American credit market outlook

Ford Motor Co's spreads widened on Friday, after the automaker said it would cut its fourth-quarter production, prompting Fitch Ratings to cut its debt ranking deeper into junk.
However, analysts are divided on whether further spread widening lies ahead, or whether improvement at rival General Motors Corp will help support Ford's debt.
Ford said on Friday it would cut fourth-quarter production by 21 percent and also reduce third-quarter production to accelerate its turnaround plan, dubbed the Way Forward.
The news led Fitch Ratings to cut the debt of Ford and its finance unit Ford Motor Credit Co and Standard & Poor's and Moody's warned they may follow, saying the production cuts will hurt cash flow.
"The fact that you're just blindly saying that you're going to cut production by 21 percent, but you're not telling what the modified plan is yet, I think is scaring a lot of people," said Brad Rubin, senior credit analyst at BNP Paribas in New York.
The cost to insure Ford's debt rose by around 25 basis points to about 660 basis points, or $660,000 per year to insure $10 million in debt. Ford Motor Credit's swaps were around 10 basis points wider at 385 basis points.
"I don't think its an overreaction, I think it's a reaction that's justified," Rubin said. "Spreads will probably go wider until the modified Way Forward plan is put out on the table."
Ford, which is battling shrinking US market share and rising costs, had said it would accelerate its turnaround plan to respond to the weakening demand for fuel-hungry trucks and sport utility vehicles in the US market as gasoline prices have remained high.
Full details of Ford's accelerated plan will be announced in September. Given a recent hiring at Ford, there may be more aggressive moves than you would have expected from current management, said Mark Altherr, fixed income analyst at Credit Suisse in New York.
The company said earlier this month it hired mergers and acquisitions expert Kenneth Leet as an advisor to Chief Executive Bill Ford Jr. to explore strategic alternatives for the automaker.
"If all they did was this, it would be negative, but the second part of this has to be right-sizing the production capacity faster and the employment reduction faster," Altherr said.