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August 25, 2005

Ford, Ford Credit downgraded by Moody's, Thurs., August 25, 2005, 7:39 AM

Yesterday, after the market's close, Moody's cut Ford Motor's senior unsecured debt to junk status. The credit ratings by Moody's, S&P, and Fitch, are important to equity investors because (1) they are presented with an independent and objective analysis of corporate operations and financial strength, and (2) an upgrade or downgrade could materially change the cost structure of the company, which will impact profits. Wall Street analysts will have to then review their opinions, which could result in an upgrade or downgrade, causing share prices to move considerably.

SAN FRANCISCO (MarketWatch) -- By Carla Mozee

Moody's Investors Service on Wednesday lowered the ratings of Ford Motor Co.'s (F) senior unsecured debt to Ba1 from Baa3, and assigned a Ba1 corporate family rating and an SGL-1 speculative grade liquidity rating. It also lowered Ford Motor Credit Co.'s senior unsecured rating to Baa3 from Baa2, and short-term rating to prime-3 from prime-2. The outlook for both companies is negative. Moody's said the downgrades reflect further erosion in Ford's operating results and cash flow generation, and noted that those factors are expected to result in a pre-tax loss from automotive operations for 2005. Since improvement in Ford's cost structure can only be implemented over a period of time, said Moody's, financial performance is expected to remain weak."

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Note that F and GM's stock rocketed north after yesterday's open, probably a result of shorts being caught. Then the rocket ran out of fuel when oil prices started to set record high prices.

But, the rubber may stop hitting the road altogether today, with Moody's now waving a red flag.

Posted by Posted by Bill Cara on August 25, 2005 07:39:27 AM | Category: 25 Cons Discretionary