Ford not Junk Anymore
Ford's credit rating has been raised from Ba2 to Baa3 by Moody's, the second ratings agency to restore the Detroit car maker's investment grade rating, meaning that Ford's seven-year period of paying higher junk bond interest rates is over.
What does that mean in the really real world? Well, Ford can now reclaim its blue oval logo, as well as billions of dollars' worth of other assets that it pledged as collateral on $23.4 billion in loans that it borrows back in 2006.
That is a massively important. Any marketing major will tell you that branding is everything and the Ford logo is known the world over. To gain control of that back is huge for the company.
In addition, and perhaps more important, Ford will now be allowed to borrow money at lower interest rates due to the fact that it has a strong balance sheet.
"We knew we could get this done," CEO Alan Mulally told reporters. "This is a very exciting day for everybody associated with Ford, our employees, our dealers, our suppliers. It's way up there on the highlight film for sure."
Bill Ford appeared on CNBC on Wednesday, and said that yesterday was a great day for Ford, especially getting the oval back.
When quizzed on the subject of a difficult European market, Bill Ford said, "Despite the troubles in Europe, we are doing exceptionally well and hitting out targets."
When asked if it is frustrating to see analysts remain bearish on the company, he said, "If we continue to hit out numbers, we'll be just fine. It's hard to predict when investors will like or dislike a company but if you get the basics right, eventually people will notice."
Moody's decision comes less than a month after Fitch did pretty much the same thing, and it provides the cherry on the cake after what has been an awesome 12 months for Ford. Mulally has pulled the company up from the depths.
When Ford borrowed that $23.4 billion, Mulally called it "a little home improvement loan", and people gasped. Today, he will feel vindicated. Ford has surged since then thanks to brutal cost cutting exercises and the introduction of some well-received vehicles like the Fiesta subcompact, a new Ford Focus, and some excellent work in the area of fuel efficient technologies.
Bill Ford said that, even in the company's darkest days, he always felt that they would turn things around. This week, he was proved right.
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