The Fitch Ratings agency lifted Ford's credit rating from junk status to investment grade Tuesday, a sign that the company's recovery from near collapse is almost complete.
But Ford Motor Co. needs another agency, either Standard & Poor's or Moody's, to make the same upgrade before it can get its blue oval logo, factories and other assets out of hock.
Ford lost its investment grade status in 2005, when it was racking up billions in losses as the SUV and truck boom went bust. The company mortgaged most of its assets, including the highly recognized oval, to borrow $23.5 billion the following year. That allowed Ford to revamp its cars and trucks and -- unlike rivals GM and Chrysler -- avoid bankruptcy protection.
Investment grade means a company's debt has a low risk of default, while junk status is considered poor credit quality. Companies with investment grade credit ratings generally pay lower interest on debt.
Tuesday, Fitch raised the credit ratings of Ford and its auto finance subsidiary to "BBB minus" from "BB plus." The ratings agency said that Ford's work to repair its balance sheet and improve its array of vehicles in recent years "has put the company in a solid position to withstand the significant cyclical and secular pressures faced by the global auto industry."
Ford's cash generation and lower costs will give it the financial flexibility it needs to stay at investment grade in a period of economic stress, Fitch expects.
Ford began its turnaround in 2006, when Bill Ford Jr. fired himself as CEO and hired Alan Mulally from aviation giant Boeing Co. The automaker used the billions it borrowed -- which Mulally calls a "giant home improvement loan" -- to restructure. It closed plants, shed brands and cut its global workforce by one-third. Ford has now reported billions in profits for three straight years. It resumed paying a dividend last month for the first time since September 2006.
Fitch's upgrade boosted Ford's stock price. Its stock rose 17 cents, or 1.5 percent, to $11.52 in morning trading Tuesday. The stock has traded between $9.05 and $16.18 the past year.
Getting an upgrade from a second agency may take some time. Standard & Poor's and Moody's rate the company one notch below investment grade. S&P analysts said last month that they didn't expect a ratings change within the next year.