Fitch Ratings upgraded Ford Motor Co to investment grade on Tuesday, marking a key step that brings the second-largest U.S. automaker closer to reclaiming its Blue Oval trademark.

Fitch upgraded Ford and its captive finance arm to BBB- from BB+ to reflect the improvement in Ford's finances since its near collapse in 2006. Ford has lowered its break-even point since the last recession and improved its vehicle lineup.

Still, the agency said Ford also faced the risk of slower-than-expected global demand for vehicles, particularly in Europe.

Fitch believes that the work that has been accomplished has put the company in a solid position to withstand the significant cyclical and secular pressures faced by the global auto industry, the credit ratings agency said in a release.

As part of its turnaround, Ford borrowed more than $23 billion in late 2006 secured by most of Ford's assets, including the Blue Oval logo. Should one more agency upgrade Ford to investment grade, the collateral underpinning those loans would be released.

In a statement, Ford Chief Financial Officer Bob Shanks called the Fitch upgrade an important proof point validating the company's revival strategy, known as One Ford, under Chief Executive Alan Mulally.

Mulally's mandate, which has been a centerpiece of Ford's turnaround since 2006, is to unify Ford's once-disconnected business units and take advantage of its scale to drive down costs and build a global brand.

As part of that push, Ford has invested more heavily in cars, such as its Focus compact car and Fusion midsize sedan.

Ford's more balanced product portfolio has put it in a better position to weather the likely mix shifts to smaller vehicles typically seen in economic downturns, Fitch said.

Major ratings agencies Moody's Corp's Moody's Investors Service and McGraw-Hill Cos Inc's Standard and Poor's Ratings Service each rate Ford a single notch below investment grade on their respective ratings ladders.

Mulally became Ford CEO in September 2006.

The last time Ford was rated as investment grade by all three major ratings agencies was in May 2005.

It's great news for Ford, said David Whiston, analyst with Morningstar, who said that it will be key to get the other two major ratings to join Fitch.

Once all three agencies give Ford investment grade rating, Ford Credit, the auto financing arm of the Dearborn, Michigan automaker, will be able to get lower borrowing rates that it could pass on to consumers, Whiston said.

It will allow Ford to sell more cars, said Whiston, whose agency had already rated Ford investment grade.

(Additional reporting by Bernie Woodall in Detroit; Editing by Chizu Nomiyama and James Dalgleish)