Fitch Ratings Downgrades Ford & Ford Credit; Outlook Negative

CHICAGO--May 1, 20059, 2005--Fitch Ratings has downgraded the senior unsecured debt ratings of Ford Motor Corporation and Ford Motor Credit Corporation (FMCC) to 'BBB' from 'BBB+'. Ratings on the Capital Trust II securities have been downgraded to BB+ from BBB-. The Rating Outlook remains Negative. Fitch also affirms the 'F2' commercial paper. The ratings of Hertz have been downgraded to 'BBB' from 'BBB+' and placed on Rating Watch: Evolving (separate press release to follow). A complete list of ratings is detailed at the end of this release.

The downgrade reflects the impact of sales declines in key product categories, relentless price and product competition and higher commodity prices on Ford's automotive operating profitability. Despite relatively successful new product offerings, the support provided by healthy F-Series volumes, steady economic growth and solid industry sales volumes, Ford nevertheless faces breakeven to modestly negative cash flows in the automotive segment.

On a consolidated basis, Ford retains very healthy liquidity resources, potentially supplemented by the sale of Hertz, which provide more than sufficient resources to reinvest in its auto operations and absorb costs related to the pending Visteon restructuring. Fitch views it as unlikely that Ford would be downgraded to non-investment grade in 2005.

Sales volumes of Ford's key mid-size and large SUVs have declined sharply in 2005. In addition, price competition, new transplant product offerings and pending refreshments of domestic producers are likely to increasingly impact the profitability of Ford's core F-Series in 2005 and 2006. These segments represent a disproportionate share of Ford's operating profitability and are unlikely to be offset in the short term by progress Ford appears to be making in smaller vehicle segments.

Over the intermediate term, Ford has made substantial progress in its cost structure and its transition to a flexible manufacturing base, producing a better balance between capacity and product offerings than is seen at GM. This has produced a more consistent competitive position and financial performance across the breadth of its product segments versus GM, supporting consolidated cash flows. However, the strong volume growth and margin advantage at the transplants, high structural and legacy costs at Ford, high commodity prices and the impact of foreign exchange indicate that it will be difficult to make significant margin progress through 2006.

The financial burden of restructuring Visteon will fall chiefly on Ford. Ford has more than adequate liquidity to absorb these costs, which will require substantial cash outlays. Restoring competitiveness at the Visteon assets will only occur through facility closures, attrition and asset divestitures; steps which will likely occur over a multi-year period. The ability to accelerate these actions would quicken Ford's ability to gain greater cost competitiveness from a meaningful part of its North American supply chain.

Liquidity remains a primary strength at Ford, with $22.9 billion in cash and S/T VEBA, plus an additional $5.2 in L/T VEBA and $13 billion at Ford Credit. Total debt at the automotive operations is $18 billion, with average maturities in excess of 25 years. Approximately $2.1 billion comes due in the next five years. Dividends from Ford Credit are likely to more than offset potentially modest negative cash flow from the auto operations (excluding activities related to Hertz and Visteon), allowing Ford to maintain its balance sheet strength.

Margins have also been pressured by high commodity costs, losses at Jaguar, and foreign exchange issues. Even in the event of a drop in steel prices, existing contract terms may result in only modest relief until 2007. Foreign exchange has particularly hurt profitability at Volvo and Land Rover, although successful new product offerings and recent steady price performance at both entities speak well for long-term results. Jaguar continues to experience losses and still faces an extended turnaround schedule.

Supplier issues are increasingly a concern for the OEMs, as financial struggles could result in higher costs for the OEMs. Tangible financial assistance such as favorable payment terms or capital investment assistance may be necessary to ensure supply chain performance. Higher costs related to adding suppliers or increased inventory levels could also occur.

Fitch views the ratings of FMCC as highly linked to those of Ford given the close business relationship between the two entities, particularly given FMCC's focus on supporting Ford vehicles sales. Fitch recognizes FMCC's improving credit quality metrics, reasonable leverage, and adequate liquidity for the current ratings. In terms of liquidity, Fitch believes that FMCC has adequate sources of liquidity to address maturing debt obligations while still supporting parent company sales. Importantly, FMCC's assets mature faster than liabilities. In addition, FMCC has access to back-up lines of credit, secured financings, and whole loans sales. In combination, these sources should be sufficient to address maturing debt obligations at FMCC. To the extent FMCC increases its use of securitization and other secured fundings, Fitch will focus on the quality and quantity of unencumbered assets relative to unsecured debt in evaluating whether increased securitization funding introduces structural subordination.

Fitch has lowered the senior debt ratings on the following Ford entities to 'BBB' from 'BBB+':

Ford Motor Co.

Ford Motor Credit Co.

FCE Bank Plc

Ford Capital B.V.

Ford Credit Canada Ltd.

Ford Holdings, Inc.

Ford Motor Co. of Australia

Ford Credit Australia Ltd.

PRIMUS Financial Services (Japan)

Ford Credit Co. S.A. de CV (Mexico)

Ford Motor Credit Co. of New Zealand

Fitch has also lowered the following rating:

Ford Motor Capital Trust II

-- Preferred stock to 'BB+' from 'BBB-'.

The Outlook remains Negative for all ratings.