Ford reclaims ‘heritage’ with upgrade to investment-grade

May 23 (Bloomberg) -- Ford Motor Co. was raised to investment grade by Moody’s Investors Service, enabling Executive Chairman Bill Ford, great-grandson of the founder, to reclaim the blue oval logo he put up as collateral for a loan.

“When we pledged the blue oval it was enormously emotional for me personally and for my family, because we weren’t just pledging an asset, we were pledging our heritage,” Ford told reporters yesterday on a conference call. “To get that back feels wonderful and this is one of the best days I can remember.”

Moody’s boosted Ford’s senior unsecured ratings two levels to Baa3 from Ba2 and raised its finance arm, Ford Motor Credit, to Baa3 from Ba1. Moody’s followed Fitch Ratings in assigning an investment-grade status. With two such ratings, Ford regains control of the logo and other assets pledged as collateral to obtain a $23.4 billion loan to keep the business going in 2006.

When the upgrade came, Bill Ford said he announced it to employees on the public-address system normally used for fire drills in Ford’s Dearborn, Michigan, headquarters. Moody’s had ranked the second-largest U.S. automaker’s debt as junk since August 2005. Fitch returned Ford to investment grade last month after assigning it junk status in December 2005.

“The upgrade of Ford recognizes the strength of the company’s position in North America, its robust liquidity position, and our expectation that the company will continue to embrace sound operating and financial disciplines,” Moody’s said in a statement. “We believe that these strengths will enable Ford to maintain an investment-grade profile in the face of the sector’s ongoing cyclicality and weakness in the European market.”

Moody’s said the outlook for Ford and Ford Credit is stable.

Mulally’s ‘Milestone’

For Chief Executive Officer Alan Mulally, achieving investment grade removes a burden he inherited when he assumed the job in September 2006. While Mulally, 66, called the rating a “milestone,” he didn’t reveal a timetable for retirement.

“This is way up there on the highlight film, for sure,” Mulally told reporters yesterday. “But it changes none of my plans to continue to serve this great corporation.”

The upgrade will lower Ford’s borrowing costs and its bonds will now be more widely traded, said Bob Shanks, Ford’s chief financial officer.

“Operationally, it doesn’t have too much effect,” Shanks said on the call. “We had pledged the assets, but it hadn’t affected our operating flexibility to any significant degree.”

Emotional Value

The greatest impact is emotional, Bill Ford said. The automaker pledged all of its major assets, including factories and its headquarters, as collateral for the 2006 loans, helping the company avoid the 2009 bankruptcies and bailouts that befell the predecessors of General Motors Co. and Chrysler Group LLC.

Moody’s yesterday reiterated its Ba1 rating on GM, one level below investment grade, and a positive outlook.

Ford has repaid more than $21 billion of the loans, Mulally said in an April 27 interview on Bloomberg Television.

“When we had to hock the blue oval, that was a very tough thing,” Bill Ford, 55, said in a May 10 interview. “I will never forget signing those papers. My heart stopped for a moment. It will start beating again when we get it back.”

Getting the logo out of hock will signify that Ford’s comeback is complete, Lewis Booth, Ford’s former chief financial officer, said in a Feb. 28 interview with reporters before his April 1 retirement.

“The psychological impact will be enormous,” Booth said of reclaiming the company’s logo. “Wherever I am in the world that day, I shall be celebrating.”

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