Fitch downgrades Ford’s debt ratings to junk status

DETROIT – Fitch Ratings cut Ford Motor Co.’s senior unsecured debt and issuer default ratings to junk status Monday because of U.S. market share losses and concerns about the company’s reliance on slow-selling sport utility vehicles.

Fitch lowered the ratings on the automaker and its Ford Credit unit from the lowest investment-grade rating of BBB- to the highest non-investment grade rating of BB+. Both Standard & Poor’s and Moody’s Investors Service already had cut the debt ratings of the company to junk status.

“The deterioration in Ford’s core SUV products has had a disproportionate impact on consolidated profitability, with higher gas prices and shifts in consumer preferences providing uncertainty as to the extent of the decline going into 2006,” Fitch said in a news release.

Fitch said Ford will get relief with some of its new products, including the Ford Fusion midsize sedan, which went on sale this fall, and two crossovers – the Ford Edge and Lincoln Aviator – due out next year. Ford’s large pickup segment also has held up well, Fitch said, but will face increasing competition in 2006 from newer models.

Ford plans to announce a major restructuring next month, including job cuts and plant closings. Fitch said Ford’s ability to accelerate that restructuring could help the company by shrinking North American capacity and making remaining plants more flexible.

Fitch said Ford will gain an expected $5.6 billion from the upcoming sale of its Hertz Corp. rental division to help with restructuring costs.

The ratings of Hertz were not affected by the downgrade, Fitch said.

But Fitch said any Ford effort to increase U.S. market share will be hampered by unrelenting competition. Ford’s U.S. market share fell from 18.4 percent in the first 11 months of 2004 to 17.4 percent during those months this year, or roughly 150,000 fewer vehicles sold.

As of Sept. 30, Ford had $19.6 billion in cash and total debt of $18.2 billion, Fitch said.

Ford spokeswoman Marcey Evans said the Dearborn, Mich.-based automaker won’t comment on Fitch’s action.

“We remain committed to accelerating our business plan,” Evans said.

Ford shares fell 7 cents to close at $8.23 Monday on the New York Stock Exchange. They have traded in a 52-week range of $7.57 to $15.