Ford Says Rise in Rates May Improve Balance Sheet

Favorable impact on automaker’s pension shortfall would offset the higher cost of funds.

Ford Motor Co., now ranked as investment grade by all major credit-ratings companies, said a gradual rise in interest rates would boost its balance sheet and help offset the higher costs to finance car sales.

Rising interest rates are having a “hugely favorable effect” on Ford’s pension obligations, Chief Financial Officer Bob Shanks said today in an interview. Shoring up the pension shortfall, which ratings companies treat as debt, would blunt the impact of higher costs of funds for Ford Motor Credit, the Dearborn, Michigan-based company’s lending unit.

Fed’s Intent

“That would be something that would raise the cost of vehicles if they’re financed by customers,” the Ford finance chief said. Rising rates could also affect “what types of vehicles they think they can afford or pay for and overall volume,” he said.

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