NEW YORK (AP) ? Ford's credit rating was lifted to within one level of investment grade Friday, making it cheaper for the automaker to borrow, after it secured a new contract with workers.
Standard & Poor's Ratings Services raised Ford two levels to "BB+" from "BB-," saying the agreement will allow its North American operations to remain profitable.
Ford Motor Co. shares rose 48 cents, or 4 percent, to $12.19 in early afternoon trading.
The agency said strong performance in North America has helped Ford generate global profits in the past two years. The new 4-year contract with the United Auto Workers "will allow for continued profitability and cash generation in North America," it said.
The union, which represents 41,000 Ford employees, approved the contract Wednesday. It includes signing bonuses but no annual pay increases, and it will let Ford hire more workers at lower wages.
Ford executives said it will raise labor costs by less than 1 percent each year ? $280 million this year and $80 million a year after that. Fitch Ratings upgraded Ford on Thursday, also to within one level of investment-grade status.
Moody's Investor Service has also said it's reviewing its below-investment grade ratings for the automaker.
Ford's credit sank to so-called junk status in 2005, when it was deeply in debt. It borrowed $23 billion in 2006 to get through the recession and fund a huge restructuring. The company had $14 billion in debt as of June 30.
Higher ratings allow companies to pay lower interest rates to borrow and refinance debt.
S&P said Friday that Ford's auto operations should generate at least mid-single-digit profit margins this year.
It also raised Ford Credit's European bank to "BBB-" from "BB" and assigned a "Stable" outlook to the parent company.
S&P said it was assuming "some improvement" in North American light-vehicle sales into next year but believed the company's North American operations would remain profitable even with flat or slightly lower sales.
It added that as Japanese auto makers rebuild inventories hurt by this spring's earthquake in Japan, it could lead to "modest market share losses" by many non-Japanese companies in the U.S.
Ford is scheduled to report third-quarter results next Wednesday.
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