Ford and Chrysler – Credit Worthiness Downgraded
After the market closed I got this information…
FORD:
MOODYS REVIEWS FORD FOR A POSSIBLE CUT; CUT FORD’S SPECULATIVE GRADE LIQUIDITY RATING FROM SGL-1 TO SGL-3; CUTS THE SR UNSECURED RATING OF FORD MOTOR CREDIT TO B2 FROM B2; ALSO FORD MOTOR CREDIT CUT AND PLACED ON RATINGS REVIEW
- Moody’s also downgraded the senior unsecured rating of Ford Motor Credit LLC (“Ford Credit”) to B2 from B1 and placed the ratings on review for further possible downgrade.
- The review of Ford’s rating is focusing on the degree to which the company can preserve adequate liquidity in the face of severely eroding demand, unfavorable mix shift, and tightening consumer credit conditions in the US. The company must also contend with the likelihood of softer demand in the important European markets. Finally, there will be continued uncertainty regarding the timing and pace of the anticipated recovery in US demand during 2010.
- The lowering of Ford’s Speculative Grade Liquidity rating to SGL-3 reflects the significant narrowing of the company’s liquidity cushion that has occurred as a result of the eroding US demand outlook.
- As a result of these more challenging market conditions, Moody’s believes that the automotive operating cash flow burn that Ford had expected to approximate $9 billion from June 2008 through year-end 2009, will increase considerably.
MOODY’S LOWERS CHRYSLER RATING TO CAA2; CONTINUES REVIEW FOR FURTHER POSSIBLE DOWNGRADE
- The move impacts about $9B of debt.
- The downgrade of the Chrysler rating reflects the increased pressure on the company’s liquidity position due to the precipitous decline in US automotive demand and the likelihood that shipment levels will remain depressed through 2009. Chrysler also faces the longer term challenge of being highly dependent on the truck and SUV segments as market demand shifts toward smaller vehicles. Moreover, its new product pipeline through 2010 will not materially increase its position in the small vehicle segment. Finally, Chrysler remains disadvantaged by having only a minimal position in markets outside of the US.
- As a result of the near-term fall off in demand in the US, Chrysler’s ability to cover all cash requirements through 2009 may come under stress.
