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DCR Reaffirms Ford's Long-Term Ratings

17 April 2000

DCR Reaffirms Ford's Long-Term Ratings, Lowers Ford Credit's Short-Term Ratings

    CHICAGO, April 14 Duff & Phelps Credit Rating Co. (DCR)
(NYSE: DCR) has reaffirmed the term debt and preferred stock ratings of Ford
Motor Company (Ford) (NYSE: F) and its automotive financing subsidiary, Ford
Motor Credit Company (Ford Credit), in light of Ford's announcement today of
major shareholder actions.  The senior debt ratings for Ford and Ford Credit
are `A+' (Single-A-Plus), and the ratings for Ford's preferred stock, the
Trust Originated Preferred Securities issued by Ford Motor Company Capital
Trust I, and Ford Credit's subordinated notes are `A' (Single-A).  The Rating
Outlook continues to be Stable.
    The commercial paper ratings for Ford Credit and its European subsidiary,
FCE Bank plc, have been lowered from `D-1+' (D-One-Plus) to `D-1' (D-One),
while the commercial paper rating for The Hertz Corporation, Ford's
81 percent-owned rental car subsidiary, has been reaffirmed at `D-1' (D-One).
    Besides the announcement that Ford's Visteon components group will be
spun-off later this year -- a move previously indicated and anticipated in
DCR's ratings -- Ford has announced a cash distribution to shareholders of up
to $10 billion as part of a share exchange.  DCR does not view the cash
distribution as a change in Ford's long-term financial strategy.  The ratings
previously assumed that Ford would maintain cash reserves of $12-15 billion as
cyclical protection and that cash beyond those levels would be used for
strategic options such as acquisitions and shareholder distributions.  Ford
had $23.6 billion of manufacturing cash on hand at year-end 1999, plus
approximately $4 billion in short-term VEBA trusts and intercompany
investments.  Manufacturing operations generated more than $6 billion of free
cash flow (net of capital expenditures and Ford dividends) in 1999, and sales
levels and product mix continue to be robust in 2000.
    The shareholder actions do significantly change the size of new
acquisitions that can be made near-term within the current debt ratings.  Ford
will need $2 billion of cash up-front to close the pending Land Rover
acquisition, as well as $1.6 billion of cash in early 2001 for the final
payment for the Volvo car acquisition.  DCR acknowledges that Ford will
continue to actively explore strategic opportunities, such as the auction of
Daewoo Motor that is currently underway, but the rating assumes that potential
acquisitions will have a size and timing which will enable Ford to fund them
primarily with free operating cash flow.
    Ford had approximately $13 billion of total manufacturing debt and
preferred securities outstanding at year-end 1999, while Ford Credit had
$133 in debt, including $42 billion of commercial paper, and Hertz had
$2.5 billion of commercial paper.  Ford Credit's commercial paper rating was
downgraded primarily due to the lower liquidity after the shareholder actions,
particularly the significant drop in net manufacturing liquidity
(manufacturing cash minus manufacturing debt).