agent Entrepreneur logo
MenuMENU
SearchSEARCH

Fitch Upgrades Ford After Contract Ratification

October 20, 2011
3 min to read


Fitch Ratings on Thursday upgraded its rating of Ford Motor Co. to "BB+" from "BB" with a positive outlook to achieve the last notch below investment-grade status in the wake of successful ratification of a new labor agreement.


"The upgrades to Ford's ratings reflect the automaker's strong financial performance and continued debt reduction through the first nine months of 2011, as well as the recent completion of the United Auto Workers labor agreement," the ratings agency said in a report.

Ad Loading...


Auto sales are still slow to recover, but Fitch cites Ford's "continued net pricing strength" and a lower cost structure. That should allow the automaker to generate strong margins and free cash flow in a weak market while continuing efforts to reduce its debt load to $10 billion by 2015, reported The Detroit News.


The move does not come as a surprise as rating agencies in recent months said they would look at upgrading Ford's credit status upon successful completion of its labor negotiations.


Ford Chief Financial Officer Lewis Booth said earlier Thursday he thought the labor contract would be favorably received by ratings agencies. Ford is hoping to return to investment-grade status again soon, but achieving it "is not an absolute necessity to pay dividends," Booth told investors.


"Our shareholders have been very patient. It would be nice to get investment grade ahead of time, but that's not in our control," Booth said.


Barclays Capital on Thursday said contract ratification paves way for a quarterly dividend of 8 cents.

Ad Loading...


"With the contract behind it, Ford is likely to consider instituting a regular dividend," said Barclays analyst Brian Johnson. He expects Ford to pay a dividend for 2012 of 36 cents, beginning with an 8-cent dividend in the first two quarters of 2012, ramping up to 10 cents per quarter in the second half and 55 cents by 2015.


But Ford could announce a dividend when third-quarter results are released next Wednesday, Johnson said.


Fitch expects Ford's rating could be upgraded in the next 12 to 24 months, but said reaching investment grade — "BBB-" would require financial assurances Ford is strong enough to withstand the cyclical pressures on the auto industry.


The agency does not want to assign investment-grade ratings to Ford unless it is reasonably confident the automaker has the liquidity, cost structure and profit-generating potential to maintain the status even in a period of economic stress.


But elevating Ford to "BBB-" or higher is likely if the company continues with its current business plan, Fitch said.

Ad Loading...


"We continue to make progress on our plan, and we are pleased with this positive step," said Ford spokesman Todd Nissen. "Ultimately, the credit rating agencies determine when we return to investment grade. Our job is to stay focused on making progress on our plan."


Mark Fields, Ford president of The Americas, said Thursday that Ford's mid-decade outlook remains intact with the terms of the new labor agreement.


More Industry

Two white men's shaking hands
Industry•October 15, 2026

Penske Auto Group Deal a Record

The deal to take the dealership and transportation services company private sets a new pace for industry buy-sell transactions.

Read More →
Rows of cars parked in exterior lot
Industry•by Hannah Mitchell•October 8, 2026

War Toll a Damper on Used Auto Prices

Cox Automotive found wholesale depreciation to be elevated in September amid high fuel prices and this year's unusual hurricane season.

Read More →
Mechanic cleaning interior of engine
Industry•by Lauren Lawrence•October 8, 2026

Bridge the Maintenance Gap

With many drivers missing recommended maintenance, service departments offering transparency and efficiency have a better chance of reaching financially strained consumers.

Read More →
Ad Loading...
Ford F-150 truck rounding a curve
Industry•by Hannah Mitchell•October 1, 2026

California Store Has New Owner

The longtime dealership in the northern part of the state is known for robust fleet sales and has served the state capital for 115 years.

Read More →
crane lowering a pipeline into the ground
Industry•by Lauren Lawrence•October 1, 2026

BMW Plant Pursues Cleaner Energy

BMW Group Plant Leipzig has utilized hydrogen to help power its production since 2013, but a new pipeline is planned to take it to another level.

Read More →
Two dodge cars outside of dealership.
Industry•by Lauren Lawrence•September 17, 2026

Auto Affordability Inches Up

The latest Cox Automotive and Moody’s Analytics index shows a slight increase in new-vehicle affordability despite high prices.

Read More →
Ad Loading...
Five men smiling for photo in front of Honda car dealership.
Industry•by Lauren Lawrence•September 10, 2026

Ohio Auto Group Under New Ownership

After 79 years with the Schluter family, Mansfield Auto Group has been acquired by Missouri-based Clement Auto Group.

Read More →
Blue and white RV parked on beach facing the ocean.
Industry•by Lauren Lawrence•September 3, 2026

RV Group Expands Carolina Footprint

Blue Compass RV Columbia Northeast is the 13th RV dealership owned by Blue Compass in the Carolinas.

Read More →
Photo of two men and one woman on a discussion panel
Industry•by Hannah Mitchell•September 1, 2026

Agent Acumen

An Agent Summit panel of people who’ve been supporting auto dealers for years gave both timely and timeless advice for those starting out or mulling the prospect.

Read More →
Ad Loading...
Gloved hand holding two wrenches next to “Turn Overdue into Opportunity” Graphic
Industry•by Lauren Lawrence•August 27, 2026

Missed Maintenance Creates Opportunity

As families get back on the road and into daily school routines, service drives have an opportunity to capture customers who are behind on recommended vehicle maintenance.

Read More →
Ad Loading...