Ford Motor Co. was dealt a major blow by Moody’s Investors Service, which cut the carmaker’s credit rating to junk on doubts that a turnaround plan by Chief Executive Jim Hackett will generate earnings and cash quickly enough.
Ford Motor Co. was dealt a major blow by Moody’s Investors Service, which cut the carmaker’s credit rating to junk on doubts that a turnaround plan by Chief Executive Officer Jim Hackett will generate earnings and cash quickly enough.
Moody’s downgraded Ford to the highest non-investment grade rating, Ba1, saying the automaker’s cash flow and profit margins are below expectations and likely to remain weak over the next two years. The descent to junk status affects one of the largest corporate bond issuers in the U.S. outside the financial sector.
The lower rating reflects “the considerable operating and market challenges facing Ford, and the weak earnings and cash generation likely as the company pursues a lengthy and costly restructuring plan,” Moody’s analyst Bruce Clark said in a statement Monday. Ford’s most actively traded bonds, Ford Motor Credit Co.’s 5.113% bonds due 2029, weakened relative to Treasuries. The extra yield, or spread, the notes pay widened 0.13 of a percentage point to 3.27 percentage points, according to Trace. The automaker’s shares plunged as much as 4.2% to $9.14 after the market closed.
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