Five-year credit protection on Ford Motor Credit blew out by 15 basis points Wednesday, following the announcement of poor results the previous day. Five-year default swaps widened to 425 basis points, up from 410bps the previous week, said one trader.
Announcements made by Ford, including a statement saying the firm will cut its production levels, forced spreads wider on Tuesday and Wednesday, said the trader. Weakening of U.S. equity indices and the strengthening of the euro against the dollar also worked against the car manufacturer, he added.
Scott Sprinzen, debt rating analyst at Standard & Poor's in New York, said the concerns on Ford rest on continuing uncertainty about the effectiveness of the car manufacturer's turnaround efforts. S&P rates Ford BBB and has it on negative outlook.
On Tuesday the auto manufacturer announced a decline in market share to 21.5% for November, down from 23.4% the previous year, with other concerns being that Ford's inventories are high and its production plans are still too ambitious, said Sprinzen. In order to take the name off negative outlook, S&P is looking to see a good rebound in the result of Ford's automotive business, notwithstanding market conditions. This may be seen in the company's market mix, pricing realizations, performance in purchase materials, labor productivity and investment efficiency, he said.
Five-Year Credit Protection On Ford
