Ford CEO sees zero net debt by 2011

[Sprint XR8]

MILAN | Sat Oct 2, 2010
(Reuters) - Ford Motor Co (F.N) plans to repay its net debt by the end of next year and return to an investment grade earlier than expected, Allan Mulally, chief executive of the No. 2 U.S. automaker was quoted as saying on Saturday.

"We count on bringing the net debt to zero by 2011 ... We are ahead of plans to return to an investment grade rating," Mulally said in an interview with Italian financial newspaper Il Sole 24 Ore at the Paris Auto Show published on Saturday.

Ford, the only large U.S. automaker to avoid bankruptcy last year, borrowed more than $23 billion in late 2006, putting up nearly all of its remaining assets, including the familiar blue oval logo to maintain a cash cushion for its turnaround.

Ford aimed to get back the investment grade rating that it lost in 2005 in 2012, or by the end of 2011, the Wall Street Journal said in August, citing people familiar with the situation.

Ford cut its automotive debt by $7 billion in the second quarter and ended the quarter with $27.3 billion of automotove debt.

Mulally reiterated Ford's plans to be solidly profitable this year with a positive cash flow from auto operations and said the group would do even better in 2011.

Mulally expected the U.S. car market to grow at a pace of 3-5 percent in the future, while the global market would expand at 5-10 percent, he said without giving a time frame.

Ford would continue to restructure its European operations to remain profitable at any level of demand, Mulally said.

The group's partnership with Italy's Fiat (FIA.MI) was doing well, he said, but declined to talk about what would happen in the future.

http://www.reuters.com/article/idUSTRE6910K220101002

[uranium_death]

Great news...the brand truly is 'moving forward'.

Great to see responsible consolidation without major aid.

[jpd80]

Ford has achieved more outside of bankruptcy than GM did by entering it.

[ebxr8240]

NOW if this was G.M it would be the first on the 6.00 P.M news...
Not a word anywhere...

[phillyc]

Originally Posted by ebxr8240

NOW if this was G.M it would be the first on the 6.00 P.M news...
Not a word anywhere...

True. But sometimes for the underdog that is the way it is.

IIRC Ford have $27B USD of debt and about $22B USD in cash. I think they could be at net debt by Q1/2011 with very little trouble considering Ford are currently the most profitable maker in the world according to first of 2010 results.

It seems the average bond / interest rate they are paying is 6.5% so every billion paid off saves them $65M a year. The $7B USD already repaid this year will save them $450M next year alone. The current debt is costing them about $1.8B in interest annually. Ouch!

If they can get to investment grade, their funding costs / interest bill will drop dramatically which will in turn accelerate earnings. A nice cycle, rather than a vicious cycle that they were previously in.

Ford are moving Forward.

[GK]

Originally Posted by phillyc

True. But sometimes for the underdog that is the way it is.

It always seems to be this way for us.

I truly get frustrated being the underdog, especially since it's been for so darn long.

GK

[jpd80]

Originally Posted by GK

It always seems to be this way for us.

I truly get frustrated being the underdog, especially since it's been for so darn long.

GK

Just sit back and watch the fireworks come GM's IPO where they expect the stock to raise
around $8-10 billion - that's based on them getting the equivalent of $133/share before they're split
and a market capitalization of around $70 billion for GM - WTF (?) GM is barely bigger than Ford ($40 billion)


The fur is gonna fly if the government and UAW get burned on this initial stock offering....

[Iggypoppin']

Originally Posted by GK

It always seems to be this way for us.

I truly get frustrated being the underdog, especially since it's been for so darn long.

GK

It makes it all the sweeter when people will eventually realize who the winning team is. And we've been on it all along.

[jpd80]

Originally Posted by Iggypoppin'

It makes it all the sweeter when people will eventually realize who the winning team is. And we've been on it all along.

GM need cash from the IPO, they risk running out of money again if US sales stay low,
they sold 172K verses 160K for Ford and Ford have a lot fewer plants and employees there.
My money is on team blue showing up GM at every post in 2011.

[vztrt]

Originally Posted by ebxr8240

NOW if this was G.M it would be the first on the 6.00 P.M news...
Not a word anywhere...

Fors US are gaining the biggest amount of market share. I bet they couldn't care less. Bigger profits, better products equals win for everyone.

