Moody’s Investment Service has downgraded Ford Motor Company’s credit rating to just above junk status. The move comes six years after the automaker managed a return to investment grade credit ratings from the major credit rating agencies.
Moody’s formally announced it was downgrading Ford’s credit from Baa3 to Baa2 earlier this week. The move comes as little surprise as the firm announced guidance earlier this year giving Ford a negative outlook; generally a leading indicator on an impending credit downgrade.
“The downgrade of Ford’s rating reflects the erosion in the company’s global business position and the challenges it will face implementing its Fitness Redesign program,” Moody’s stated in its rationale for the downgrade.
Ford recently announced a $11 billion restructuring plan, focused on reducing costs and aligning its product portfolio to consumer needs. The restructuring plan is expected to take three to five years to complete, also contributing to the credit downgrade.
Moody’s states it is plausible Ford will be downgraded to again to ‘junk’ bond status if the automaker cannot showcase significant achievements by mid-2019 with regards to their restructuring plan. Such a downgrade would place Ford in ‘junk’ status for the first time following the company’s 2009 mortgage of the entire company to weather the financial crisis.