Ford debt downgraded further
Fitch Ratings today downgraded Ford Motor Co.'s long-term debt one notch further into junk status, highlighting a litany of problems that will plague the No. 2 domestic automaker for the foreseeable future: falling market share, aggressive competition from the likes of Toyota and Nissan, a shortage of fresh products, and an overreliance on gas-guzzling vehicles like the Ford Explorer.
"The downgrade and negative outlook reflect Fitch's expectation of persistent revenue deterioration through at least 2006," the ratings agency said.
Ford posted a $1.2 billion loss in the first quarter, and its key North American operations have been struggling for several years. This year alone the Ford nameplate has lost half a point of market share, more than any other brand except Chevrolet. Toyota, by contrast, has gained a full percentage point of share. In January, Ford announced its "Way Forward" program, designed to propel the flagging automaker back to profitability. Among the goals: Cut $6 billion in costs by 2010, cut the time it takes to develop a car by six to 12 months, and get back in the black by 2008.
But so far tangible results have been scarce, while key vehicles have been piling up on dealer lots. Sales of the venerable Explorer SUV—one of Ford's biggest cash cows for over a decade—have fallen more than 27 percent this year. And that comes right after Ford introduced a brand new model, which usually boosts demand. Sales of Ford's other big moneymaker, the F-150 pickup, have been more stable, but are starting to slip too. And the news is likely to get worse, with G.M. and Toyota set to introduce new trucks that will bite further into Ford's dwindling share. A couple of new passenger cars, like the Fusion and the Mustang, have been hits—but margins on those vehicles are far too low to carry Ford through an ugly-looking dry spell. With little near-term relief in sight, Fitch even downgraded Ford's profitable lending arm, in anticipation of fewer loans and higher interest rates.
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