Ford Motor Co. will pay down $1.8 billion of its long-term debt today and continues to negotiate a new agreement with the United Auto Workers as precursors to restoring the investment grade status it lost in 2006.
"We've fixed the business fundamentals," Lewis Booth, Ford chief financial officer, said Wednesday at the UBS Frankfurt Auto Show Investor Conference. "The only real stumbling block is to get past the UAW negotiations successfully."
Ford's four-year contract expired at midnight but was extended to keep plants running as talks continue.
The UAW wanted agreements with General Motors Co. and Chrysler Group LLC first.
Booth told investors he thinks economic uncertainty is also affecting an upgrade of Ford's credit rating.
"They think our financial metrics are working at investment grade now," he said, referring to Moody's Investors Services, which has Ford two notches below grade.
At the end of June, total debt was $14 billion. Ford is using its $22 billion in cash reserves to retire the final $1.8 billion of a $7 billion long-term loan secured in 2006 and maturing at the end of 2013.
Automotive debt will be about $10 billion in 2015, far from the $33.6 billion at the end of 2009, Booth said.
"If cash continues to grow, we'll look at further shareholder actions," Booth said, without elaborating.
"Paying down the debt is a further sign of confidence in their business plan," said Charles Moore, senior managing director of Conway MacKenzie Inc. in Birmingham.
"When companies are nervous, they have a hard time parting with cash," he said.
In other projections, Booth said revenue and pricing will improve and capital spending will increase $500,000 to $6 billion.
Booth said the automaker will cut costs and respond accordingly if the economy experiences significant downturns.
But the company is leaner and better able to weather turmoil
Source: Detroit News