[Revolver]

We will see eventually. Im not saying anymore than this... Something big has been tipped for 2011/12/13. Donald Trump & a few other financially educated people have tipped it to happen. However this current situation puts Ford in a damn good position for when it does happen, & may be able to whether it pretty well.

[Ohio XB]

Does anyone know exactly what "net debt" means in financialeze? You hear talk about several debt amounts in relation to Ford. I am wondering which debt this is and how significant it really is.

Last week Lewis Booth, Ford Chief Financial Officer, announced Ford is going to pursue more concessions from the UAW.

Among them is the relinquishing of the right to strike for 5 or 6 years. Ok, so there has not been a strike at Ford since the 1980's. How does Ford gain one dollar by the union giving up the right to strike? By being able to push through a change that we would normally strike over. So the question is, what does Ford want to change that they KNOW we would strike over, when we haven't struck the company since the 1980's? Personally, I don't want to go there.

Another demand is a 5 year wage freeze for new highers who hire in at the new wage of $14/hr.. Of course this does not apply to new hires in managment.....so where is the "shared sacrifice?"

In March, 2009 we agreed to do away with the cost-of-living allowance (money that was based on specific economic factors that assured level purchasing power) and bonuses (performance bonus, Christmas bonus, other contractual bonuses) that cut costs $500 million a year. We agreed to ALL the concessions that GM and Chrysler did BEFORE GM and Chrysler did, except for the relinquishing of striking and wage freeze for new hires specifically. Our wages have already been frozen since 2007, still are, and we VOTED for that, as well as MANY more concessions/give backs.

Now Ford is making good profit, paying off net debt, returning to investment grade, salaried workers have had some sacrifices restored, such as a percentage of matched retirement accounts being reinstated, and they are going to ask the union for more concessions.


Steve

[vztrt]

Originally Posted by Ohio XB

Now Ford is making good profit, paying off net debt, returning to investment grade, salaried workers have had some sacrifices restored, such as a percentage of matched retirement accounts being reinstated, and they are going to ask the union for more concessions.


Steve

Well now they haven't got the excuse for more concessions. When are your next negotiations?

[Ohio XB]

Originally Posted by vztrt

Well now they haven't got the excuse for more concessions. When are your next negotiations?

The next contract will be signed in September 2011. Negotiations will probably begin in July 2011.

Everyone I spoke with was very surprised (eyes popped out of heads) that Ford would go after more concessions when Mulally had already announced to the press over a year ago that "Ford has everything they wanted from the Union and Ford's creditors...." It was only 6 months later that they came after more, and now this after announcing the pay off of the Net Debt.

Profits are solid ahead of schedule. Ford has gained market share in 23 out of the last 24 months. There are about 50% less workers than 5 or 7 years ago. Quality is through the roof. Costs are the lowest they've ever been.


I don't get it.


Steve

[Joe5619]

Originally Posted by Ohio XB

Does anyone know exactly what "net debt" means in financialeze? You hear talk about several debt amounts in relation to Ford. I am wondering which debt this is and how significant it really is.

"Net Debt" is just the sum of all the assets less all the liabilities. If you get a positive number it means if you where to close the doors today (& sell every thing you own), you’d be able to pay all your debt & still have money left over. If you get a negative number (which is where Ford is now, & hope to move to the above in 2011) it means if you where to close the doors today (& sell every thing you own), you would not be able to pay all your debt..

Think of it a bit like a mortgage.. If you owe 200K, but your house it worth 250K your sweet. But if you owe 200K & you house is worth 150K your screwed!!

[Sprint XR8]

Net Debt Definition

What Does Net Debt Mean?
A metric that shows a company's overall debt situation by netting the value of a company's liabilities and debts with its cash and other similar liquid assets.

Calculated as:
Net Debt = Short Term Debt + Long Term Debt -Cash & Cash Equivalents

http://www.investopedia.com/terms/n/netdebt.asp

[Iggypoppin']

So dont people get confused; ford will still have a debt to it's creditors. It's just that it's liabilities will not exceed the sum value of it's assets. This is still a very good thing. Ford look dead on track to become world number 1 automaker. This is my hope in the next 10-15 years. Ohio xb do you have any more info you can share with us?

[Ohio XB]

Thanks for the explanation guys. I needed to know how much to celebrate and how much would be over doing it. ;)


I haven't read anything else new about this.


Steve