Is Ford Better Off Than Rivals? Not So Much, Says S&P

Standard & Poor's Ratings Services downgraded Ford Motor Co. recently to the same "CCC+" rating as General Motors and Chrysler, despite Ford's recent efforts to play up the fact that it is in better shape financially than it crosstown rivals.

To an extent, Standard & Poor's agrees that Ford's greater liquidity is an advantage, said credit analyst Robert Schulz, in a Nov. 20 note. Unlike GM and Chrysler, Ford has a $10.7 billion credit facility it can call on. Schulz said he expects that resource to remain untouched at least through December.

However, at the rate Ford is burning through cash, that advantage won't last long, the analyst said.

"Ford faces a less imminent, but still significant, danger of falling below the necessary levels of cash to run its automotive business. Still, the difference in liquidity relative to that of its competitors provides Ford with a few additional quarters of comfort rather than a year or more," he said.

Even assuming Ford, GM and Chrysler soon start receiving part of a previously approved $25 billion in government loans, Schulz said the loans will only buy time for the automakers, unless demand picks up, which Standard & Poor's doesn't expect to happen any time soon.

Schulz said his current U.S. auto sales forecast is only about 13.3 million units for 2008, "the lowest in 15 years and down sharply from 16.1 million units in 2007." The firm's 2009 forecast is even lower, at 12.3 million units.

Standard & Poor's will revisit its automotive ratings if the government passes any additional bailout money, but Schulze said he is not optimistic, repeating: "We stress that we would likely view such assistance as buying more time for Ford rather than solving its fundamental business risks."