The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.NEW YORK ( Trefis) -- Both S&P and Moody's are reviewing Ford's ( F) credit ratings for possible upgrades, after a tentative agreement was struck between Ford and United Auto Workers (UAW). The agreement still needs to be ratified by unions and could face a tough time as some local unions have voted against it. With the proposed agreement, Ford will limit its fixed costs by paying its workers more in profit-sharing and signing bonus instead of pay increases. Currently, Ford is rated BB- by S&P and Ba2 by Moody's, and we believe that a rating upgrade to near investment grade levels is likely once UAW votes in favor of the agreement this week. A similar contract between GM ( GM) and UAW led Fitch and S&P to upgrade GM's credit ratings because of cost control benefits.
Also Ford's credit rating upgrade will reduce the firms risk and lower its risk-premium or discount rate, which will provide further upside to the stock. You can drag the trend lines in the modifiable charts above to see the impact of these trends on Ford's stock value. Like our charts? Embed them in your own posts using the Trefis Wordpress Plugin.