The US$9.9 billion result is slightly less than the US$10.4 billion maximum originally put on Ford's debt restructuring effort. Ford and its Ford Motor Credit subsidiary used a combined US$2.44 billion in cash to reduce the debt, slightly more than the US$2.2 billion of cash originally dedicated to the effort. Ford described the debt reduction as very successful.
"By substantially reducing our debt, Ford is taking another step toward creating an exciting, viable enterprise," Ford CEO Alan Mulally said in a statement. "As with our recent agreements with the UAW, Ford continues to lead the industry in taking the decisive actions necessary to weather the current downturn and deliver long-term profitable growth."
And it seems Wall Street agreed, sending Ford shares up 16 per cent to close at US$3.78 on a day when markets were generally down.
Ford said the restructuring initiatives, completed April 3, cut the company's automotive debt by US$9.9 billion from US$25.8 billion at the end of December. The efforts also lower Ford's annual cash interest expense by US$520 million, based on current interest rates.
The results of the debt restructuring satisfies Ford's targets under its agreement with the UAW. It also satisfies the US government's term sheets for debt restructuring for General Motors and Chrysler, the source said.
Analysts said Ford's moves were positive but tempered by the continuing crisis besetting the industry.
"We still project sizable losses at Ford in '09, and note that the failure of competitors or key suppliers could further complicate Ford's situation and cause it to ask for the government loans that it is trying to avoid," Efraim Levy, an analyst for Standard & Poor's ratings service, wrote in a report today.
Ford should have enough cash on hand to survive 2009 with a slight uptick in sales and some asset sales, analysts said.
"Cost reductions and improvement in industry sales levels in 2010 will be necessary to avoid having liquidity reaching minimum required operating levels," Fitch Ratings Service said in a report.
Source: Auto News