Why Ford Is Cheering for Higher Interest Rates


Ford's headquarters in Dearborn, Michigan. Photo credit: Ford.

Other economic indicators are still sluggish, but new-car sales in the U.S. have roared ahead recently, thanks in part to cheap financing deals spurred by super-low interest rates. Few automakers have benefited more than Ford , which has posted booming profits -- and Ford stock has recently boomed as well.

Now, though, interest rates are starting to rise. Are the automakers worried? Should Ford shareholders be worried? On the contrary: Ford executives are very glad that rates are rising. While higher interest rates will make car loans a little more expensive, they'll also help Ford by lowering the risk of its pension portfolio.

Say what?

If you're invested in Ford stock, pay attention: Risks surrounding Ford's pension plans may have been holding Ford's stock price back for the last couple of years. In this video, Fool contributor John Rosevear explains what you need to know -- and why today's rising interest rates could turn out to be a boon for Ford shareholders.

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The article Why Ford Is Cheering for Higher Interest Rates originally appeared on Fool.com.

Fool contributor John Rosevear owns shares of Ford and General Motors. You can connect with him on Twitter at @jrosevear. The Motley Fool recommends Ford and General Motors. The Motley Fool owns shares of Ford. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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Originally published