Fitch Ratings on Friday has upgraded the Issuer Default Ratings for Ford Motor Company (Ford) and its captive finance subsidiary, Ford Motor Credit Company LLC from BB to BB+. It’s the last notch below investment-grade status.
“The upgrades to Ford’s ratings reflect the automaker’s strong financial performance and continued debt reduction through the first nine months of 2011, as well as the recent completion of the United Auto Workers labor agreement,” the ratings agency said in a report.
Fitch said it may increase Ford’s credit rating again in the next 12 to 24 months if the company continues to reduce its debt.
The automaker on Thursday signed a new four-year labor agreement with the UAW after heavy negotiations. The contract’s lump-sum payments to workers, including a $6,000 bonus to be paid to each of Ford’s 41,000 UAW workers for ratifying the contract, will cost Ford $280 million this year.
On Thursday, Ford told Wall Street analysts its labor costs will initially increase by 1%, but said those costs will fall over the life of the four-year deal with the UAW.
But Ford also expects to reduce its costs over time as it hires additional, lower-cost, entry-level workers.
Last week, ratings agency Standard&Poor’s raised the rating for Ford’s cross-town rival, General Motors Co , by two notches to BB+ from BB-. The rating left GM one notch below investment grade. GM fell into non-investment grade in 2005.
AAA : the best quality companies, reliable and stable
AA : quality companies, a bit higher risk than AAA
A : economic situation can affect finance
BBB : medium class companies, which are satisfactory at the moment
BB : more prone to changes in the economy
Ford’s last grade: BB+