An investment-grade rating may eventually lower the cost of funds for Ford Credit. In turn, that could make it cheaper for the captive finance arm to offer incentives, and lower the rates at which Ford and Lincoln dealers offer loans and leases.
In March, CFO Lewis Booth told Bloomberg that Ford has “a lot of steps to go before we get to investment grade.” Ford, which ended three years of losses totaling $30 billion last year, needs to show “consistent and predictable” improvements, Booth said.
Kent underscored that goal at an investor conference in November: “We have used returning to investment grade as a rallying cry within the business.”
The cost of funds has become a competitive issue for Ford Credit since rival Ally Financial, the former GMAC, became a bank holding company in late 2008. That gives Ally access to customer deposits, a cheaper source for funding new loans.
Ford Credit had a cost-of-funds advantage over Ally in 2009 until the second quarter of that year. Since then, Ally has been able to borrow more cheaply than Ford Credit.
Said Booth in a statement last week: “As we continue to make progress on our One Ford plan and move toward an investment-grade credit rating, we are committed to providing the investment community with authoritative and highly credible insight into our automotive business and Ford Credit.”