Ford Motor pays down $4 billion in debt

DETROIT (AP) – Ford Motor Co., the only Detroit automaker to avoid bankruptcyprotection, said Wednesday it will reduce its huge debt by another $4 billion as it continues to show signs of financial strength.

The Dearborn, Michigan, automaker will pay $3.8 billion in cash to a United Auto  Workers trust fund that pays retiree health care bills, and it will pay out $255 million in  dividends on preferred securities that had been deferred as the automaker worked its way through financial troubles. The company now will make quarterly payments on the  securities, which are a combination of preferred stock and bonds.

Ford CEO Alan Mulally said in a statement that the payments are another sign of  confidence that the company’s restructuring plan is working.

“We expect to continue to improve our balance sheet as we deliver on our plan,” Mulally said.

After the payment, Ford will still owe the UAW trust about $3.6 billion due by 2022,  with an option to pay it over three years.

The company said it intends to repay the note early but wouldn’t say when. Shares of the  automaker rose 20 cents, or two percent, to close at $10.08 on Wednesday.

The automaker said the actions combined with a $3 billion debt payment in April will  reduce its total debt to around $27 billion from $34 billion at the end of the first quarter. The payments will save Ford roughly $470 million in annual interest costs. Ford was   forced to mortgage its factories and even its blue oval logo to borrow more than $23 billion in 2006 and 2007. But the move helped it avoid bankruptcy protection, unlike  

Chrysler Group LLC and General Motors Corp. Recently Ford has reported sales gains  and four straight quarterly profits. It earned $2.1 billion in the first quarter, helped by  higher transaction prices for its cars and trucks, which have been getting high quality  ratings from third-party groups such as Consumer Reports magazine and J.D. Power and Associates.

Ford sales are up more than 30 percent through May, almost double the 17 percent  increase in total US car sales. Analysts for Barclay’s Capital and Moody’s Investors Service said the announcement is a sign of confidence that Ford can generate cash to  repay debt.

“Ford continues to benefit from strong operating performance in North America due  to a competitive product lineup, a disciplined pricing and production strategy, and a significantly reduced breakeven level,” Moody’s said in a note to investors.