Moody’s may upgrade Ford’s credit rating image

After they slashed Italy’s government bond ratings by three notches to A2, the credit agency may raise Ford Motor Co’s (F.N) corporate credit rating after the automaker reached a tentative labor agreement with the United Auto Workers yesterday.

The proposed agreement between Ford and UAW holds the line on base pay for most hourly workers while granting a signing bonus and other one-time payments that don’t compound over time as cost-of-living raises once did.

The Ford agreement and a similar deal reached by General Motors Co. last month show a restructured auto industry now able to hold the line on labor costs to better compete with foreign rivals and still add jobs.

Ford plans to add 5,750 new positions at its U.S. factories and offer $6,000 signing bonuses. The company will pay new hires $17 an hour, $11 less than the veterans make.
Shortly after the agreement, Moody’s Investors Service said Wednesday that it’s reviewing its ratings for Ford Motor Co., after the Dearborn, Mich., automaker reached a deal with the United Auto Workers for a new four-year contract.

“Our initial assessment of the proposed UAW contract is that it should enable Ford to maintain its operating flexibility, fixed cost position, break-even point, and liquidity position near current levels,” Moody’s said in a statement.

Bruce Clark, Senior Vice President with Moody’s said, “Ford has built a much stronger operating model and financial profile during the past year. We want to determine if it can maintain this position if markets conditions become more difficult.”

Standard & Poor’s raised its rating on GM by two levels to BB+, the highest non-investment grade, on Sept. 29. S&P said it may raise Ford to the same rating from BB-, depending on the outcome of its talks with the Detroit-based union.

The last rating action on Ford was a change in the outlook to positive from stable on January 28, 2011.