Exhibit 99
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) August 24, 2005
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FORD MOTOR COMPANY
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(Exact Name of Registrant as Specified in Its Charter)
Delaware
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(State or Other Jurisdiction of Incorporation)
1-3950 38-0549190
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(Commission File Number) (IRS Employer Identification No.)
One American Road, Dearborn, Michigan 48126
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(Address of Principal Executive Offices) (Zip Code)
(313) 322-3000
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(Registrant's Telephone Number, Including Area Code)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:
|_| Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
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Item 8.01 Other Events.
On August 24, 2005, Moody's Investors Service, Inc. ("Moody's") took,
among other actions, the following actions with regard to the credit ratings it
assigns to Ford Motor Company ("Ford") and Ford Motor Credit Company ("Ford
Credit"):
o Lowered the ratings for Ford's senior unsecured debt to Ba1 from
Baa3;
o Lowered the ratings for Ford Credit's senior unsecured debt to
Baa3 from Baa2, and lowered the short-term rating to Prime-3 from
Prime-2; and
o Continued the negative rating outlook for Ford and Ford Credit.
Moody's press release dated August 24, 2005 is attached hereto as
Exhibit 99.
Item 9.01 Financial Statements and Exhibits.
EXHIBITS
Designation Description Method of Furnishing
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Exhibit 99 Moody's Press Release Filed with this Report
dated August 24, 2005
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
FORD MOTOR COMPANY
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(Registrant)
Date: August 25, 2005 By: /s/ Kathryn S. Lamping
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Kathryn S. Lamping
Assistant Secretary
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EXHIBIT INDEX
Designation Description
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Exhibit 99 Moody's Press Release dated
August 24, 2005
Exhibit 99
MOODY'S LOWERS FORD'S RATINGS
Approximately $150 Billion of Debt Affected
New York, August 24, 2005 -- Moody's Investors Service lowered the ratings
of Ford Motor Company (Ford), senior unsecured to Ba1 from Baa3, and assigned a
Ba1 Corporate Family Rating and an SGL-1 speculative grade liquidity rating.
Moody's also lowered the ratings of Ford Motor Credit Company (Ford Credit),
senior unsecured to Baa3 from Baa2, and short-term rating to Prime-3 from
Prime-2. The rating outlook for both companies is negative.
The downgrades reflect further erosion in the operating results and cash
flow generation of Ford in consideration of weakened market share and continued
challenges in addressing its uncompetitive cost structure in North America.
These factors are expected to result in a pretax loss from automotive operations
for 2005. Since improvement in the company's cost structure can only be
implemented over a period of time, financial performance is expected to remain
weak.
Ratings lowered:
Ford Motor Company and supported entities: senior unsecured debt to Ba1
from Baa3; trust preferred to Ba2 from Ba1; shelf registration for senior
unsecured debt to (P)Ba1 from (P)Baa3, and trust preferred to (P)Ba2 from
(P)Ba1; and VMIG-3 rating to SG.
Ford Motor Credit Company and supported entities: senior unsecured debt to
Baa3 from Baa2; shelf registration for senior unsecured debt to (P)Baa3 from
(P)Baa2, and subordinated debt to (P)Ba1 from (P)Baa3; and, short-term rating to
Prime-3 from Prime-2.
Ratings assigned:
Ford Motor Company: corporate family rating, Ba1; and, speculative grade
liquidity rating, SGL-1.
Ratings withdrawn:
Ford Motor Company: preferred stock, Ba2.
Moody's expects that Ford's automotive operations will consume over $500
million of cash during 2005 following the payment of its $700 million common
dividend. This is prior to a number of other significant cash flow items that
are not reflective of the automotive operation's ongoing performance, including
receipt of dividends from Ford Credit, and proceeds from the Hertz monetization,
and does not consider cash outflows associated with the Visteon restructuring,
and contributions to the pension and Voluntary Employees' Beneficiary
Association (VEBA).
The SGL-1 speculative grade liquidity rating reflects Moody's expectation
that the company's $22 billion cash and short-term VEBA position (June 30,
2005), in combination with proceeds realized from the Hertz monetization, will
provide ample coverage of all anticipated cash requirements. The major
requirements are to fund the expected $500 million negative cash flow during
2005, any further working capital requirements due to industry conditions,
approximately $1 billion of scheduled debt maturities and other restructuring
requirements. This liquidity has provided Ford with an essential cushion as it
has attempted to reconfigure its business model to accommodate the increasingly
challenging operating environment.
