The Blue Oval is Back
On May 22, 2012, Moody’s Investors Service upgraded Ford’s credit rating to investment status. This milestone is to be congratulated because of the time, effort and commitment it took to regain this rating. According to Bill Ford, great grandson of Henry Ford, “At great emotional cost, the company used its Blue Oval logo as part of the collateral for a $23.5 billion loan it obtained in 2006.” The loan enabled Ford to do a major restructuring allowing the automotive manufacturer to avoid the crisis that led GM and Chevrolet to obtain a Federal bailout. Part of the loan requirements was the regaining of the investment status by two of the credit rating agencies. Fitch Ratings upgraded Ford’s credit rating last month.
In looking over the recovery that has occurred within the Ford Motor Company, several steps have been noted:
- In 2006 the company raised $23.5 billion in liquid assets through the combination of secured and unsecured loans. The Blue Oval logo along with a substantial part of it domestic assets secured the loan.
- In 2007 Ford negotiated a labor agreement with the UAW that allowed for a lower wage structure for new employees as well as a new set of flexible work rules.
- In March 2009 it reached another major agreement with the UAW that brought in the ability for the company to reach equality with transplant automakers. This resulted in annual savings and efficiencies on an incremental basis.
- In October 2009 Ford reported its first quarterly pre-tax operating profit since the first quarter of 2008.
- At end-of-year 2009 Ford achieved its first full-year of operating profit. It also had a net income of $2.7 billion, which was an improvement of $17.5 billion over its losses in 2008.
- At end-of-year 2011 Ford reported the third year in a row of improved annual operating profits. It also reduced its debt by more than $20 billion compared with year-end 2009.
- In September of 2011 Ford was able to completely pay back its loan.
- In March of 2012 Ford was able to make its first dividend payment.
The day after Moody’s Investors Service announced its decision, Ford’s accomplishment was being touted in the National News Services. Michael Reader, President of Precision Plus Inc., added , “My personal congratulations to the Ford Team, this is an impressive accomplishment as the only domestic auto group to do it on their own.”