Moody's Investor Service has downgraded Ford to junk status rating of Ba1, one step below investment grade. They say that Ford's cash flow and profit margins are below expectations and are expected to remain weak for the next two years. Outside of the financial sector, Ford is one of the top 15 issuers of corporate bonds.
The primary cause for concern is a cash crunch brought on by a lengthy restructuring plan that includes closing factories and laying off thousands of workers. Investors are not impressed with CEO Jim Hackett's plans to ditch sedans and revive an aging lineup of SUVs and trucks. All new versions of the Ford Explorer and Ford Escape debuted this year.
Back in July, Ford issued a disappointing profit forecast as it struggles to compete in China's slowing car market. So far S&P Global Ratings and Fitch Ratings have an investment grade of BBB on Ford, however both firms have a negative outlook on Ford's future.
After the Moody's announcement, Ford's shares dived 4.2 percent to $9.14.