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Visitor support makes this site possible. Please shop often via Auto on Info. Thank you. Men's Fine Tie Clips and Ties Forzieri tie clips Men's Ties by Versace Men's Ties by Valentino To view more men's ties, icons, and search phrases, click here. Men's Watches Men's Watches by Gucci Men's Watches by Movado Men's Watches by Cartier To view more men's watches, icons, and search phrases, click here. Fine Women's Watches Women's Watches by Cartier Women's Watches by Movado Women's Watches by Gucci To view more fine women's watches, icons, and search phrases, click here. Fine Women's Perfumes Must II de Cartier by Cartier for women Allure by Chanel for women Zen Classic by Shiseido for women To view more fine women's perfumes, icons, and search phrases, click here. Auto on Info March 2006
Fitch Cuts Ford's Credit a Notch
By James B. Bleeker
On March 13, 2006, Fitch Ratings cut its creditworthiness rating of Ford Motor Company's long-term debt one notch deeper into junk, from "BB+" to "BB." The following table puts Ford's creditworthiness and the General Motors-Ford race to bankruptcy into perspective.
Table I S&P, Fitch, and Moody's Long-Term Debt Ratings as of March 13, 2006 Ratings Automobile Manufacturers S&P, Fitch Denominations Moody's Denominations Investment Grade Ratings AAA Toyota Motor Corporation AA+ AA AA- A+ Honda Motor Company A A- BBB+ Baa1 BBB Baa2 DaimlerChrysler AG BBB- Baa3 Junk Grade Ratings BB+ Ba1 BB Ba2 Ford Motor Company BB- Ba3 Ford Motor Company, Ford Motor Company B+ B1 B B2 General Motors Corporation, General Motors Corporation, General Motors Corporation B- B3 CCC+ CCC CCC- Delphi Corporation (GM's jettisoned aggregation of parts plants is in Chapter 11 bankruptcy.) D As Fitch's rating of Ford's debt was two notches above S&P's and Moody's, the cut was viewed as rather catch-up.
Fitch retained its negative outlook on Ford's long-term debt, meaning that it may cut Ford's debt rating further without advance notice.
For more than a decade, U.S. consumers have been abandoning General Motors' and Ford's products for the quality products of Toyota Motor Corporation and Honda Motor Company, and in the past two years the pace of this abandonment has quickened, maybe doubling or more. (See Table II of "In 2005, U.S. Consumer Shift to Quality Continues at Quickened Pace, But GM and Ford Avoid Disastrous Market Share Plunges with Big Discounts and Huge Financial Losses: Is a Big Three Product Worth a Dime?," Auto on Info, January 2006.) As it would likely take decades of determination and effort to significantly narrow the quality gap between the Big Two and the Reliable Two (see The Bottom Line on Auto Reliability), GM and Ford are left with but one choice: Cut productive capacity to match dropping demand. Although this is normally a clear-cut business solution that puts things back into balance, it's not for these two. GM's and Ford's current contract with the United Auto Workers obligates them to pay furloughed employees most of their wages (or all of their wages, as reported in some newspapers, but denied by a Ford employee on a Minnesota Public Radio call-in broadcast), whether working or not. As a result, General Motors and Ford may exhaust their cash before their contract with the UAW expires in 2007. Without cash to pay their bills, GM and Ford would be forced into bankruptcy reorganization. Once there, their bonds may be converted to shares (preferred, common, or some combination of both), the market value of each of which may be but a small fraction of the face value of the preceding bond.
To help cope with the prospective cash crunch, Ford has sold its Hertz Corporation rental division and General Motors has sold its stakes in Fuji Heavy industries Ltd. and Suzuki Motor Corporation and is trying hard to unload a majority stake in its GMAC finance division.
The gap between GM's credit ratings and those of Ford reflects a common assessment by the credit rating services that GM holds a solid lead in its sprint to insolvency.
Source for Fitch rating cut and outlook: "Fitch Cuts Ford's Ratings Deeper into Junk Status," Reuters, March 13, 2006, available at Yahoo! News
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Additional Ideas for Holiday, Anniversary, and Special Occasion Gifts Solis Espresso Machines KitchenAid Stand Mixers Cuisinart Food Processors Zojirushi Grills Cuisinart Dessert Makers Le Creuset Cookware Sets West Bend Fondue Sets To view more espresso machines and coffee makers, icons, and search phrases, click here. To view more stand mixers, food processors, grills, frozen dessert makers, fondue sets, and other small appliances, icons, and search phrases, click here. To view more cookware sets, icons, and search phrases, click here. To view a more comprehensive selection of kitchen items, click here. Visitor support makes this site possible. Please return often to do your shopping at Amazon.com. Thank you.
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