S&P cuts Ford to BBB-

Standard & Poor's said Wednesday that it has lowered its ratings on Ford Motor Co. and all related entities, including Ford Motor Credit Co. and Hertz Corp., to BBB- from BBB. The outlook is stable.

Ford's profitability and cash flow remain poor, and S&P said it believes that only limited improvement will be achievable over the next few years, the ratings agency said.

Ford's global automotive operations are expected to be nominally breakeven on a pretax basis in 2003, before special items. However, the year-to-year improvement over 2002 is magnified by a significant reduction in accruals for warranty and recall expenses and by the exclusion of a large charge related to further restructuring actions needed in Europe.

S&P said it expects Ford's automotive cash flow in 2003 to be only about breakeven (after capital spending and before pension contributions, tax refunds, and dividends from Ford Credit).

Ford Credit is expected to report record profitability this year, but from an analytic perspective, its year-to-year improvement over 2002 is magnified by a significant reduction in accruals for credit losses - notwithstanding persisting high charge-offs - and by accounting effects related to derivatives.

The rating outlook is stable, the agency said.

Over the next two years, even if expected improvement in earnings and cash flow should fail to materialize, and even if the company were to experience minor losses, S&P said the ratings would not necessarily be jeopardized as long as Ford maintains a large liquidity position and Ford Credit maintains satisfactory funding flexibility.

Ratings lowered include Ford Motor Co.'s, Ford Motor Credit Co.'s,. and Hertz Corp.'s senior unsecured debt to BBB- from BBB and commercial paper to A-3 from A-2.

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