DETROIT – Moody's Investors Service lowered Ford Motor Co.'s (F) credit rating further into junk status Friday, saying the market shift from big SUVs to cars was hurting the company's prospects for recovery.
Moody's lowered Ford's credit rating to B2 from Ba3. It also lowered the long-term credit rating of the company's finance arm, Ford Motor Credit Co., to Ba3 from Ba2.
Moody's said the downgrade reflected its expectation that high fuel prices and the resulting shift away from highly profitable sport utility vehicles would further damage the company's profits. Ford's sales of mid-size SUVs fell 24.7 percent in the first six months of the year, while sales of large SUVs declined by 32.1 percent, Moody's noted.
"The strong performance of Ford's new cars is certainly a positive. But the profitability of these vehicles doesn't come close to what the company had been earning on Explorers and Expeditions," Bruce Clark, a senior vice president at Moody's, said in a statement.
In January, Dearborn-based Ford launched a turnaround plan aimed at reversing billion-dollar losses in North America.
Clark said the shift away from SUVs "is pushing out the time frame during which the restructuring plan might contribute to any meaningful improvement in its credit ratios."
On Thursday, Ford announced it was cutting in half its dividend for a savings of about $92 million per quarter. It also said it was cutting in half the fees paid to board members. The company cited high gas prices and the shift from SUVs as a reason.
Moody's said the cuts would have "minimal impact on Ford's cash flow," but could aid in negotiations with the United Auto Workers next year. The company needs to achieve significant reduction in health care and other costs in the next labor contract, the ratings agency said.
Ford's shares fell 17 cents, or 2.6 percent, to $6.39 in midday trading Friday on the New York Stock Exchange.