EXHIBIT 99.2
RESEARCH UPDATE: FORD MOTOR CO., FORD CREDIT 'BB+' RATINGS
PLACED ON WATCH NEGATIVE
PUBLICATION DATE: 03-Oct-2005
PRIMARY CREDIT ANALYSTS: Scott Sprinzen, New York (1) 212-438-7812;
scott_sprinzen@standardandpoors.com
Robert Schulz, CFA, New York (1) 212-438-7808;
robert_schulz@standardandpoors.com
CREDIT RATING: BB+/Watch Neg/B-1
RATIONALE
On Oct. 3, 2005, Standard & Poor's Ratings Services placed its 'BB+'
long-term and 'B-1' short-term ratings on Ford Motor Co., Ford Motor
Credit Co., and all related entities on CreditWatch with negative
implications. (Hertz Corp.'s ratings had already been placed on
CreditWatch negative on Sept. 13, 2005, pending completion of Ford's plan
to divest Hertz). Consolidated debt outstanding totaled $158 billion at
June 30, 2005.
The CreditWatch placement reflects our increased concerns about Ford's
ability to effect a turnaround at its troubled North American automotive
operations amid sharply deteriorating product mix and sales volume, and
prospects for persisting severe pricing pressure.
We currently plan to resolve this review by mid-January, following
Ford's announcement of its fourth-quarter results. We presently believe the
rating is unlikely to be lowered below 'BB/B-2'.
We believe soaring gasoline prices after Hurricanes Katrina and Rita
are leading to an accelerating decline in demand for SUVs. Given Ford's
disproportionate reliance on SUV-related earnings, its ability to return to
meaningful profitability in its automotive business will be heavily influenced
by the performance of its SUV models, despite efforts it is taking to strengthen
its product offerings in other segments.
More broadly, we are increasingly concerned about the sales and pricing
outlook for Ford's products amid signs of waning consumer confidence. Ford's
"Family Plan" was highly effective in boosting sales during July and August and
enabled Ford to eliminate its excess dealer stocks. However, Ford likely only
"pulled forward" sales from subsequent months, as its weak sales in September
attests.
The remainder of Ford's automotive operations and Ford Credit are
performing roughly in line with our expectations, and so are not central factors
in this review. However, the performance of these units is not sufficient to
offset to the problems the company faces in its North American operations.
Ford's liquidity should be sufficient relative to near-term
requirements. We believe consolidated parent-level cash automotive cash flow
should be around break-even in 2005. Ford has a large liquidity position,
composed of the following:
- Cash, marketable securities, and short-term assets in its VEBA
trust (which it could use to meet certain near-term benefits
costs, thereby freeing up other cash) totaled $21.8 billion at
June 30, 2005 (excluding Ford Credit);
- As of July 1, 2005, Ford had $7.1 billion of committed credit
facilities with various banks, most of which are committed
through June 30, 2010;
- Parent-level debt maturities are moderate for the near term
(about $1 billion for the 12 months from June 30, 2005), and
long-term debt has an exceptionally high average maturity of
about 25 years; and
- Ford faces no ERISA-mandated pension fund contributions for
the next few years, nor the need to make contributions to
avoid Pension Benefit Guaranty Corp. variable-rate premiums.
At June 30, Ford had a net cash position of $3.7 billion and
this net cash position will improve following receipt of
approximately $5.6 billion, pretax, from the expected sale in
2005 of its Hertz unit.
As part of this review, Standard & Poor's will assess Ford's sales
performance over the next few months, as well as its third- and fourth-quarter
financial performance. We will also seek to meet with Ford's management to
discuss the company's marketing strategy and new initiatives aimed at addressing
the heightened challenges it faces in North America.
RATINGS LIST
To From
Ford Motor Co.
Ford Motor Credit Co.
Corporate credit rating BB+/Watch Neg/B-1 BB+/Negative/B-1
Complete ratings information is available to subscribers of RatingsDirect,
Standard & Poor's Web-based credit analysis system, at www.ratingsdirect.com.
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navigation bar, select Find a Rating, then Credit Ratings Search.
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