MercoPress. South Atlantic News Agency

Ford slashes debt and dashes ahead in US auto industry restructure

CEO Alan Mulally: “Ford continues to lead the industry”

Ford Motor Co said on Monday it has slashed automotive debt by 38%, 9.9 billion US dollars, bolstering its finances amid a deep auto industry downturn. Markets reacted with Ford shares up over 15%.

Ford said the debt restructuring would trim its cash interest expenses by more than 500 USD million per year, providing the latest evidence that Ford is ahead of domestic rivals General Motors Corp and Chrysler in restructuring to survive the lowest US auto sales in three decades.

Ford, the only US automaker not operating with emergency US government loans, also was the first to reach agreement with the United Auto Workers to slash cash payments for a union retiree healthcare trust.

It has now achieved a fair amount of what was asked of GM and Chrysler by the Obama administration, while those two automakers, operating on 17.4 billion USD of government loans since the start of the year, remain in talks with creditors and the UAW to restructure debt and cut costs.

“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” Ford Chief Executive Alan Mulally said in a statement.

Ford is using 2.4 billion in cash and 468 million shares of common stock to cut its automotive debt from the 25.8 billion it had at the end of 2008.

US auto sales tumbled nearly 40% in the first three months of 2009 to the lowest level in 27 years, driving GM and Chrysler to the brink of bankruptcy and other major automakers into mounting losses.

GM, which has been operating with 13.4 billion of government loans since the start of the year, is under pressure to reach sweeping concessions with bondholders and the UAW by June 1. The Obama administration has said the alternative would be a government-controlled bankruptcy.

The Ford agreement with the UAW on labour cost cuts and a reworking of the funding of the healthcare trust, the Voluntary Employee Beneficiary Association, includes efforts to cut its debt over time and make executive pay cuts.

Those reductions had been intended to roughly match the details GM and Chrysler had agreed to in accepting emergency loans from the US government.