Two ratings agencies expressed confidence in Ford Motor Co. Thursday, citing the automaker's first-quarter profit and competitive products, although both said Ford faces challenges if U.S. vehicle sales remain weak.
Standard and Poor's Ratings Service changed its outlook from stable to positive. It affirmed its corporate debt ratings for Ford and said there is a chance it will raise those ratings during the next year. Fitch Ratings raised its issuer default ratings for Ford and its finance unit, Ford Credit, from "B minus" to "B" and said its outlook on the company remains positive.
Ford shares rose 29 cents, or 2.2 percent, to $13.54 in early afternoon trading.
Ford said Tuesday it made $2.1 billion in the first three months of the year, its fourth straight positive quarter. The company said it expects to be solidly profitable this year, a year sooner than it had previously forecast. The results were particularly strong at home, where the company saw the biggest quarterly jump in its U.S. market share in 33 years. S&P cited Ford's 8.9 percent pretax operating margin in North America.
"We believe the company's prospects for sustained profitability in its global automotive operations in 2010 have improved since our previous assumptions, even if margins do not remain at their current levels," S&P credit analyst Robert Schulz said.
S&P and Fitch noted Ford's strong cash position. The automaker ended the quarter with $25.3 billion in cash, up $4.4 billion from the same quarter a year ago. Both believe Ford's products have improved and S&P said consumers' improving perception of Ford and its efforts to build smaller, more fuel-efficient cars will help.
"Ford's credit profile will continue to strengthen as the global economy recovers and as the company leverages its increasingly competitive product portfolio and improved cost position to increase production and unit sales," Fitch analysts said in their release.
Fitch said Ford faces multiple challenges, including the rising cost of steel and other raw materials, global industry overcapacity, heavy incentive spending and, in the longer term, tougher emissions standards.
S&P added that Ford is vulnerable to factors beyond its control, including historically weak U.S. sales. S&P expects U.S. sales to rise to 11.7 million vehicles this year and 13.6 million in 2011, up from 10.4 million in 2009 but still far below the 16 million level seen as recently as 2007.
Both companies also cited Ford's substantial debt. Ford said its debt increased by $700 million to $34.3 billion in the first quarter, although it paid off $3 billion in debt at the beginning of the second quarter.
S&P said there is a one-in-three chance it could raise Ford's ratings further if vehicle sales continue to improve and Ford continues to show solid profits.
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