Fitch affirms Ford, FMCC, Hertz

Fitch Ratings said it affirmed the senior debt ratings of Ford Motor Co., Ford Motor Credit Co., Hertz Corp. and their respective subsidiaries at BBB+ and commercial paper at F2.

The outlook has been revised to stable from negative by Fitch, reflecting the progress to date of Ford's revitalization program and the continuing strength of its balance sheet.

Under its "Back to Basics" plan, Ford has made significant reductions in its cost structure, while still investing heavily in product and process improvements. Although still weak, automotive profitability has improved and margins could benefit further from improvement in economic conditions and new product introductions.

Ford's successful re-introduction of the F-150, a critical product in Ford's lineup, provides important support to the company's near-term cash flow visibility. Additionally, Ford's process improvements in design, engineering and flexible manufacturing position the company to compete more effectively through rapid product rollouts, parts commonality, production efficiencies and quality issues.

Fitch said concerns still remain concerning the sustainability of margin enhancement, the lack of profitability in Europe and at the Premier Automotive Group, and legacy pension and healthcare liabilities. Additionally, ever-present price competition and industry over-capacity will limit margin expansion.

The rating continues to be supported by Ford's strong balance sheet and very high liquidity. Despite weak profitability and heavy investments, Ford improved its net cash position from $4 billion at fiscal year-end 2001 ($17.7 billion in cash offset by $13.8 billion in debt) to $7.3 billion at the end of the fiscal quarter ended March 31, 2004 ($26.5 billion in cash offset by $19.2 billion in debt).

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