Le incognite sono ancora tantissime, sebbene Fitch disegni un percorso di possibile uscita dal tunnel. In realtà, letti fra le righe i dettagli della situazione contingente continuano a mostrare una situazione in linea con un rating estremamente basso.
Fitch Revises Ford/Ford Credit Outlook to Stable http://www.fitchratings.com/creditdesk/ratings/issuer_content.cfm?pr_id=505231
26 Aug 2009 3:12 PM (EDT)
Fitch Ratings-Chicago-26 August 2009: Fitch Ratings has revised the Rating Outlook on Ford Motor Company (Ford) and Ford Motor Credit Company to Stable from Negative. In addition, the Issuer Default Rating of Ford is affirmed at 'CCC'. The change in the Outlook is based on the solid execution of Ford's restructuring program, a competitive product lineup with a healthy level of new and refreshed product introductions over the next several years, realignment of the company's manufacturing footprint, and diminished liquidity concerns.
A return to positive cash flow is not expected over the next 12 months, but is probable upon the industry reaching more normalized sales levels above 12 million light vehicles.
Although Fitch projects a slow rebound in industry sales (consistent with a weak economic recovery), signs of stabilization in the economy, coupled with replacement demand, indicate that industry sales should reach this level of annualized demand in late 2010 or 2011.
Improvement in the company's Outlook and rating will be driven by the pace and mix of the rebound in industry sales, steady execution of the company's product introductions, continued discipline in the company's production/inventory strategy, further margin improvement and competitive access to capital at Ford Credit.
These trends are largely pointing in the right direction, but have been overwhelmed by general economic and industry conditions. The behavior of competitors in production and pricing could also influence the timing of any improvement in the outlook or rating. Ford's product lineup continues to perform well, and the company is positioned to maintain or increase retail share over the next several years with new products and an aggressive refreshening program.
Ford has achieved relatively broad competitiveness across market segments, including smaller product segments where industry sales have been trending. Ford's Focus and Escape were two of the top eight vehicles in the Cash for Clunkers program, while the refreshed Fusion continues to perform well in the competitive mid-size sedan market.
Two new product introductions should lead to incremental share gains: the Fiesta in the sub-compact market where Ford has not recently had a U.S. product, and the new Taurus in the large sedan category, where Ford has not been competitive for some time. Ford's quality improvement has been well-documented and together with Ford's ability to avoid taking government aid, may benefit Ford's near-term retail share.
Although Fitch is not projecting a rapid rebound in industry sales in 2010 (particularly with the pull-forward from the Cash for Clunkers program), a stronger-than-expected rebound in industry sales to above the 12 million light-vehicle sales level and improvement in housing construction could lead Ford to operate at a cash- flow breakeven point in the second half of 2010.
Weak employment, high foreclosure rates, higher savings, shaky consumer confidence and the impact of the Cash for Clunkers program, however, all point to a modest recovery in industry sales over the near term.
A Fitch upgrade of Ford would be driven by a combination of the following:
--Industry sales rebound to an annual 12 million sales level more quickly than currently forecast;
--Ford's products continue to hold or gain share;
--Inventory management at Ford and the industry allows Ford to hold or improve product prices;
--A clear path to positive free cash flow is projected;
--Liabilities continue to be managed or addressed, including the maturity of the company's bank agreement;
--Independent access to capital by Ford Credit improves.
A downgrade could result from some combination of the following factors:
--U.S. industry sales revert to further declines in the event of a double-dip recession;
--A market disruption in oil prices which sends gas prices sharply higher and drives consumers away from vehicle purchases;
--A breakdown in the supply chain resulting from further supplier bankruptcies and lack of access to capital, or from dislocations caused by the dissolution of a major competitor;
--Inability of Ford Credit to obtain financing on competitive terms.
Ford has made significant reductions in its fixed cost structure, although step-changes to its headcount, wages and benefits have largely been completed. Realization of recent actions should continue through year-end, with a full run-rate of savings expected in 2010.
