Ford Motor Co. (NYSE: F) announced that it’s paying down an additional $4 billion in debt to strengthen its balance sheet and analysts have taken the move as a positive development for the company.
Morningstar analyst avid Whiston told Barron’s in a recent interview that “cash flow generation will significantly improve over the coming years, which, coupled with the debt reduction, will certainly give Ford a more stable base and flexibility.” The magazine said that Ford Motor Co. (NYSE: F) is also in a much better position than General Motors.
Specifically, Ford will reduce a significant sum of its corporate debt with a $3.8 billion cash payment into the United Auto Workers trust fund which pays retiree’s health care bills. The firm will also pay out $255 million in dividends on preferred securities which were previously deferred as the Detroit auto manufacturer worked through financial troubles. The company will also now make quarterly payments on the securities which are a combination of stocks and debt.
CEO Alan Mulally said in a statement that the payments are another sign that the company’s overall restructuring plan is working well. “We expect to continue to improve our balance sheet as we deliver on our plan,” Mulally said.
The automaker said that, with the $3 billion debt repayment in April and this latest $4.055 billion repayment, it now has decreased its total debt from $34 billion at the end of the first quarter to $27 billion. The payments are expected to save the company $470 million in interest costs annually.
