Please ensure Javascript is enabled for purposes of website accessibility

Ford Downgraded to BBB- by Fitch, Investment-Grade Status Now in Peril

By John Rosevear – Mar 24, 2020 at 10:06AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Ford is close to losing its hard-won credit status.

Ford Motor Company's (F -1.20%) credit rating was downgraded by Fitch Ratings on Monday, a move that puts Ford's hard-won investment-grade rating in peril. 

Fitch cut Ford's credit rating by one notch, to BBB-, with a "negative" outlook. The rating applies to both Ford Motor Company itself as well as its financial-services subsidiary, Ford Credit. BBB- is the lowest level considered "investment grade." 

Fitch said that the downgrade "reflects Fitch's significant concerns about the effect that the global coronavirus mitigation actions currently under way will have on the company's near-term financial performance and credit profile."

Ford's world headquarters building in Dearborn, Michigan.

Image source: Ford Motor Company.

Fitch said that it believes Ford has ample financial flexibility to get through an extended shutdown of its factories in North America and Europe. The agency's concern is with what could happen afterward: If COVID-19 passes but leaves Europe and North America mired in deep recessions that could strain Ford's balance sheet and lead to a further downgrade. 

On the other hand, if Ford's operations return to a "typical run rate" in the second half of 2020, it could revise the company's outlook to "stable," Fitch said.

The downgrade puts Ford's investment-grade rating in peril. Moody's Investors Service cut Ford's rating to junk level in September; if either Fitch or the third credit-rating agency, Standard & Poor's, follows suit, then Ford will no longer be considered an investment-grade credit. 

Ford suspended production at its factories in North America and Europe until at least the end of March, to sanitize the facilities and to adjust its inventories ahead of an expected sales decline. 

Ford last week drew down $15.4 billion from its credit line and suspended its dividend. 

John Rosevear owns shares of Ford. The Motley Fool owns shares of and recommends Moody's. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Ford Motor Company Stock Quote
Ford Motor Company
$12.36 (-1.20%) $0.15
Moody's Stock Quote
$254.07 (-2.98%) $-7.79
S&P Global Inc. Stock Quote
S&P Global Inc.
$316.17 (-1.70%) $-5.48

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 10/06/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.