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TEXT-S&P: Ford's ratings, outlook unaffected by Q2 results
July 25, 2012 / 5:41 PM / 5 years ago

TEXT-S&P: Ford's ratings, outlook unaffected by Q2 results

 (The following statement was released by the rating agency)
 July 25 - Standard & Poor's Ratings Services said today that Ford Motor
Co.'s (BB+/Stable/--) second-quarter results have no impact on the rating
or outlook. North American profits continue to dominate the results; margins for
that market were consistent with our ongoing expectations at 10.2% (albeit lower
than the 11.5% last quarter), but most other regions were loss-making. Given the
outlook for some of these other markets, especially a very weak outlook in
Europe, we expect North America to generate the vast majority of Ford's profits
and cash flow in 2012. This could also be the case in 2013, absent an improved
European market, which we do not expect, and Ford's own success in addressing
European overcapacity. 

Automotive operating cash flow in the quarter was $800 million, down 
sequentially from $900 million, and down from $2.3 billion year-over-year. For 
the rating, we assume Ford will generate annual global automotive operating 
cash flow of at least $2 billion-$3 billion each year in the next few years 
(first half 2012 was $1.7 billion). While Ford's automotive debt rose 
slightly, so did gross automotive cash balances, to a substantial $23.7 
billion. Ford contributed $800 million to its pension plans in the second 
quarter, for a total of $1.9 billion so far in 2012--we view this as 
equivalent to debt reduction. 

We view the sales recovery in the U.S. as solid even with the weak economic 
recovery. Prospects for 2012 are far brighter than in the European market, 
which we view as very weak overall for the volume automakers, but with wide 
variations by country. Our U.S. light-vehicle forecast for 2012 is 14.1 
million units--the first time we have expected sales to be materially above 
our estimate of replacement levels since 2008. We assume 2012 will be the 
fifth consecutive year of lower auto sales in Europe, and 2013 could be the 
sixth. This year we expect year-over-year production growth, an important 
factor of cash flow, in the mid- to low-single-digits in North America and 
year-over-year production declines in Europe. For example, Ford expects its 
European production in the third quarter to be down 8.8% after a 15.2% 
year-over-year decline in the second quarter.

For further information, please see our full analysis on Ford published March 
14, 2012, on RatingsDirect.

 (New York Ratings Team)
 

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