Ford Announces Plans To Reduce Debt by $4 Billion (NYSE: F)

June 28th, 2010 | by Heather Munoz |

In an effort to further strengthen its balance sheet, the Ford Motor Company, Inc. announced on Wednesday that they are paying off more than $4 billion in debt. This action is in addition to the $3 billion Ford paid off in April which brings the combined total of debt payments to $7 billion in the second quarter of 2010. In reducing the debt owed by $7 billion, the company will save $470 million in yearly interest expenses.

Ford is the only Detroit automaker that has avoided bankruptcy and this action indicates the company is gaining in financial strength. According to a press release from Ford via the PR Newswire, the company is paying $860 million on Notes A and B held by the United Auto Workers Retiree Medical Benefits Trust, with an addition $2.9 billion to retire the remaining obligation on Note A. In a separate payment, $255 million will be used toward previously deferred quarterly distributions of preferred securities.

By reducing debt by $4 billion, Ford continues a series of actions that began early last year to improve their balance sheet. In the spring of 2009 the automaker reduced debt by $10.1 billion while raising over $5.7 billion through several equity and equity linked offers.

Ford President and CEO Alan Mulally stated, “Our One Ford plan to profitably grow our business is working, and we are increasingly confident about the future. We expect to continue to improve our balance sheet as we deliver on our plan. Importantly, our business results make it possible to take these actions while still accelerating the investments we are making in our business to serve our customers with the very best cars and trucks.”

Samuel W. Halpern, president of Independent Fiduciary Services, Inc. stated, “We are pleased with this transaction, which continues the process of diversifying the Trust’s assets at very attractive values and assists the thousands of Ford retired employees, their families and survivors and others who look to the Trust to fund their retiree health benefits”.

Mulally also stated, “We are pleased to make these payments ahead of schedule for the benefit of Ford and our UAW-Ford retirees who count on the Trust for their health care benefits”.

Ford has recently reported sales gains as well as four straight quarterly profits. While other automakers are plagued by recalls and declining sales, Ford vehicles are seeing higher quality ratings from third-party groups which may be resulting in the higher transaction prices they are seeing for their cars and trucks.

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