Moody's Investors Service is likely to give Ford Motor Co. and General Motors until this fall to demonstrate credit improvement, said Bruce Clark, senior v.p. and senior auto analyst. Ford and GM have around $22 billion and $18 billion of liquidity, respectively, he said. "Because of liquidity, my view is it makes you prudent to bring the ratings down in a measured manner," he commented.
Clark's comments about being prudent and his use of the term "measured" come after competitor Standard & Poor's roiled credit markets recently with its swift downgrades of GM and Ford. To be sure, Clark declined to discuss S&P's approach to the credits and did not explicitly criticize his competitor for moving too fast.
S&P's rating activity took market participants by surprise because it came shortly after the rating agency put the automakers' ratings on negative outlook; a lengthy review period is customary before a downgrade.
Clark expects to review the credits in September or October, approximately six months after downgrading GM to Baa3 with a negative outlook last month and Ford to Baa3 with a negative outlook this month. However, the analyst noted should a "material negative development" occur, such as a rapid erosion of market share, the timeframe could be accelerated and that strong market shares are essential to maintaining investment-grade ratings. He declined to quantify market share benchmarks.
