Ford upgraded, reclaims Blue Oval
May 23, 2012
Ford upgraded, reclaims Blue Oval
By JACLYN TROP / The Detroit News
At Ford Motor Co.’s Glass House in Dearborn Tuesday afternoon, Executive Chairman Bill Ford Jr. announced to employees over the fire-drill loudspeaker that the automaker had reached a milestone six years in the making: The Blue Oval was theirs again.
Ford reclaimed its Blue Oval and other mortgaged assets Tuesday when it received a long-awaited investment-grade from a second ratings house, the final step it needed to get back the assets it pledged six years ago.
Moody’s Corp. upgraded Ford’s debt from junk status, one month after Fitch Ratings did the same. The automaker needed two investment-grade ratings to reclaim the company logo, the F-150 and Mustang trademarks, the Glass House headquarters in Dearborn, and plants and machinery. It had used all of them to secure the $23.5 billion loan that kept the company afloat during the recession.
But the return of the Blue Oval is especially symbolic, Ford said.
“When we pledged the Blue Oval, it was enormously emotional for me and my family,” Ford told reporters on a conference call Tuesday afternoon.
CEO Alan Mulally, 66, told reporters that he had no plans to retire even though the company had reached its last major milestone after the recession.
“Clearly, it is a very significant milestone, but it changes none of my plans to continue to serve this great corporation,” Mulally said.
Moody’s elevated Ford’s debt, which hit junk bond status in 2005, on the strength of its North American operations, liquidity, and sound operating and financial disciplines, according to a statement Tuesday.
“We believe that these strengths will enable Ford to maintain an investment-grade profile in the face of the sector’s ongoing cyclicality and weakness in the European market,” the statement said.
Ford has made steady financial gains since 2006, reporting its 11th consecutive profitable quarter in April and reinstating its first dividend payment in almost six years. The automaker reinvented its image, creating stylish cars and using social media to appeal to a wide range of consumers.
Green light to investors
The return of the collateral “means that Ford now possesses a largely unencumbered balance sheet,” Citi Investment Research analyst Itay Michaeli said in a note to investors Tuesday.
“That an auto company can be upgraded to investment grade in today’s choppy macro backdrop only supports our view that ‘new auto’ fundamentals have indeed been established since the 2008-09 downturn,” Michaeli said.
The investment-grade rating will continue to improve Ford’s position by lowering interest rates for Ford and Ford Credit’s debt.
The rating will be a green light to some institutional investors forbidden from investing in below-investment grade debt.
“The return of Ford debt to investment-grade status and the release of the company’s assets should put to rest most concerns about whether Ford has turned the corner in its recovery,” said Edmunds.com Senior Analyst Bill Visnic.
Loan spared bankruptcy
The 2006 loan, which Mulally has called “the world’s biggest home-improvement loan,” helped Ford avoid the government-assisted bankruptcies of General Motors Co. and Chrysler Group LLC.
“Moving forward,” Mulally said, “we will continue to focus on driving profitable growth for all of our stakeholders. We are confident that, by staying focused on our plan and working together, we will maintain strong investment-grade ratings through all economic cycles.”
The company is concentrating on its next two major financial goals, according to CEO Bob Shanks: reducing its automotive debt to $10 billion from $13.7 billion, and funding its pension.
The automaker said last month it’s taking an unprecedented step in U.S. corporate history to offer salaried retirees pension payouts in the hope of closing $15.4 billion gap in its pension funding.
The first wave of offers will reach retirees this summer.
Mulally told reporters he never lost faith in the automaker’s ability to reclaim the Blue Oval and other assets.
“I always believed we had the right plan,” he said.
‘A great day for everyone’
Executive Chairman Bill Ford Jr. and CEO Alan Mulally sent this email to workers Tuesday:
This afternoon, Moody’s Investors Service announced its decision to upgrade Ford Motor Company to Baa3 with stable outlook, or investment grade. This is a significant milestone for all of us and the result of several years of hard work and progress by everyone associated with Ford.
We all can be very proud of today’s decision by Moody’s and the resulting release of the collateral securing the loans we took out in 2006 — particularly the Ford Blue Oval. This is further proof that, by staying laser-focused on our One Ford plan, the Ford team can deliver great products, build a strong business and contribute to a better world even through the most challenging external environment.
When we pledged the Ford Blue Oval as part of the loan package, we were not just pledging an asset. We pledged our heritage. The Ford Blue Oval is one of the most recognized symbols in the world, and it is a source of great pride and passion, both inside and outside our company.
Moving forward, we will continue to focus on driving profitable growth for all of our stakeholders. We are confident that, by staying focused on our plan and working together, we will maintain strong investment grade ratings through all economic cycles.
The Ford Blue Oval is back where it belongs. This is a great day for everyone associated with our company.
Congratulations and thank you!
Bill and Alan