Fitch Ratings on May 17 affirmed the issuer default ratings of Ford Motor Co. and its finance subsidiary, Ford Motor Credit Co. LLC, at BBB, citing the group's restructuring initiatives that are tracking as planned.
The rating agency revised the group's outlook to negative from stable over concerns that near-term macro pressures in certain key markets, such as western Europe and China, may result in a decline in the auto industry in those regions. Fitch said such issues could make it more challenging for the U.S. carmaker to achieve the advantages of its global redesign strategy within the expected timeframes.
However, the agency said it could revise the outlook back to stable if the company remains on track with the larger elements of its restructuring program and if it begins to show tangible benefits from the actions as they are completed.
Ford's $11 billion restructuring plan, which was announced in July 2018, is expected to result in negative cash effects of approximately $7 billion.
Meanwhile, Fitch also assigned ratings of BBB to Ford's $2.0 billion supplemental unsecured revolving credit facility due 2022 and its $1.5 billion unsecured delayed draw term loan due 2022.
Fitch said it affirmed the group's ratings because of its expectation that Ford's profitability and financial flexibility will improve once its redesign is complete.
The rating agency said Ford's most current significant rating risk is the possibility of a significant economic slowdown while the carmaker is in the process of restructuring. Fitch also said a downturn in North America or simultaneous downturns in two or more regions outside North America, where the company has significant operations, may result in a substantial amount of cash burn, even without the impact from restructuring.
Fitch said Ford's strong automotive liquidity position, including more than $24 billion in cash and nearly $14 billion of credit facility capacity, would be more than enough to cover its restructuring costs in the middle of a moderate recession.
The agency believes that Ford's automotive free cash flow after dividends will remain under pressure over the next couple of years, mainly due to the timing of the group's restructuring activities, as well as ongoing investments in mobility initiatives.