Future cost savings will be achieved largely through more standard (but challenging) efficiency and productivity gains, including materials savings.
Upon completion of the conversion of several truck plants, Ford's manufacturing footprint will be well-aligned with near-term product plans, supporting an expected improvement in efficiency and capacity utilization.
New product introductions and higher volumes through existing assembly plants, plus increased platform sharing, should provide material improvement in operating margins, also aided by the ability to add lower-tier hourly wage earners.
Ford's ability to navigate recent events - the plummet in industry sales, consumer migration to smaller vehicles, multiple plant closures, a dramatic reduction in its workforce, the bankruptcy of Chrysler and GM, diminished retail financing capacity and distress in the supply base - while still introducing competitive, improved-quality products and accelerating its product cadence, has been impressive.
A primary driver of operating performance over the near term will be the high-margin large pickup segment, which constituted 10.4% of U.S. light-vehicle unit sales through August 2009, and 24% of Ford's non-Volvo unit deliveries.
This market has suffered a decline of more than 50% in production from 2006 levels, and sales volumes remain mired below replacement demand.
Demand is expected to recover slowly due to lingering weakness in the housing market, but the potential trough of the housing market should signal improved demand and consolidated margin performance as a result.
From a competitive standpoint, Ford and GM could be poised to gain pickup share from Nissan (weak market presence) and Chrysler (the impact of its bankruptcy on sales and capital investment capacity).
Over the longer term, it remains to be seen what Toyota's plans in the full-size pickup segment will be. Although a withdrawal from the pickup truck market is not expected, Ford and GM's comparative strengths in brand and pickup truck quality, the lack of global platform scale, and the vast market share advantage of the Detroit 3 call into question Toyota's ability to earn an adequate return on the capital investment in this platform over the long term.
Ford's plant consolidation, cost reductions, product introductions and operating strategy have aided a disciplined production/inventory balance in 2009, and allowed Ford to achieve pricing gains that have benefited operating results.
This discipline will lead to production boosts in the third and fourth quarter of 2009 from levels that were below demand for much of the year, although it remains to be seen whether the industry's history of over-production and price discounting will allow Ford to consistently adhere to this strategy.
Ford has also committed substantial resources to the support of its supply chain, a cost that is unlikely to abate in 2010.
Access to capital remains limited or non-existent for a large part of the supply base, and further bankruptcies will be a certainty. It has been noteworthy that through the bankruptcy of numerous Tier 1 and lower-tiered suppliers, as well as the bankruptcy of Chrysler and General Motors, the production process has been surprisingly well-managed with very few disruptions (although aided by the substantial injection of funds by the Federal government).
As the supplier industry consolidates and business migrates to financially viable suppliers, the reduction in support costs for Ford could be material in the outer years. However, the industry has been supported by multiple layers of Federal government support, including direct capital injections into General Motors and Chrysler (as well as their finance arms), supplier aid, the TALF program and more. The reduction or termination of these actions will place additional burdens on the industry, as self-sufficiency remains uncertain.
Liquidity remains sufficient to finance reduced operating losses over the near term, even if a slow recovery pushes out the timing of the company's cash-flow breakeven point.
As of June 30, 2009, Ford had cash of approximately $21 billion, with a reduced rate of outflow projected for the second half due to increased production and working capital inflows.
Fitch estimates that if U.S. industry sales rebound only to 11 million light vehicles in 2010, that Ford's cash drain from operations would be $5 billion or less, depending on mix.
Primary risks to this forecast include a U.S. relapse in economic conditions, a sharp escalation in gas prices, the collapse of the supply base, or a lack of retail financing capacity. In addition to cash on hand, sources include future funding from the government for energy programs, modest asset sales, potential securities issuance, and dividends from Ford Credit. These sources are deemed sufficient to fund cash drains from operations even if a recovery in industry sales is deferred.
Shrinking U.S. production has also modestly lowered the cash level needed to operate the business to below $10 billion. Liquidity in 2009 and into 2010 is expected to benefit from working capital inflows associated with higher production volumes, and modest asset sales. In addition, liquidity will benefit from an expected $5.9 billion in federal government loans under an energy-efficiency program.
