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Drew Dowdell

Ford News: Moody's Cuts Ford to Junk Status

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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.


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Without the F150, Ford would be losing money.   They abandoned sedans, the Escape, Edge and Ecosport don't seem very competitive and will probably need incentives to move them, especially with any market downturn.  Lincoln doesn't have much volume.  I don't think Hackett's plan is very good.

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5 minutes ago, smk4565 said:

Without the F150, Ford would be losing money.   They abandoned sedans, the Escape, Edge and Ecosport don't seem very competitive and will probably need incentives to move them, especially with any market downturn.  Lincoln doesn't have much volume.  I don't think Hackett's plan is very good.

One of the rare instances where we agree.  Lincoln's volume isn't sufficient to sustain the company no matter how good the new SUVs are.

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And really Lincoln has 2 good SUVs, and the Navigator is like a #4 seller in a segment that isn't a lot of volume to begin with.  TBD how Aviator sells.  

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The new escape and explorer can’t come at better times. I think the explorer will be a long term success. The escape is tbd. I think they may have made it too soft. The ecosport is trash but if the next one is good like the encore they may come out ok. The edge is the one that is quickly getting dated.  Ford is missing the big showroom draw.  Mustangs do and the trucks drive volume but otherwise there’s little compelling about ford. Saw a couple aviators the other day and I am optimistic about those. 

Edited by regfootball
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If Wall Street had its way, Ford would be facing liquidation any day now.  They do NOT believe in Ford as a healthy going concern.  It is all about the search for more money.

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1 hour ago, riviera74 said:

If Wall Street had its way, Ford would be facing liquidation any day now.  They do NOT believe in Ford as a healthy going concern.  It is all about the search for more money.

While true... Ford is definitely threading a needle here. The Explorer really must launch without any issues. F-150 is up next and they can't flub it. I fear they've already lost direction on the Escape and Ecosport. 

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6 minutes ago, balthazar said:

The last time Ford ‘flubbed’ the F-150 to any degree was the ‘soft’ design of the ‘97s, and was pretty minor from a business case.

There was a lot of noise from the press and naysayers about the switch to aluminum body and bed w/ the '15 redesign, but it seems to have done well in the market.

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Lincoln is a great example - big margins per vehicle but low volumes. This is the strategy that seems to be chased by GM and Ford - hike prices to the point where volume really suffers or big risk financing is required to move metal. Looks good to profitability but volume and cashflow will continue to fall as a result. Cut models that you don't feel like competing in anymore - may have had thin margins but they could move generate cashflow and revenue. These vehicles that are being cut actually do a lot of damage to the reputation and strength of the company - cutting out whole swaths of customers that might be able to one day afford and move up to one of the big margin vehicles. Seems like a death spiral strategy. 

Perhaps the smarter strategy would have been to let silicon valley take the finanical risk on autonomy and maybe even electrics - then adopt an industry standard and harness partnering and JVs to bring it into the big fleet. What I see instead are a bunch of companies throwing money around on things that have yet to be standardized (a LOT of parallel R&D) and yet to be proven as having any sufficient customer demand.  

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41 minutes ago, texas99alpha said:

Lincoln is a great example - big margins per vehicle but low volumes. This is the strategy that seems to be chased by GM and Ford - hike prices to the point where volume really suffers or big risk financing is required to move metal. Looks good to profitability but volume and cashflow will continue to fall as a result. Cut models that you don't feel like competing in anymore - may have had thin margins but they could move generate cashflow and revenue. These vehicles that are being cut actually do a lot of damage to the reputation and strength of the company - cutting out whole swaths of customers that might be able to one day afford and move up to one of the big margin vehicles. Seems like a death spiral strategy. 

Perhaps the smarter strategy would have been to let silicon valley take the finanical risk on autonomy and maybe even electrics - then adopt an industry standard and harness partnering and JVs to bring it into the big fleet. What I see instead are a bunch of companies throwing money around on things that have yet to be standardized (a LOT of parallel R&D) and yet to be proven as having any sufficient customer demand.  

Ford has outsourced their AV work to a company call Argo.  VW uses the same company. 

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1 hour ago, balthazar said:

I thought all that noise just came from ocnblu. 😉

Wait until the electric aluminium F150's get here...

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33 minutes ago, A Horse With No Name said:

Wait until the electric aluminium F150's get here...

Right! :metal: 

 

 

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19 hours ago, Drew Dowdell said:

Ford has outsourced their AV work to a company call Argo.  VW uses the same company. 

But I thought that Ford was rehabbing the train station in Corktown to be the epicenter of their AV and "innovation" activity.

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15 minutes ago, texas99alpha said:

But I thought that Ford was rehabbing the train station in Corktown to be the epicenter of their AV and "innovation" activity.

Maybe that's for the future... but right now, Argo is doing their AV research. They're here in Pittsburgh and I see the Argo AV Ford Fusions all the time. 

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I don’t think Ford is going to roll over, but they are going to hurt, Truck and Explorer sales, along with the success of the Bronco should them the keep their footing. Dropping the the price on the Ranger/pushing for more commercial use will also help.

The Fusion really doesn’t need to stick around to at least give the person who does not want the pay the money/want the size can still drive a car. Focus and Tarusus won’t be missed much.....

The Ecosport is okay, though they are starting to lease them like Nissan leases everything...

Any guys that enjoyed driving the last gen of Escape will be leaving with the 2020 one. I kinda clones the Mazda CX-5, which would normally not be a bad thing. Except people still would still like to use it for outdoory type things, like camping, and some very soft “off-roading”. The new one won’t even have roof racks....(at least from the new ones I have seen) Not sure how well it will do.....

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10 hours ago, daves87rs said:

Any guys that enjoyed driving the last gen of Escape will be leaving with the 2020 one. I kinda clones the Mazda CX-5, which would normally not be a bad thing. Except people still would still like to use it for outdoory type things, like camping, and some very soft “off-roading”. The new one won’t even have roof racks....(at least from the new ones I have seen) Not sure how well it will do.....

I agree and they probably do as well and that's why they have the "baby bronco" to fill that spot. It'll be on the same platform as the Escape and I'm assuming it'll actually have the same wheelbase, just all new body panels and some off road goodies. 

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15 hours ago, ccap41 said:

I agree and they probably do as well and that's why they have the "baby bronco" to fill that spot. It'll be on the same platform as the Escape and I'm assuming it'll actually have the same wheelbase, just all new body panels and some off road goodies. 

And the Bronco again saves the day.. 🙂  Let’s hope they don’t overprice it like the Ranger....

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10 hours ago, daves87rs said:

And the Bronco again saves the day.. 🙂  Let’s hope they don’t overprice it like the Ranger....

Given it's niche nature, I bet they will go premium w/ the pricing like the Wrangler and Gladiator...I'd assume it will be priced higher than the Ranger.

Edited by Robert Hall
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8 hours ago, daves87rs said:

And the Bronco again saves the day.. 🙂  Let’s hope they don’t overprice it like the Ranger....

I expect it to be very very similar to the Wrangler.. 

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12 hours ago, ccap41 said:

I expect it to be very very similar to the Wrangler.. 

Let’s hope for a wide range of models then......

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4 hours ago, Drew Dowdell said:

I wonder if Moody's knew about the Explorer Aviator issue before it was publicized. 

Internal whistle blower??? 🤔

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