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Last week, Ford Motor Co.’s (F - Analyst Report) debt rating was upped to ‘BBB-’ from ‘BB+’ by Standard & Poor’s (S&P) Ratings Services. Thus, the rating agency has increased the credit rating of the automaker to investment-grade status from below investment grade, or junk status. This means that Ford has a low risk of debt default, which will help Ford to lower its borrowing costs.

Ford had cash and marketable securities of $25.7 billion as of Jun 30, 2013, an improvement of nearly $2.0 billion from $23.8 billion as of Jun 30, 2012. However, automotive debt rose $1.6 billion to $15.8 billion as of Jun 30, 2013 from $14.2 billion as of Jun 30, 2012.

The revision in Ford’s rating is based on solid performance by the automaker in North America together with better pension coverage. In addition, the rating agency believes that Ford is earnings profits worldwide. While sales are growing in China, retail market expansion in the Europe should also have a favorable impact on earnings.

Ford’s North America segment recorded 13.7% increase in revenues to $22.4 billion in the second quarter of 2013 on a 14.5% rise in wholesale volumes to 823 thousand units. The company benefited from higher industry sales and healthy full-size pickup sales in the region, market share gains in East and West Coast markets, continued discipline in matching production to real demand and a lean cost structure.

In Apr 2012, Fitch Ratings had raised Ford’s credit rating to investment grade from junk status. Just a month after, Moody's Investors Service lifted the company’s credit rating to investment grade after seven years.

Ford believes that this improvement in rating will support the company in delivering the One Ford plan. The automaker plans to maintain the investment grade for one entire economic cycle.

Meanwhile, S&P also raised its outlook on General Motors Company (GM - Analyst Report) to positive from stable. This improvement in outlook creates a possibility of improvement in the credit rating to investment grade if the company maintains the improvement in its auto business. However, General Motors carries a junk status since 2005.

Ford currently has a Zacks Rank #3 (Hold). Other major automobile stocks worth considering are Nissan Motor Co. Ltd. (NSANY) and Volkswagen AG (VLKAY). Nissan carries a Zacks Rank #1 (Strong Buy) while Volkswagen is Zacks Rank #2 (Buy) stock.

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