its report.
“The company does have a sound balance sheet and liquidity position from which to operate,” added Bruce Clark, senior vice-president at Moody’s.
Ford has embarked on a turnround in hopes of improving profitability and better positioning itself to capitalise on new technologies including electric and self-driving vehicles. The automaker had announced job cuts and plant closures in Europe, while also reducing salaried staff across the globe. It also formed an alliance with German carmaker Volkswagen in which they will share development costs.
Shares in Ford were down 1.3 per cent at $9.42 in after-hours trading. The stock has gained 24.7 per cent since the start of 2019, as of Monday’s closing price.