Moody’s upgrades General Motors and Ford debt ratings image

Moody’s, the American financial research and analysis company, upgraded its credit ratings on Ford Motor Co. (F) and General Motors Co. (GM) citing new labor agreements and improvements in their finances.

Both automakers saw their bond ratings fall to junk status about six years ago as their outlook continued to degrade.

The ratings were raised from “Ba2″ to “Ba1,” which is one notch below investment grade. As expected, the upgrades will make it cheaper for the automakers to borrow money from banks.

Based on the liquidity and capital positions of Ford and Ford Credit, Moody’s estimates that Ford has the capacity to support Ford Credit to a level equivalent to the Ba1 rating, the company said in a statement.

“Ford Credit could achieve an investment-grade stand-alone profile, but we expect that its movement in that direction will lag the improvements that drive higher ratings at the parent company,” said Moody’s Vice President Mark Wasden.

Ford Credit has stepped up distributions to its parent, which has aided Ford’s efforts to repay indebtedness and improve Ford’s credit standing.

In its last Ford Credit rating action on October 5, 2011, Moody’s placed Ford Credit’s Ba2 Corporate Family Rating on review for possible upgrade.
In addition, the rating company said General Motors has competitive products and a strong position in China and other high-growth markets. The Detroit based automaker will report its Q3 earnings Nov. 9.
Fitch  and Standard & Poor’s also recently upgraded Ford and General Motors debt. Ratings for both companies fell below investment grade in 2005 when they were deeply in debt.