Upgrading Ford (F)

Ford Motor Co. (NYSE: F) is probably one of the only ways to bet on the big Detroit Auto Show this week, but the stock was trading at 52-week and multi-year highs today on what might seem as unlikely news if you were looking at the economy just a couple of quarters ago.  It seems that most debt ratings agencies have been in downgrade mode for most of 2009, but 2010 is off to a new start and today Ford received a positive call from an independent ratings agency.  Fitch has raised Ford’s issuer default rating for both Ford Motor Company and for Ford Motor Credit Company.  The rating went to ‘B-‘ from ‘CCC’ and what is perhaps more important is that Fitch said the outlook remains Positive.

Today’s hike was based upon an improved macroeconomic environment, but also noted was Ford’s current cost and margin trends.  The ratings took into consideration Ford’s competitive products, its future business, the liquidity, and current and future cash flows.  The agency believes that Ford will now be cash flow positive in 2010 as the US market gets back to 11.5 million annualized units later in 2010 and 12 million annualized sooner than expected.

The agency further noted that Ford has access to capital for its retail and dealer financing.  What is perhaps the most important issue is that with the criteria being positive after already under review, Fitch noted that the meeting of this criteria will remain a driving force for future upgrades.

Ford closed up 3.6% at $12.11 on an unofficial closing bell basis today, and the stock hit a 52-week high of $12.14.  That is actually close to a 5-Year high.

JON C. OGG