Fitch to cut Ford’s outlook to negative

Fitch Ratings on Monday became the third ratings agency in a week to indicate it may cut the debt ratings of Ford Motors, which is the secon...

Fitch Ratings on Monday became the third ratings agency in a week to indicate it may cut the debt ratings of Ford Motors, which is the second-biggest US corporate bond issuer.

Fitch cited production cuts that will likely hamper Ford’s operating results, stiff competition, and cost pressures.

Fitch also noted that consumer preferences are shifting away from mid-sized cars and SUVs, which have been a big part of Ford’s profits.

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Fitch revised the outlook to negative from stable on Ford and its Ford Motor Credit Finance arm. Fitch currently rates the senior debt of both entities at ‘‘BBB-plus,’’ which is three steps above junk.

On Friday, Standard & Poor’s said it may cut Ford to junk status after the automaker slashed its 2005 profit outlook. Last Tuesday, Moody’s Investors Service cut GM’s rating to a step above junk and cautioned that it may cut ratings of Ford.

Lower ratings boost the cost of borrowing, and a cut to junk status would mean some investors would not be able to hold the automaker’s debt.

Ford shares fell nearly 6 per cent to trade at $10.38 on NYSE. Ford bonds also weakened. The yield premium on Ford bonds due 2031 with a 7.45 per cent coupon widened by 0.35 percentage point to 4.65 percentage points, according to MarketAxess. Fears of GM and Ford slipping to junk status have gripped the corporate bond market for months.