The new Ford UAW contract will not increase labor costs over its four year term, which paves the way for the return of a Ford stock dividend on common shares for the first time since 2006. (See Ford UAW Workers Ratify 4-Year No Cost Increase Contract and UAW has Deal at Ford Pending Local Approvals. Shared Prosperity Claimed)
“We think this will be favorably received” by credit rating companies, Chief Financial Officer Lewis Booth said on a conference call this morning with analysts and reporters, including AutoInformed.
“There is the opportunity going forward to think about a dividend not directly related to investment grade.”
Ford previously maintained it would not restore the divided until it achieved an investment-grade rating, Booth said, omitting that a dividend was forbidden under covenants for previously issued bonds that kept Ford out of bankruptcy during the Great Recession. Those bonds presumably have been or will be paid off. Ford still has $14 billion in debt according to its latest SEC filing. Third quarter earnings are due on 26 October.
“Our shareholders have been very patient,” Booth said. “It would be nice to get to investment grade, but that’s not entirely in our control.”
Moody’s Investors Service said earlier in the month that it would likely raise Ford’s credit rating if the contract was approved by the UAW rank and file, which it was by 63% of those voting. Moody’s has Ford debt at junk or Ba2, two steps below investment grade. Standard & Poor’s has also said it may raise Ford’s credit rating two levels to BB+, the highest non-investment grade, depending on the outcome of labor talks. (See also S&P Raises General Motors to Highest Junk Grade – BB+)
