Ford Motor Co. And Subsidiary Ratings Lowered To 'BB+' And Placed On CW Negative Due To Weaker Metrics, Pandemic Risk

  • Ford Motor Co. announced it is suspending production at its manufacturing sites in Europe for four weeks and halting production in North America to clean these facilities and boost containment efforts for the COVID-19 coronavirus. We expect Ford's EBITDA margin to remain below 6% on a sustained basis and believe that its free operating cash flow to debt is unlikely to exceed 15% on a consistent basis.
  • Ford has drawn $13.4 billion on its corporate credit facility and $2 billion on its supplemental credit facility. We believe the company's current cash position stands at about $36 billion.
  • We are downgrading our long-term issuer credit rating to 'BB+' from 'BBB-'. At the same time, we are assigning issue-level ratings of 'BB+' on Ford's unsecured debt.
  • We are also placing the ratings on CreditWatch with negative implications, which reflects at least a 50% chance that we could lower the ratings depending on factors such as the duration of the plant shutdowns, the rate of cash burn, and the adequacy of Ford's liquidity position.
NEW YORK (S&P Global Ratings) March 25, 2020—S&P Global Ratings today took the rating actions listed above.
The coronavirus has delivered supply-side and demand-side shocks to light-vehicle demand.  The decision to downgrade Ford Motor Co. investment grade to speculative grade reflects that the company's credit metrics and competitive position became borderline for the investment-grade rating prior to the coronavirus outbreak, and the expected downturn in light-vehicle demand made it unlikely that Ford would maintain the required metrics.
The CreditWatch placement with negative implications, which reflects at least a 50% chance that we could lower the rating on Ford on account of longer-than-expected plant shutdowns or a potential economic recession leading to negative cash flow generation, eroding liquidity, and higher debt leverage. We expect to resolve the CreditWatch placement over the next 90 days, once we have a better understanding of how long the light-vehicle production and demand will remain curtailed due to government efforts to contain the spread of the coronavirus.
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