DBRS Places Ford Motor Company Under Review with Positive Implications

DBRS has today placed the long-term ratings (including the recovery ratings) of Ford Motor Company (Ford or the Company), Ford Motor Credit Company LLC and Ford Credit Canada Limited Under Review with Positive Implications. The associated short-term ratings remain confirmed with a Stable trend. The ratings action follows the Company’s announcement of its third quarter earnings that were above DBRS’s expectations. Notably, DBRS observes that in the most recent quarter, Ford was able to generate a profit from its core North American automotive operations. On a consolidated basis, pre-tax earnings were also positive in the amount of $1.1 billion, with both the automotive and the financial services operations being profitable. More significantly, the Company’s automotive net free cash flow was also slightly positive; further bolstered by cash generated from working capital as Ford increased production. Automotive cash as of September 30, 2009 totaled $23.8 billion, with cash balances essentially holding firm or increasing through the past six months amid very challenging market conditions. Accordingly, DBRS notes that the Company’s liquidity risk has now diminished significantly, with the Company in all likelihood having well-sufficient liquidity over the next couple of years.

While very significant industry headwinds remain, the results reflect the consistent progress of Ford in its structural cost reductions. DBRS also notes that Ford’s market share has been on an upswing, with the Company appearing to have benefited from the difficulties of General Motors Corporation and Chrysler Group LLC. However, Ford’s positive market share performance is also attributable to its own significant product momentum following the consecutive successful introductions of several new models. Additionally, the Company has been making consistent strides in its vehicle quality, with such progresses also being highlighted by favourable results in numerous recent quality surveys.

DBRS expects the Under Review – Positive status to be resolved within the next few weeks.

Notes:
All figures are in U.S. dollars unless otherwise indicated.

The applicable methodology is Rating Automotive, which can be found on our web site under Methodologies.

This is a Corporate (Autos & Auto Suppliers) rating.