celebrated a dramatic moment Tuesday, as a credit upgrade enabled the automaker to reclaim the assets it mortgaged six years ago.
Key among those assets was the symbolic
, which Ford reclaimed after receiving an upgrade from junk to Baa3, investment grade with a stable outlook, from Moody's. Last month, Fitch Ratings took a similar action. The combination of two investment-grade ratings meant the automaker could reclaim its logo, headquarters, plants and machinery, all collateral for a $23 billion loan in 2006.
"That was a once-in-a-lifetime event," Chairman Bill Ford said late Tuesday, recalling the decision to mortgage everything, during a hastily called conference call with reporters. "By definition, today is (also) a once-in-a-lifetime event.
"It was just a heroic effort by every Ford employee to get us to this day," Ford said, noting that he had gone on the public address system at the Dearborn headquarters to announce the upgrade. "It's typically used only for fire drills," he said.
Recalling the decision to pledge the assets, Ford said: "It was enormously emotional for me and my family. We weren't just pledging an asset. We were pledging our heritage."
Of course, the Ford turnaround story has been widely applauded and CEO Alan Mulally has been widely recognized for presiding over it. But again on Tuesday, Mulally, who is 66, gave no indication he has any desire to leave the automaker.
"It is a very significant milestone but it changes none of my plans to continue to serve this great corporation," he said.
Asked how the company can avoid complacency, Bill Ford responded that, first, "Alan isn't going anywhere," and that even when he does leave, "the process Alan has put into place has worked so beautifully, I can't imagine anyone wanting to abandon that process." Also, he said, "I plan to be here a long time," and to ensure there is no return to past unprofitable practices.
In its upgrade, Moody's said it was recognizing the strength of Ford's position in North America, "its robust liquidity position, and our expectation that the company will continue to embrace sound operating and financial disciplines."
Bruce Clark, Moody's lead analyst, said in a prepared statement that "The key factor in our considering an investment-grade rating for Ford was whether or not the company would be able to sustain its strong performance. We concluded that the improvements Ford has made are likely to be lasting."
Clark said that as a result of cost reductions, Ford's breakeven point in North America has declined to annual sales of 1.8 million units from annual sales of 3.4 million units. For the last 12 months, he said, Ford's North American wholesale shipments were 50% above the breakeven point.
A negative is that 25% of Ford's global revenues are generated in Europe, where the company expects to lose $500 million to $600 million this year. But Ford is better-positioned than competitors in Europe, especially given its strong presence in North America, Moody's said.
As for the immediate implications of the upgrade, Ford CFO Bob Shanks said the company expects to see a reduction in its borrowing rate and its bonds can be included in institutional indices, meaning broader participation by bond buyers. In after-market trading, Ford shares were rising 11 cents to $10.30. At that price, shares are down 6% year-to-date.
-- Written by Ted Reed in Charlotte, N.C.
>To contact the writer of this article, click here:
>To follow the writer on Twitter, go to