Ford Motor Company announced overnight that it is reducing its debt by more than $US4 billion ($4.74 billion), primarily by paying in cash a debt owed to the United Auto Workers retiree medical benefits trust.
Ford President and CEO, Alan Mulally, said the repayment would further strengthen the company’s balance sheet as it gains momentum in 2010 with solid sales and profits and positive automotive operating-related cash flow.
“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,” Mr Mulally said.
“Our One Ford plan to profitably grow our business is working, and we are increasingly confident about the future. 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.”
President of Independent Fiduciary Services, the investment manager for the UAW retiree medical benefits trust, Samuel W. Halpern, welcomed the announcement.
“We are very 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,” Mr Halpern said.
The repayment is the second made by Ford for the second quarter after a $US3 billion ($3.55 billion) payment in April. Given that Ford’s debt was $US34 billion ($40.25 billion) at the end of the first quarter, it is believed Ford’s current debt is now closer to $US27 billion ($31.96 billion). Ford said the second-quarter debt reduction will save it more than $US470 million ($556 million) in interest annually.
In late 2006, Ford borrowed $US26 billion ($30.78 billion) in a move that allowed it to avoid bankruptcy.
Ford sales in the US have increased by more than 30 percent this year, almost double the overall industry gains.