Press Release: Ford Motor Company, Ford Motor Credit Company & Ford Credit Canada Limited

Press Release: Ford Motor Company, Ford Motor Credit Company & Ford
Credit Canada Limited
Date of Release: Jun 10, 2002
Confirms at A (low) & R-1 (low)

David Schroeder, Kam Hon /  416-593-5577 ext.2232, ext.2243/
dschroder@dbrs.com

DBRS is confirming the above ratings of the Ford group of companies,
("Ford" or "the Company"), all with Stable trends.  The confirmations
recognize that the Company is in the process of a major revitalization
plan aimed at improving profitability.  The program is well underway in
Europe but just begun in North America.  Ford estimates that that it
will take until mid-decade before profit goals are reached.

 

The main challenge facing the Company is to execute the revitalization
plan.  Ford has made good progress in Europe.  Although no problems have
been encountered to date in the North American restructuring, there is
concern as to the timing and ultimate level of profit recovery due to:
(1) The extent of changes being planned are considerable including the
closure of four major assembly plants and moving to flexible
manufacturing.  (2) The success of new model introductions at Ford and
its competitors will have a significant influence on the earnings
recovery but cannot be determined.  The high level of sales incentives
used to support sales is problematic.  (3) Ford has added high cost
features to new models including the Explorer, Expedition and the new
F-150 making the products more costly to produce but has been unable to
raise prices as an offset. Ford aims to engineer certain low value
features out of its products but this will take time to achieve. (4)
Ford faces the greatest risk of a strike since it has been the most
aggressive to date in announcing major plant closures. A strike in
Canada this year would hamper production throughout North America.
Fortunately, the Company has a strong balance sheet and ample liquidity
to fund the high cash use that a strike would cause. Cash exceeded
automotive debt by $1.2 billion ($3.9 billion including VEBA) at
year-end 2001 and DBRS believes this will increase further this year.
Even if unforeseen issues arise, Ford is committed to maintaining
surplus cash balances in the manufacturing business and should have the
flexibility to keep this commitment.

 

 

Dominion Bond Rating Service Limited (DBRS) will publish a full report
shortly that will provide additional analytical detail on this rating
action. If you are interested in receiving this report, please contact
us at: info@dbrs.com.

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