Moody’s downgraded Ford to ‘junk’ status amid a massive restructuring — and its stock is set to tank


Bullitt Ford Mustang 2018 Detroit auto show

Moody’s, the credit ratings agency, just downgraded Ford’s credit rating to junk status on Monday.
The credit ratings agency cited Ford’s weak financial outlook, as the Detroit based company embarks on its $11 billion restructuring plan.
It also said that prospects for its cash flow and profit margins through 2020-21 were poor.
Stocks were down 2.37% in premarket.
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Moody’s, the credit ratings agency just downgraded Ford’s credit rating to “junk”, as it slated Ford’s financial outlook for the year ahead, citing weak earnings and poor cash generation.

Moody’s criticized Ford saying its performance had eroded as the automobile giant embarks on a major restructuring of the business, costing around $11 billion.

“Ford is undertaking this restructuring from a weak position as measures of cash flow and profit margins are below our expectations, and below the performance of investment-grade rated auto peers,” Moody’s said in its report, dated September 9. “These measures are likely to remain weak through the 2020/2021 period including a lengthy period of negative cash flow from the restructuring programs.”

Ford’s share price tanked in premarket trading, falling 3% on the news. If it sinks that much on the open, it would wipe about $1.1 billion off its market cap.

“Ford now faces the challenges of addressing these operational problems as demand in major markets is softening and as the auto industry is contending with an unprecedented pace of change relating to vehicle electrification, autonomous driving, ride sharing and increasingly burdensome emission regulations,” Moody’s said.

The Detroit based company already have announced earlier this year that 7000 jobs were to be cut from the business saving around $690 million per year. The Financial Times reported that Ford currently has around $100 billion worth of debt globally, in the form of bonds and loans.

Moody’s previously had Ford rated at Baa3, which is the lowest investment-grade rating. It’s decision to cut Ford to Ba1, puts Ford on the highest level on the junk bond scale.

Ford is also looking to develop new technologies as part of its restructuring and is also working with Germany automobile giant Volkswagen in developing electric cars.

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Source:: Businessinsider – Finance

      

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