Ford Motor Co. and its Ford Motor Credit Company was downgraded by Fitch Ratings as the coronavirus pandemic sends shock waves through supply chains, decreasing demand across the auto industry.
Fitch downgraded Ford’s credit rating one notch to BBB- on Monday with a negative outlook. The company’s price target was lowered March 11 by Morgan Stanley analyst Adam Jonas who cited “demand shock” sparked by the virus.
“The downgrade of Ford’s IDR to ‘BBB-’ with a Negative Outlook reflects Fitch’s significant concerns about the effect that the global coronavirus mitigation actions currently underway will have on the company’s near-term financial performance and credit profile,” the company said in its report. “Fitch currently believes the company has the financial flexibility to manage through an extended shutdown of its facilities, but concerns are increasing that a combination of an extended shutdown followed by weak demand in a global recessionary environment could further pressure the company’s credit profile.”
Moody’s Investment Service downgraded Ford to the first rung of speculative grade last September, and the auto giant sits just one step above junk at S&P Global Ratings. The company was upgraded to investment grade from junk in 2012.
CEO Jim Hackett is now under pressure to accelerate his $11 billion restructuring after a disastrous rollout of the redesigned Explorer led to dismal earnings and a disappointing profit forecast. While Hackett maintains the support of Executive Chairman Bill Ford, great-grandson of founder Henry Ford, he shook up his management team in February by installing Jim Farley as his new number two executive to speed up the company’s turnaround efforts.