Ford announced its tentative agreement on a four-year contract with the United Auto Workers Union (UAW), which is likely to maintain its operating flexibility, fixed cost position, breakeven point, and liquidity position near current levels, according to Moody's Investors Service.
These combined factors, said the rating agency, are credit positive for existing floorplan transactions from the Ford Credit Master Owner Trust (FCMOT), sponsored and serviced by Ford Credit, the largest single provider of inventory financing for Ford dealerships.
As a result the rating agency has place Ford on review for upgrade.
"The positive trajectory of Ford’s rating implies that scenarios involving a manufacturer bankruptcy are increasingly remote," explained Moody's analysts. "These remote scenarios involve lower payment rates and higher dealer defaults in response to weaker demand for the manufacturer’s products, and lower recovery rates on auto collateral as a result of disposing unsold inventory en masse without manufacturer buyback support. "