Fitch: $5.6B Hertz Sale Does Not Affect Ford's Ratings

CHICAGO--Sept. 12, 2005--Ford's announcement that it is selling Hertz for $5.6 billion (plus assumed debt) does not affect the ratings of Ford or Ford Motor Credit, according to Fitch Ratings.

The monetization of this asset supplements Ford's already-healthy liquidity position as it faces costs associated with the pending absorption of Visteon assets and as it undertakes a restructuring of its overcapacity position in North America. Fitch expects that proceeds from the sale will be upstreamed to Ford to finance these outflows as well as to offset operating losses in the North American auto segment during 2005. Rating actions will continue to be driven by the performance of the company's North American auto operations.

Ford has experienced mounting operating losses in its core North American automotive segment in the first half of 2005, driven by the sharp decline in large and mid-size SUVs, higher raw material prices, high fixed costs, supplier issues and pricing pressures. Recent incentive programs have reduced inventories, but the lower price points established in the market have made Ford more vulnerable to potential volume declines.

Fitch expects that persistently high gas prices and changing consumer preferences will further migrate the U.S. market away from larger vehicles, incrementally hurting profitability. Ford's growth in 2005 in several car and crossover categories, still-strong F-series volumes and pending introductions (mid-size car market and a refreshed Explorer) are expected to provide some offset to the decline in large vehicles volumes. Nevertheless, transplant manufacturers are better positioned in terms of product and have continued to gain share at a strong pace.

High commodity costs and costs associated with the supply base are expected to continue to hinder margin improvement in the near term. Ford has also experienced higher fleet sales in 2005, and escalating warranty expenditures. Given these factors and the severe pricing environment, Ford will have to produce deeper cuts in its fixed cost structure in order to stabilize margins and cash flow.

Ford has stated that it will undertake a more fundamental restructuring to address its persistent over-capacity in the North American market, and these actions are expected to result in meaningful facility closures, employee buyout programs and assisted asset sales. Due to restrictions under the existing union contract, the wind-down of these assets is expected to occur over a number of years, as will the exit costs. Ford's liquidity position, product balance and expected cost reductions position the company to address these issues. Additional progress on the cost side could also occur over the intermediate term through any declines in commodity costs (not expected to be material until at least 2007) and any concessions that may be derived by the Big Three from the UAW.

Proceeds from the sale of Hertz will provide supplementary liquidity to finance the cost of its restructuring programs. As of June 30, 2005, Ford had gross cash and short-term VEBA of $21.8 billion versus total debt of $19.1 billion. The net debt position will be strengthened by the addition of the Hertz proceeds, and the maturity schedule remains very extended. Ford Credit continues to perform well and is an important contributor to Ford Motor's credit profile.

Fitch rates the following with a Negative Outlook:

Ford Motor Co.

-- Senior debt to 'BBB-'.

Ford Motor Credit Co.

-- Senior debt to 'BBB-'.

FCE Bank Plc

-- Senior debt to 'BBB-'.

Ford Capital B.V.

-- Senior debt to 'BBB-'.

Ford Credit Canada Ltd.

-- Senior debt to 'BBB-'.

Ford Motor Capital Trust II

-- Preferred stock to 'BB'.

Ford Holdings, Inc.

-- Senior debt to 'BBB-'.

Ford Motor Co. of Australia

-- Senior debt to 'BBB-'.

Ford Credit Australia Ltd.

-- Senior debt to 'BBB-'.

PRIMUS Financial Services (Japan)

-- Senior debt to 'BBB-'.

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

-- Senior debt to 'BBB-'.

Ford Motor Credit Co. of New Zealand

-- Senior debt to 'BBB-'.

Ford Motor Credit Co. of Puerto Rico

-- Senior debt to 'BBB-'.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.