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28 Jan 1999
MOODY'S CONFIRMS RATINGS OF FORD MOTOR COMPANY AND FORD MOTOR CREDIT CORPORATION
Moody's Investors Service confirmed the A1 long term rating of Ford Motor Company (Ford) and A1 long term and Prime-1 short term ratings of Ford Motor Credit Corporation (FMCC). The outlook on both the long and short term ratings is negative. Moody's confirmation is in response to the company's announcement that it plans to purchase Volvo Car Corporation, the car operations of AB Volvo, and Volvo Car Finance Holding AB for $6.4 billion. Moody's confirmation reflects the complementary fit of the Volvo brand and car products to Ford's marketing strategy and product line-up. The confirmation also incorporates the financial flexibility of Ford post acquisition. The negative outlook reflects Moody's concern regarding the cost of integration and Ford's weakened positioned in the event of a near term recession in the auto markets.
Moody's believes an extended product range is an important benefit of the acquisition. In the European market, Volvo's products are complimentary, targeting more luxury buyers than does the Ford brand and less sporty buyers than does the Jaguar brand. In the US, Volvo provides an alternative product for Ford to offer younger buyers in the luxury category. In addition, Volvo's strong brand image of safety and environmental awareness fits well with Ford's overall marketing objectives.
At yearend 1998, Ford's cash liquidity had risen to $23.8 billion enhancing its financial flexibility. Without the pending acquisition, this would have likely resulted in the removal of the negative outlook on their rating. The cash spent to purchase Volvo will reduce the company's cash and net liquidity position, leaving Ford in an otherwise weaker position to withstand a downturn. Nonetheless, Moody's believes the company has sufficient financial flexibility to maintain its product spending and financial protection measures in a recession scenario.
Moody's views the integration of Volvo as an important uncertainty and risk to the proposed transaction. Potential disruptions to normal operations may occur as management seeks to integrate the Volvo operations with its own. To rationalize the cost structure between Volvo Cars and Ford could entail substantial integration costs, particularly in Europe. These added costs raise some uncertainty regarding the financial and operational impact of Volvo Cars on Ford over the intermediate term.
Ratings confirmed include:
Ford Motor Company
Ford Motor Company - A1 rated senior notes, bonds, debentures, pass-thru certificates, and industrial revenue bonds; (P)A1 shelf registrations; "a2" rated preferred stock; and A1 rated counterparty rating.
Ford Holdings, Inc. - A1 rated guaranteed notes, debentures, and euronotes;(P)A1 rated shelf registration; "a2" rated preferred stock and (P)"a2" shelf registration for preferred stock.
Ford Capital B.V. - A1 rated guaranteed notes, debentures and euronotes.
Ford Motor Company SA De C.V. - Prime-1 rated commercial paper.
Ford Motor Credit Company
Ford Motor Credit Company - A1 rated notes, bonds, eurobonds, euronotes, global notes, medium term notes, euro-medium term notes, global medium term notes, floating rate notes; (P) A1 rated shelf registration for debt securities; and Prime-1 rated commercial paper.
Ford Motor Credit Canada - A1 rated guaranteed eurobonds and Canadian medium term notes; and Prime-1 rated guaranteed commercial paper.
Ford Credit Europe plc - A1 rated bonds, euronotes, and eurobonds; and Prime-1 rated commercial paper and French certificate of deposit program.
Ford Credit Australia Ltd. - A1 rated guaranteed eurobonds, euronotes, and Australian medium term notes; and guaranteed Prime-1 rated commercial paper program.
The A3 long term and Prime-1 short term rating of Hertz, an 81% owned affiliate are also confirmed with a negative outlook.
Ford Motor Company, headquartered in Dearborn, Michigan, is the world's second largest automobile manufacturer. Ford Motor Credit Corporation, also headquartered in Dearborn, Michigan, is the worlds largest auto finance company. Hertz Corporation, headquartered in Park Ridge, New Jersey, is the world's largest rent-a-car company and is a leader in the rental and lease of construction and material handling equipment. Volvo Car Corporation is headquartered in Goteborg, Sweden and represents the car operations of AB Volvo.
No Related Data.
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