(Bloomberg) -- Ford Motor Co.'s loss of institutional investors to General Motors Co. after its planned initial public offering will be “muted,” Ford Treasurer Neil Schloss said.
“I'm not overly worried about what GM's IPO does,” Schloss said Tuesday when asked how the stock sale will affect Ford's shares. “I think it's muted. We have to continue with our results, and if we do, our investors will stay with us.”
Executive Chairman Bill Ford said in August that some investors may reduce their holdings in the second-largest U.S. automaker to buy shares in GM's IPO and spread their risk across the automotive industry. GM, 61 percent owned by the U.S. Treasury, filed in August for a share sale that would cut the government's stake and mark the company's return to public markets after filing for bankruptcy last year.
“We don't sense that anybody is full-exposure in autos, so to the extent that they like GM and like Ford there's no reason why they can't hold them both,” Schloss, 51, said in the interview at Bloomberg's headquarters in New York.
Schloss, who joined Ford in 1982, said investors will make relative-value trades of Ford depending on where GM prices its IPO. GM probably will seek to raise $8 billion to $10 billion in November, a smaller sale than the automaker originally targeted, two people familiar with the matter said last week.
“I'm sure a lot of guys are underweight autos, but the GM IPO still might hurt them,” said Joe Phillippi, principal of AutoTrends Inc., a consulting firm in Short Hills, N.J. Some investors “will have to either stay with their Ford bet or hedge their bet by selling some Ford and buying GM.”
The U.S. economy is recovering, “but it's not going anywhere fast,” Schloss said. Ford is “nervous” about Europe and the austerity programs being implemented in the region.
In Asia, “growth is there, it's just a little lighter than it has been,” he said.
Ford earned $4.7 billion in the year's first six months, its largest first-half profit since 1998. Sales of redesigned models such as the Taurus and Fusion sedans helped propel the automaker's U.S. sales to an 18 percent increase this year, compared with an industry-wide gain of 8 percent.
‘On a trajectory'
Ford is “on a trajectory” to returning to an investment-grade credit rating, Schloss said. Chief Executive Officer Alan Mulally, who left Boeing Co. to lead the automaker four years ago, told an aviation-industry group in New York on Sept. 15 that Ford “is going to be back to investment grade a lot sooner than what we thought.”
“To get to an investment-grade rating, they have a lot of cash they're going to have to raise through operations or through equity issuance,” said Kip Penniman, a debt analyst at KDP Investment Advisors in Montpelier, Vermont. “Ford can certainly get to investment grade, but I think the question on how soon is really a macro call.”
Standard & Poor's raised Ford's credit rating last month two steps to B+, the fourth level below investment grade. Moody's Investors Service rates Ford B1, also the fourth level below investment grade. Speculative-grade debt is rated below Baa3 by Moody's and BBB- by S&P.
“We're trying to make an argument where it's going to be really hard for them not to” rate Ford investment-grade, Schloss said.
Ford's finance arm, Ford Motor Credit Co., has tapped the corporate bond market four times this year, selling $4.5 billion of notes, according to Bloomberg data. Ally Financial Inc., the auto and home lender majority owned by the U.S. government, is the only junk-rated company to sell more this year, the data show.