Ford Faces Junk Bond Status

According to Bloomberg, Ford Motor Co. (NYSE: F) faces a downgrade from investment grade status to junk. That is an image problem, and it also means the company will pay more for money.

Bloomberg says its BI unit reports that Ford’s investment-grade status is hanging on by a thread. The downgrade by S&P might be preceded by a “negative watch.” Ford carries a BBB− rating today.

The automaker has $47 billion in bonds, which makes it the largest issuer in the sector.

Is it any wonder? The company has been a train wreck for years. The Ford family has let William Clay Ford, Jr., act as executive chair and pick several chief executives who were not competent to run the company. The latest of these is Bill Farley, who likes to spend time making podcasts that almost no one watches.

The market has been punishing the stock. Its share price is down by 15% this year.

Ford’s black eye is primarily due to its feeble effort to enter the electric vehicle (EV) market. It claimed it would invest $30 billion and ramp production to a run fate of 600,000 a year, but it has virtually abandoned that plan. About 4% of its first-quarter sales were EVs.

The company attempted to sell EVs by rebranding its most famous cars. The Mustang, a sports car, became the electric crossover Mustang Mach-E. The F-150, one of the most successful vehicles in American history, became the F-150 Lightning.

Ford has less than 10% of the U.S. EV market. There is scant data that this will improve much.

Is there any question about why Ford’s bonds may be downgraded to junk.

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