Fitch: Ford unaffected

Fitch Ratings said Ford Motor Co.'s announcement of an accelerated restructuring plan was incorporated in the Aug. 18 downgrade of Ford and Ford Motor Credit Co. and no additional rating action will be taken at this time. Fitch currently rates both Ford and Ford Motor Credit's issuer default rating at B with a negative outlook.

According to Fitch, the restructuring plan, including sweeping reductions in salaried employees and in Ford's North American hourly workforce, represents an acceleration of the steps outlined in Ford's Way Forward plan. Given the severe revenue pressures that Ford faces in 2006 and 2007, Ford will be forced to realize deeper, more immediate cost reductions in order to reduce accelerating cash outflows.

The agency estimated that negative cash flow from operating losses, working capital reductions and restructuring costs could exceed $8 billion in 2007, depending on the timing and extent of the accelerated hourly buyout program. Operating results in first-half of 2007 should benefit from the realization of lower salaried and hourly workforce levels and the effects of the health care agreement with the United Auto Workers union.

However, continued share losses, adverse mix issues, lower production and profitability in Ford's key pickup segment, the termination of Taurus production in Atlanta and pricing pressures will lead to further revenue declines in 2007 that will offset cost reduction efforts, the agency predicted.

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