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Ford credit rating upgrade wins back iconic oval logo pledged away

By Jerry Hirsch, Los Angeles Times –

LOS ANGELES — Moody’s Investors Service raised the credit rating for Ford Motor Co. to an investment grade Tuesday, giving its seal of approval to a corporate turnaround of the business that started with heavy borrowing at the end of 2006.

The move returns control of the automaker’s famous “Blue Oval” logo back to Ford. The iconic logo, with the Ford name written in distinctive script, was first seen on a Model A in 1928 and was pledged as collateral to obtain the loans.

Moody’s raised its assessment of the creditworthiness of Ford’s automotive operations to Baa3, up from Ba2. Ford Motor Credit Co., the automaker’s finance arm, now has a rating of Baa3, up from Ba1.

The investment rating is an important measure of corporate health and will reduce the automaker’s borrowing expenses.

“The upgrade of Ford recognizes the strength of the company’s position in North America, its robust liquidity position, and our expectation that the company will continue to embrace sound operating and financial disciplines,” Moody’s said. “We believe that these strengths will enable Ford to maintain an investment grade profile in the face of the sector’s ongoing cyclicality and weakness in the European market.”

Ford officials were pleased with the validation of their turnaround efforts.

“This is a great day for us and is the result of several years of hard work and progress by everyone associated with Ford,” said Bill Ford, the automaker’s executive chairman. “When we pledged the Ford Blue Oval as part of the loan package, we were not just pledging an asset. We pledged our heritage.”

At the end of 2006, Ford borrowed $23.5 billion. Most of that was secured by substantially all of the company’s domestic assets, including the Ford Blue Oval as well as the F-150 pickup truck and Mustang sports car trademarks. Ford needed two rating companies to upgrade its credit to regain control of the assets. Fitch Ratings upgraded the automaker last month.

Ford used the funds to restructure and streamline its operations and was able to survive plunging auto sales in 2009 without the federal bailout and bankruptcy reorganizations that kept General Motors Co. and Chrysler Group in operation.

For the first quarter of this year, Ford had an operating profit of $2.1 billion in North America, its highest in the region in more than a decade.

Overall, the company has been consistently profitable despite losing money in Europe, where all automakers are struggling with the economic fallout of the Eurozone debt crisis.

Throughout its operations, Ford earned $1.4 billion in the first quarter, down 45 percent from $2.6 billion a year earlier. Sales fell 2 percent to $32.5 billion.

“The key factor in our considering an investment-grade rating for Ford was whether or not the company would be able to sustain its strong performance. We concluded that the improvements Ford has made are likely to be lasting,” said Bruce Clark, senior vice president with Moody’s

He noted that Ford’s restructuring slashed the level of auto sales it needs to stay profitable in its core North American market. The annual break-even mark has fallen 45 percent from 3.4 million units to 1.8 million vehicles.

“The return of Ford debt to investment-grade status and the release of the company’s assets should put to rest most concerns about whether Ford has turned the corner in its recovery,” said Bill Visnic, an analyst with auto information company

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