Standard & Poors has downgraded its corporate credit ratings for both Ford and General Motors to junk status. The news sent both companies’ stock price tumbling by 5%, and left investors asking: why? According to S&P, lousy SUV sales have a lot to do with it.
S&P said its greatest immediate concern for Ford is the prospect that its sport utility vehicle business will not be able to generate the profitability it’s enjoyed historically. Ford’s financial performance has been heavily dependent on the earnings of its SUVs but sales of midsize and large SUVs have plummeted of late
The question is – with lower gas prices nowhere in sight, will American car companies refocus on the more efficient vehicles that have beefed up the profits and market share of their Japanese competitors?