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Ford Credit Rating Slashed On Doubts On Turnaround Plan

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Ford has been closing factories and laying off workers around the world to shore up its finances and return to profits globally; it has closed factories overseas and in the United States. The automaker is investing heavily in its factories for the important new models like the 2020 Explorer and 2020 Escape. As Ford and CEO Jim Hackett fight to turn things around at the Blue Oval, it has been hit with a hard blow.

Moody’s Investors Service cut Ford’s credit rating to junk due to doubts of the turnaround plan that Hackett has implemented generating earnings and cash quickly enough. The Ford credit rating downgraded Ford to the highest junk rating, which is Ba1. Moody’s said that Ford’s cash flow and profit margins are expected to stay weak for the next two years.

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The Ford credit rating downgrading to junk status puts Ford in a tight spot. It means that Ford will pay higher interest rates and that many institutional investors will think twice about investing. Ford has issued a statement that says it remains confident in its plan and progress.

Despite the Ford credit rating downgrade, it has a strong business, a solid balance sheet, and “plenty of liquidity” to invest in its future, the automaker said in a statement. Ford has been in this situation before back in 2005 during the financial crisis alongside GM. In that instance, Ford had to finance itself by putting everything from its inventory to rights to its logo in hock. Bill Ford Jr. said at the time that the founding family was “pledging our heritage.” Perhaps the downturn will push Ford’s stock price down further and give Bill Ford another opportunity to buy millions in Ford stock.

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Source: Yahoo! Finance

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Written by Shane McGlaun

Shane is a car guy with a fondness for Mustangs and off-roading.

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3 Comments

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  1. I think Ford has things pretty much under control. They are selling what is popular right now at a profit, and investing in new products which will be profitable in the long run. They are exiting markets that have been a cash drain, and partnering with others to make strides in new tech.

  2. Ford made close to 1 million 3.5 TT V6 engines. Tell me another company that produces as many state of the art V6 engines ?

  3. As a lifelong Ford guy with a ‘67 Mustang GT, a 2005 50th Anniversary T-Bird & a 2019 5.0 GT Premium in my garage, I thoroughly enjoy all the vehicle stories. As a stockholder I also appreciate the Corp. news, good or bad. You might add that the credit downgrade was done by only 1 of 3 credit agencies and explain the effect China has on sales and profits. Mr. Hackett’s turnaround is well underway along with all the new models. The 3 research analysis I use all have Ford rated as a “buy” so what is so different now that Moody’s needs to downgrade the company? They should have done it a year ago when things were not as good. Also please mention the ability to continue the high dividend they pay every qtr. thanks.

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