Ford Motor Company is planning to reduce its debt by more than US$10.4 billion in the near future. The plan will see the swapping of company stock and cash for existing debt.
The blue oval’s debt-reduction plans are in line with the US government’s contractual agreement with General Motors and Chrysler to hand out the already approved $17.4 billion in loans.
However unlike GM and Chrysler, Ford has so far not asked for loans from the US government. Ford has suggested that it can benefit from a $9 billion line of credit just in case US car sales continue in the same downward manner as they have in January and February.
“Ford is an enormously leveraged company today, so a debt reduction of this size would significantly improve the company’s risk profile and reduce its losses by slashing interest expense,” said John Casesa, principal of Casesa Shapiro Group LLC and a former Wall Street analyst.
At the end of last year, Ford had almost $40 billion in debt, so a $16 billion reduction is a significant step in the right direction.
Even though the company has failed to post a profit since 2005, it will make up to $2.2 billion cash available for the debt restructuring.
If you’re thinking Ford has done rather well given the fact that GM and Chrysler are in serious financial trouble, it’s worth noting that in late 2006 Ford borrowed $23.4 billion – this cash reserve is part of the reason the company currently needs no further aid.
It’s not all good news for Ford however, the American giant posted a massive 49.5% drop in US sales for February – marking the company’s 25th sales decline in the past 26 months.
Adapted from CarAdvice
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March 5th, 2009 at 11:10 pm
Just wanted to say HI. I found your blog a few days ago on Technorati and have been reading it over the past few days.
March 7th, 2009 at 6:58 pm
“The No. 2 U.S. automaker is so far navigating brilliantly through a very dangerous minefield while the fate of its U.S. competitors, General Motors and Chrysler, looks bleaker by the day.” The Detroit Free Press says, “While GM and Chrysler quickly asked for bridge loans in order to keep operating, Ford — thanks to a cash pile it built by borrowing back in 2006 before the credit crunch — said it didn’t need a rescue. At least not right away.
Wow, I love this statement,$ 20 would have saved two lives. Ford Motor Company may not need a rescue, but all the people who’s houses and cars have burned up sure do! Many people have been ‘literally’burned alive by defctive ford products, and the families that were loyal Ford Motor Company consumers, appear to be the last concern on Ford’s list. It goes back to the old saying ” when times get hard you find out who your true friends are”. Ford has not been a very good friend, to me or the other families that have lost loved ones. A Good Friend, or a Good Company would not let the consumer drive around with ticking time bombs under their hood. A good company would own -up to all it’s mistakes financial and structural decisions are one thing, human life is another.
What is the price, the worth of my son Payton? The 22 year old young man in his prime, that was so proud to be driving a Lincoln. This American Car Company, turned it’s back on this typical all American Young man, by failing to recall the car until 7 months after his being burned beyond recognition. Failing in ever aspect of good Customer Relations ( including Scott Monty on twitter). No flowers, No car-replacement, No payment of funeral cost,and then to have the audacity to deny! To hire attorney’s to fight against the families, as if we are the enemy instead of loyal consumers that have lost children. To Ford’s navigating brilliantly through a very dangerous minefield statement, I agree Ford Motor Company did navigate brilliantly during the cruise control switch recall,doing it in stages as to not scare off the consumer. Unfortunate for the poor loyal consumer that’s car burst into flames because the ‘navigator’ failed to acknowledge (SCDS bomb) under the hood.
Payton Tyler Lewis 9-9-94 killed 12-9-06 Rest in Peace my son Momma is hear to plea your case and hopefully save some others their lives.