Ford Motor Company and Ford Motor Credit Company Bond Ratings

Press Release: Ford Motor Company and Ford Motor Credit Company
Date of Release: Oct 23, 2001
Downgrades to A (low)

Kam Hon, David Schroeder / 416-593-5577 ext.2243, ext.2232 / e-mail:
khon@dbrs.com

Ford Motor Company
Rating	Trend	Rating Action	Debt Rated	
A (low)	Stable	Downgraded	Long-Term Debt	
Ford Credit Canada Limited
Rating	Trend	Rating Action	Debt Rated	
A (low)	Stable	Downgraded	Guaranteed Unsecured Senior Notes	
Ford Motor Credit Company
Rating	Trend	Rating Action	Debt Rated	
A (low)	Stable	Downgraded	Corporate Rating*	

* The Corporate Rating represents the highest rating achievable on a
company's most senior debt, if issued.
DBRS is downgrading the senior debt of Ford Motor Company ("Ford" or
"the Company") from A to A (low) with a Stable trend. The downgrade
reflects the deterioration of market share particularly in the highly
profitable truck segment, lower profitability and a weakened balance
sheet. 
Deterioration in the Company's profitability is being affected by the
following structural factors: (1) Intensified competition in the North
American market, particularly with new entrants in the truck segment,
has led to sharper market loss. The Company's market share declined to
22.8%, a 1.6% loss in the last 12 months, in September 2001 despite high
incentive spending. With major competitors expected to continue to
introduce new truck models and Ford's new models not being introduced
till 2003, it will be a challenge to Ford to maintain its current market
share. (2) The event of September 11 has worsened market conditions and
vehicle demand. With a restrictive labour agreement that restricts plant
closure until 2002 in Canada and 2003 in the U.S., the depth of the
decline in income could be severe in 2002-03 for the following reasons:
(a) with largely fixed costs, profitability falls off sharply as volume
falls. (b) Margins are under pressure due to growing incentives, which
now well exceed $2,000 per vehicle. (c) The use of incentives to boost
sales currently could lead to a "pull forward" of sales leading to a
more prolonged downturn. (3) Ford's international operations continue to
underperform and weigh on overall performance. (4) Ford is experiencing
quality problems, and the advantage that Ford enjoys over its North
American competitors is narrowing rapidly. Higher costs incurred to
address the quality issues further depress profitability. (5) The recent
rise in the Company's cost of raising funds in the capital market will
further depress the Company's earnings and delay the recovery in
profitability. 
The revised rating still reflects the strong franchise and geographical
diversity. Ford's automotive operations continue to be debt free (cash
plus VEBA exceeds debt) as all debt is related to the finance
operations. In addition, the Company's action to reduce dividends, with
annualized savings of about $1.1 billion, further adds to liquidity. The
finance operations have very liquid assets with relatively low loss
rates near 1% of average receivables. Although the Company has a higher
proportion of 2 to 3 year leases, where residual value risk is higher,
compared to prior down cycles, the potential increase in losses is not
considered serious. Furthermore, DBRS expects the Company's efforts to
restructure its North American operations to be successful, leading to
the eventual recovery of its operating performance. 

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