Moody’s Investors Service has issued a negative financial outlook on Ford Motor Company. The outlook marks the first negative for the company since it bounced back from financial ruins during the recession and is a threat to the company’s investment-grade credit rating.
Prior to this announcement Moody’s had Ford at a “stable” outlook. The firm is citing an increasingly challenging operating environment as the vehicle for shifting to a negative outlook. Greater challenges are stemming from the fact the automaker is now in restructuring mode yet again under new CEO Jim Hackett.
Dubbed the ‘Fitness Redesign,’ Hackett has crafted a restructuring plan to shed $14 billion in costs, invest $11 billion in electrification and shed low-margin models from the company’s portfolio.
“The negative outlook reflects the challenges Ford will face in implementing its ‘Fitness Redesign’ initiatives, and restoring operating performance,” Moody’s said in a statement. “During the past 18 months the company has allowed an erosion in many of the operating disciplines that it established following the 2009 restructuring of the North American auto sector.”
Although a negative outlook does not automatically equate to a credit rating downgrade, it does increase the chances of one occurring.
During a recent earnings call Hackett referred to 2018 as a “bad year,” citing increasing commodities costs as a primary concern. Higher steel prices also impacted the company’s financial performance in the ladder part of 2017. These remarks likely helped fuel the shift in investment outlook.
Moody’s added that if Ford does not show sizable progress as it relates to its turnaround efforts, its credit rating is at risk as well. The firm also does not anticipate a change in outlook at least through 2020.