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Ford Motor Co F

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Morningstar’s Analysis

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We Like Ford's Plan to Use Excess Cash to Pay Down Debt

Analyst Note

| David Whiston, CFA, CPA, CFE |

On Nov. 4, Ford announced more uses for its $31.5 billion of Sept. 30 automotive cash balance in addition to the dividend resumption announced with third-quarter earnings on Oct. 27. Ford’s credit rating is one to two notches below investment-grade by major credit rating agencies and management is trying to fix that by launching a tender offer expiring Dec. 3 for $5 billion of high interest bonds. This includes the $8 billion of bonds issued in April 2020 in response to the pandemic. There are 10 bonds eligible with their outstanding principal totaling about $11.4 billion. Three of the bonds with combined principal of $4.68 billion each pay a coupon between 9% to 9.98% while the other seven bonds’ coupons range between 6.375% and 8.9%. Ford has prioritized the bonds to be tendered and the top two are a 9% bond due April 2025 with $3.5 billion outstanding and 9.625% 2030 notes with $1 billion outstanding, both issued in April 2020 and at that time were highly oversubscribed.

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Company Profile

Business Description

Ford Motor Co. manufactures automobiles under its Ford and Lincoln brands. The company has about 14% market share in the United States and about 7% share in Europe. Sales in North America and Europe made up 69% and 19.5% of 2020 auto revenue, respectively. Ford has about 186,000 employees, including about 58,000 UAW employees, and is based in Dearborn, Michigan.

One American Road
Dearborn, MI, 48126
T +1 313 322-3000
Sector Consumer Cyclical
Industry Auto Manufacturers
Most Recent Earnings Sep 30, 2021
Fiscal Year End Dec 31, 2021
Stock Type Cyclical
Employees 186,000