Ford's negative outlook recognizes that, in order to meet the operational
and competitive challenges it faces, and to achieve the financial benchmarks
necessary to support the Ba1 rating, the company will have to successfully
execute a number of strategic initiatives. These initiatives include continuing
to reduce its variable and fixed costs including the cost burden associated with
healthcare, stemming the loss of market share in the US through successful
launch of its new products, and laying the groundwork to optimize its global
manufacturing and supply footprint. As the company undertakes these initiatives,
market factors beyond its control (higher incentives, rising fuel prices, or an
economic slowdown in Europe or the US) could contribute to a more stressful
operating environment. Any material erosion in Ford's liquidity position would
make its ratings more vulnerable to the pressures that continue to confront its
automotive operations.
The Ba1 rating anticipates that through 2006, Ford will: 1) maintain US
market share approximating 18.5%; 2) achieve strong market acceptance and
sustain healthy price realization for its new mid-size cars; 3) exceed breakeven
automotive profit before tax; 4) generate automotive cash flow in excess of $500
million; and 5) maintain gross liquidity (cash and short-term VEBA balances) at
or above $20 billion. Ford Credit, through its continued support for the
wholesale and retail financing requirements of Ford and through the dividend
payment to its parent ($4.4 billion during 2004), is also a critical positive
factor in Moody's assessment of the company. The Ba1 rating anticipates that
during 2006 Ford's metrics, including the Ford Credit dividend and using Moody's
standard adjustments, will approximate the following: EBITA margin exceeding 2%;
interest coverage of 2 times, and free cash flow to net debt greater than 10%.
Factors that could stabilize Ford's rating outlook include a rebuilding of
the company's US market share through strong consumer demand for its products
and a material and sustainable reduction in its cost structure. Relief from
healthcare costs paid to active and retired hourly workers is imperative to
achieve necessary cost repositioning.
Factors that would contribute to downward pressure on Ford's Ba1 rating
include continuing loss of market share in the US which could result from
consumer movement away form trucks and SUVs, a further escalation in price
competition, a material reduction in the dividend stream available from Ford
Credit, or an erosion of Ford's liquidity. The potential impact of any future
restructuring initiatives would be evaluated in the context of the amount and
timing of any cash outflows, Ford's ability to maintain adequate liquidity after
providing the funding, and the likelihood that the anticipated benefits would be
achieved in a reasonable timeframe.
The downgrade of Ford Credit's ratings reflects concerns that exist at the
parent level. Ford Credit's volumes, asset quality, and earnings are influenced
by Ford's product and marketing decisions, which are currently under pressure to
yield more favorable results, as well as by its own origination and servicing
strategies. Recent quarters have demonstrated the virtue of Ford Credit's
decision to strengthen its underwriting, as credit losses have trended to
historically low levels, propelling higher earnings. Offsetting this, Ford
Credit's base of earning assets has declined on lower origination levels which,
combined with higher cost of funds, has subdued results. This is a trend likely
to be sustained in future periods; however, in such circumstances, portfolio
liquidations are expected to continue to generate significant cash flow,
mitigating liquidity stresses associated with declining access to traditional
unsecured funding sources and enabling a relatively high dividend payout to
parent Ford.
Though most of Ford Credit's earning assets are securitizable, certain of
the company's assets, particularly those that are more highly correlated with
parent-level factors such as retail leases and dealer finance receivables, are
less readily securitized and have traditionally been funded with unsecured debt.
Declining access to unsecured debt may become a limiting factor to the company's
scale in future periods. Nevertheless, Moody's expects Ford Credit will maintain
the necessary flexibility to manage foreseeable near-term liquidity stresses
and, in addition, will be disciplined regarding maintaining acceptable capital
levels. Leverage measures that increase from current levels could impair the
company's financial flexibility and result in negative ratings pressure.
Ford Credit's one-notch differential from Ford's rating is based on Moody's
view that, in a default scenario, Ford Credit's assets would likely provide
superior asset recovery to unsecured creditors compared to the assets of Ford.
Moody's believes that Ford and Ford Credit are mutually motivated to preserve
Ford Credit's franchise value, by maintaining the corporate separateness of its
various functions, controls, and leadership, thereby offering some protection of
its assets from potential substantive consolidation in a bankruptcy filing by
Ford. Any change in Moody's view regarding the magnitude of the notching
differential would likely relate to actions Ford might pursue to decrease Ford
Credit's probability of default, by modifying ownership or governance
structures. The potential for additional notching is probably limited to one
notch, due to the significant ties between the companies.
Ford Motor Company, headquartered in Dearborn, Michigan, is the world's second
largest automobile manufacturer. Ford Motor Credit Company, also headquartered
in Dearborn, Michigan, is the world's largest auto finance company.
New York
J. Bruce Clark
Senior Vice President
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS:212-553-1653
New York
Mark L. Wasden
Vice President - Senior Analyst
Financial Institutions Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
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