Ford's maturity schedule is centered on the December 2011 maturity of its $10.7 billion bank agreement. Given current market conditions in the leveraged finance market, the company's recent performance and the state of Ford's collateral, it is probable that the company could "amend and extend" this facility in the existing amount (although at higher pricing).
This would mitigate refinancing risk and address the liquidity risks associated with a double-dip recession and the resulting step-down in industry sales. Ford executed a voluntary debt exchange in 2009, removing $9.9 billion in debt ($7.7 billion in unsecured debt and $2.2 billion in secured debt) and $500 million in interest costs.
This debt reduction, however, was effectively replaced by the drawdown of its revolving credit facility.
Over the past several years, Ford has also completed several equity-for-debt swaps and a straight equity issuance, thereby managing the growth in its liabilities and somewhat moderating the damage caused by severe cash drains.
Ford's willingness to use equity is likely to continue. The interests of equity and bondholders have recently been very much aligned, as both sides have benefited from the issuance of equity and the boost in liquidity, although it remains to be seen how long this will last.
Fitch expects that Ford will continue to issue equity over the next 12 months as market conditions permit, and will likely issue equity to finance its VEBA obligations to the full $6.5 billion permitted. However, even with periodic equity issuances, any balance sheet improvement over the near term is expected to be modest.
Although General Motors and Chrysler have realized substantial access to capital from various government actions, Fitch does not believe that this represents a competitive disadvantage to Ford from a balance sheet perspective.
To the contrary, Fitch views Ford and Ford Credit's periodic access to equity and the debt markets as a distinct competitive advantage. Over the longer term, balance sheet strength or deterioration will be driven by operating results, and Fitch views Ford as better-positioned in this respect than its Detroit-based competitors. The retention of Ford Credit remains a positive.
Ford's underfunded U.S. pension plan will require incremental contributions over the next several years, although there are no contributions required in 2010. Deferral of these contributions, however, will result in larger funding gaps in outer years, and will remain a material claim on cash flows. The VEBA agreement with the UAW, changes to wage and benefit levels, and reduced employment levels have materially reduced the long-term risks and costs associated with legacy obligations.
Ford has shown steady improvement in market share in Europe, but operating results will remain challenging through 2010 due to weak economic conditions and a sharp 2010 payback resulting from various aggressive 2009 Cash for Clunkers programs throughout Europe. Results from Latin America and Asia are not expected to be material users or generators of free cash flow over the next several years.
Over the longer term, tighter regulations around the globe addressing fuel-efficiency, emission standards, other environmental, safety and urban planning are all likely to pressure profitability by limiting or skewing demand, as well as escalating capital investment requirements.
These factors, along with changing lifestyles indicate that global overcapacity is likely to be a fundamental characteristic of the industry over the long term, pressuring margins and leading to regular failures among competitors. As technologies and regulatory requirements multiply, Ford may continue to be capital constrained versus a number of transplant competitors.
The ability of Ford Credit to finance itself and its customers, independent of government sponsored programs and at economically competitive rates will be a factor in future upgrades. Fitch has revised Ford Credit's senior debt ratings following changes in Fitch's rating definitions published in March 2009, which suggests a baseline rating of 'B' for a 'CCC' IDR with an 'RR2' Recovery Rating (RR). Fitch continues to believe potential recoveries are at the lower end of the 71%-90% recovery range.
In the event of a bankruptcy, unsecured bond recoveries at Ford are expected to be negligible. The senior secured loans are currently rated 'RR1' (90%-100% recovery), based on a restructured, going-concern North American enterprise value plus certain international operations and joint ventures (particularly those in Latin America and China).
According to Fitch methodology, an RR of 'RR1' would typically translate to a rating of 'B+'. However, in the event of a stress scenario, recent industry events suggest that the corresponding plunge in asset values would result in less than full recovery, even though Ford's secured borrowings are subject to a borrowing base.
