CHICAGO, Oct 06, 2008 (BUSINESS WIRE) -- Fitch Ratings has downgraded the Issuer Default Rating (IDR) of Ford Motor Company (Ford) and Ford Motor Credit Company (Ford Credit) by one notch to 'CCC' from 'B-'. A full list of rating actions follows the end of the press release.
This rating action reflects the growing impact of the credit crisis on industry sales volumes, supply chain financial risks, the financial health of dealerships and the capital advantage of transplants. These issues are compounding the already-severe stresses resulting from weakening economic conditions and the migration to fuel-efficient vehicles. Plummeting sales volumes will accelerate negative cash flows in the second half of 2008 and will result in deep cash drains through 2009. Despite significant progress in Ford's cost reduction efforts and an easing of commodity price pressures, Fitch projects that without additional capital raising or asset sales, Ford will reach the minimum required operating cash levels in the second half of 2009.
Although Ford remains the best positioned among the Detroit Three in terms of liquidity, financial resources, manufacturing footprint and intermediate-term product plans, these relative attributes are being overwhelmed by industry conditions and the impact of the credit crisis. Fitch expects that industry volumes will not trough until 2009.
The current credit crisis has augmented a number of risk factors listed below, which apply to all the Detroit Three:
--Of primary concern is the impact of the credit crisis on the extension of credit throughout the supply chain. The decline in production among the Detroit Three, higher commodity prices and other margin pressures, and lack of access to capital is likely to produce further bankruptcies within the supply chain. The potential contraction of trade credit throughout the industry, and the critical nature of trade credit to the capital structure of the supply industry and the Detroit Three, poses a high degree of risk in the event that capital market conditions continue to contract;
--Industry volumes will continue to ratchet down through at least 1H'09 due to the decreasing ability of retail consumers to obtain competitive financing from the financing arms of the manufacturers or from third-party lenders. This adds to the impact of the pullback in leasing on sales and production volumes;
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