Standard & Poor’s upgraded its credit rating on Ford Motor Co. from BB to BB+, the highest non-investment grade. The announcement comes shortly after Fitch Ratings increased its rating on Ford to BB+.
“Fitch has reviewed the terms of the new agreement and believes that it provides the company with improved flexibility to allow continued positive financial and operational progress over the next several years,” Fitch wrote.
The other major credit agency, Moody’s Investors Service, announced earlier this month it was looking at raising its rating for Ford.
Higher ratings allow companies to pay lower interest rates to borrow and refinance debt.
Ford shares are jumping 3.45% to $12.04 at last check, though still well below their highs for the year of more than $18.
“We believe the company’s automotive operations in North America will remain profitable with industry light-vehicle sales at or even somewhat below current levels,” Schulz said today in a statement.
“We also believe Ford has good prospects for generating at least $2 billion in automotive operating cash flow in 2012, even if the key U.S. auto market does not recover significantly.”
The credit agency said in Friday that the new 4-year contract with the United Auto Workers will allow for continued profitability and cash generation in North America.
The contract contains a few costly provisions, including a $6,000 signing bonus and annual payouts to offset inflation. Those will add up to about $360 million in new costs, according to Mark Fields, Ford’s President of the Americas.
The company may reinstate a dividend before the ratings agencies certify it as investment grade, but did not offer an estimate on the timing of the dividend.