Fitch Ratings has affirmed a positive outlook on Ford Motor Co. (F), stating that the company has the flexibility to meet financial commitments in the future. However, the rating agency has fixed the issuer default rating on Ford at “BB,” which is one notch below the investment grade and implies that the company is at an elevated risk of default. A positive outlook indicates that the rating could be upgraded within a couple of years.
Fitch is worried about Ford’s weakened position in Europe, rising oil prices, tightening regulatory requirements and expiring labor contracts in the U.S. However, it believes demand growth in the U.S. and developing markets will offset weakness in Europe.
Fitch has a “BBB-” rating on Ford's secured credit facility and secured term loan, “BB” rating on Ford Motor Credit Co. LLC's long-term issuer default rating and a “B” rating on the subsidiary's short-term issuer default rating. The agency also has a “BB-” rating on the company’s senior unsecured notes and “B” on its commercial paper.
Recently, Ford revealed that it expects global sales to expand by 50% to 8 million vehicles by 2015 given the potential growth in Asia, mainly China and India; and rising demand for small cars. The automaker anticipates small cars to account for 55% of the total sales by 2020 compared with 48% presently. One third of the small car sales is expected to come from Asia.
Ford has been gearing to catch-up with its rivals in China – the world’s largest auto market. The automaker has been lagging behind the big players in the country, including General Motors Co. (GM), Toyota Motor Corp. (TM), Volkswagen AG, Hyundai Motor Co. and their respective joint ventures.
The company plans to expand its production capacity in China to 1.1 million vehicles by 2012 and triple its lineup by introducing 15 models by 2015.
By 2015, Ford also plans to cut its debt level to $10 billion from $16.6 billion at the end of the first quarter. The company expects the move to help regain investment-grade credit rating.
We are not surprised about Ford’s highly optimistic expansion plan given the fact that it had already turned in $9.28 billion in profits in the past 2 years after incurring losses of $30.1 billion from 2006 to 2008. However, Ford still looks up to U.S. and Europe for the lion’s share of its sales and profits.
The Zacks #3 Rank (Hold) company posted a roaring 48% rise in profit to $2.61 billion in the first quarter of 2011 from $1.76 billion in the same quarter of 2010. On earnings per share basis, profits rose 35% to 62 cents per share from 46 cents per share a year ago, thereby topping the Zacks Consensus Estimate by 12 cents per share.
FORD MOTOR CO (F): Free Stock Analysis Report
GENERAL MOTORS (GM): Free Stock Analysis Report
Be the first to comment