One week after the Ford Motor Co lost its investment-grade rating from Standard & Poor's, a second credit rating agency on Thursday lowered its assessment of the automaker's debt to one step above junk status.
Also on Thursday, Ford's chief executive, William Clay Ford Jr, told company shareholders at their annual meeting that he would not accept any compensation from the company until profits from the automotive division improved. Ford, the great-grandson of the company founder, Henry Ford, receives no cash salary, but a spokesman said he would forgo his stock options and accept only job-related benefits like use of the corporate jet. Last year, his total compensation was about US$22 million, almost all in some form of stock.
The downgrade by Moody's Investor Service reinforces the notion that Ford, one of the nation's largest corporate borrowers, faces an increasingly uncertain financial outlook as the US auto industry loses its grip at home. In dropping Ford's credit rating two notches to the lowest investment-grade status, Moody's cited a litany of issues that it said would choke Ford's profitability, from lower demand for large sport utility vehicles to higher health care costs for workers.
By keeping Ford's investment-grade rating intact, however, Moody's has left the automaker some breathing room. Ford was spared the fate of being rated junk by two of Wall Street's major debt-rating agencies, a move that would have forced its bonds to be removed from the Lehman US Credit Index under rules that take effect in July. Under those rules, a company will keep its place in the index, an influential indicator of corporate bond security, if it is rated junk by only one of the three agencies. Some investors are restricted from owning bonds of companies not listed in the index.
Ford, which has US$161 billion in outstanding bonds, was also spared any immediate speculation that its credit rating would be downgraded further. Moody's indicated that it would not cut Ford's credit rating below investment grade in the near future.
"Moody's believes that Ford's strong liquidity position, in combination with the operational progress that it has demonstrated" will prevent the company from dropping below investment grade, Moody's said.
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