Ford Gets Rid of the Junk in its Trunk

Walmart has just been reminded about the tight connection between investor sentiment and brand reputation. Now Ford hopes to see the same effect — in reverse.

Ford got the happy news this week that Fitch raised its credit rating to "investment" grade, becoming the first debt-rating firm to return the automaker from the junk-debt status it had suffered for seven yeras.

Among the immediate benefits, investors rapidly bid up Ford bonds. This will allow Ford to borrow money less expensively.

And perhaps most important, the re-emergence of Ford debt from junk status reaffirms the lonely strategy forged by CEO Alan Mulally — alone among leaders of the Detroit Three automakers — in refraining from accepting a U.S.-government bailout after the onset of the Great Recession.

Now Ford can enjoy its new standing as the only Detroit-based automaker unburdened by a junk-bond rating on its debt.

"It is an important proof point of the continual progress the Ford team is making with our One Ford plan," said Ford CFO Bob Shanks in a statement, referencing Mulally's long-term success blueprint.

Among other aspects of the still-unfolding One Ford plan, of course, Ford has slashed labor costs and launched a raft of highly competitive new products over the last few yeras. The brand still faces huge challenges such as the contraction of the European auto market.

But if just one more of the three main credit-rating agencies raises Ford's debt a notch, the company can reach another goal that is only symbolic but is important nonetheless: getting its Blue Oval logo out of hock. Mulally pledged the iconic representation of the brand as collateral, along with other assets such as manufacturing plants, in 2006 in order to keep the company going.

Today, the Blue Oval may seem to shine brighter than ever.