Bangkok--Apr 19--Fitch Ratings
Fitch Ratings (Thailand) today changed the Outlook on the National ‘AA+(tha)’ rating on Primus Leasing Company Limited’s (“Primus”) guaranteed notes under its medium-term note programmes and guaranteed bills of exchange to Negative from Stable.
The revision in Outlook follows a similar change in Outlook on the senior debt ratings of Primus’ parents, Ford Motor Company (“Ford”) and Ford Motor Credit Company (“Ford Credit”), to Negative from Stable. Fitch said the change in the latter reflected the effect of further production cutbacks on Ford's consolidated operating results, continuing price competition in key market segments, shifting consumer buying patterns away from mid-size and large SUVs (which have comprised a significant component of Ford's automotive profitability) and cost pressures. These factors have further compressed margins, already weak for the rating category, and Ford now expects automotive operations to be breakeven at best. Future rating decisions will focus on Ford's ability to restore margins through stabilisation of market shares, the ability to retain pricing on new and recent product introductions, and further success in cost reduction programs.
Ford's difficulties have occurred despite being in a relatively favorable part of its product cycle and during a period of solid economic growth. The success of the company's core F-Series and several new product offerings (most notably the new Mustang) have not been sufficient to improve consolidated operating results in light of less successful new car introductions and continuing price competition. In particular, the truck market has recently experienced higher incentive levels, and product and capacity expansions in this segment indicate no let-up in competitive pressures in this key segment. Ford's recent announcement highlights the sensitivity of operating cash flows to SUV volumes and pricing in the truck market, and pressures in these areas will persist. Ford also continues to struggle with losses at its Premier Automotive Group (“PAG”) unit, primarily in its Jaguar operations. Despite several restructuring programs, losses have persisted.
Primus’ National rating is based on the full, irrevocable and unconditional guarantee by Ford Credit and the creditworthiness of Primus' parents, Ford and Ford Credit, both of the US, which are rated ‘BBB+’ on the international scale. This compares to an international local currency rating of ‘A-’ (A minus) for Thailand. Any change in the international rating differential between Ford or Ford Credit and the Thai sovereign could also have an impact on Primus’ National rating in the future.
Contact: Chaiyapat Paitoon, Vincent Milton, Bangkok +662 655 4762/4759; David Marshall, Hong Kong +852 2263 9963.
Note to Editors: Fitch’s National ratings provide a relative measure of creditworthiness for rated entities in countries with relatively low international sovereign ratings and where there is demand for such ratings. The best risk within a country is rated ‘AAA’ and other credits are rated only relative to this risk. National ratings are designed for use mainly by local investors in local markets and are signified by the addition of an identifier for the country concerned, such as ‘AAA(tha)’ for National ratings in Thailand. Specific letter grades are not therefore internationally comparable. End.